Praetura EIS Growth Fund

Praetura Group (“Praetura”) has been investing in early-stage businesses since it was founded in 2011. Today it has one of the UK’s largest venture capital investment teams and a reputation for delivering strong investment performance and returning capital to investors. 

In 2018, Praetura set up Praetura Ventures with the aim to create a leading EIS fund management business. The first EIS fund launched in 2019 and raised £15 million on the back of Praetura’s reputation, breaking the record for the largest maiden EIS fundraise. The team deployed this capital in seven months and raised a further £7 million in its second fund, which closed in January 2020. Over the subsequent two tax years, Praetura Ventures raised £21.1 million. 

All the members of the Praetura Ventures team, as well as other Praetura employees, board members, and non-executives, have collectively invested £7.35 million into the EIS funds (January 2022).

The fund will target regional businesses, predominantly in the North where Praetura is based. The fund has two soft closes per year and seeks to fully deploy capital within six months of its "soft close" dates.

Important: The information on this website is for experienced investors. It is not a personal recommendation to invest. If you’re unsure, please seek advice. Investments are for the long term. They are high risk and illiquid and can fall as well as rise in value: you could lose all the money you invest.

Read important documents and then apply

Highlights

  • Large investment team supported by a well resourced parent company
  • Strong track record of realised returns (past performance is not a guide to the future)
  • Expected focus on companies mainly based in the North
  • Target portfolio of 8–10 companies, not guaranteed
  • Expects to fully deploy capital within six months of a soft close date (not guaranteed)
  • Target return of £2 per £1 invested, not guaranteed
  • Focus on providing post-investment support
  • Minimum investment of £25,000 – you can apply online 

The manager

Praetura was founded in 2011 to capitalise on what the founding partners believe is a sizeable opportunity to invest in early-stage businesses in the North of England. The three founders, Mike Fletcher, David Foreman and Peadar O’Reilly, had previously held senior positions in investment banking and asset-based lending in the North of England and Ireland. 

Praetura’s first investment was in 2011 – £1.3 million into a business called Inspired Energy. It returned £21.3 million to investors, a 16x realised return. After making investments on a deal-by-deal basis, Praetura Ventures was established in 2018 to specialise in EIS investments. A year later, Praetura's first EIS fund was launched, breaking the record for the largest maiden EIS fundraise. 

To date, Praetura has invested £88 million into 42 investee companies, earning a reputation as one of the North’s leading venture capital investors.

Praetura has one of the UK’s largest EIS investment teams, consisting of four permanent investment committee members, four invitee committee members, four experienced operating partners, seven members of the investment team, and five members of the portfolio management team.

Watch a video interview with Dave Foreman, MD of Praetura Ventures:

Praetura has also developed its own reporting software, which helps the team understand its portfolio companies, and enables them to produce, in our view, high-calibre investor communications. The investment team is responsible for due diligence and deal selection while the portfolio team provides post-investment strategic support. Additional oversight comes from Praetura’s investment committee, made up of Praetura Group board members. Praetura staff have now personally invested £7.35 million into Praetura's EIS funds (January 2021). 

The Praetura Group consists of three subsidiary businesses: Praetura Asset Finance and Praetura Commercial Finance, which provide asset-based and debt financing respectively, and Praetura Ventures, which provides venture capital to early-stage businesses. The combined group has £410 million assets under management (December 2021). 

Venture Partners network

To complement the team, the group has established a network of over 60 Venture Partners. These are individuals with specific industry or entrepreneurial experience, able to mentor investee companies and provide the investment team with external validation. All venture partners are expected to invest in the EIS fund and can co-invest in specific deals. To date, Venture Partners have invested £19.8 million into Praetura’s EIS funds. 

Investment strategy

The North of England accounts for 23% of the UK’s population, 20.9% of all new business formations and 21.2 % of all businesses with greater than 50 employees, but just 6.9% of venture capital investment. Praetura estimates there to be a funding gap of £700 million to £1.4 billion per annum for early-stage businesses in the region. Praetura Group aims to capitalise on this opportunity. Most of the fund’s investee businesses are expected to be based in the North.

Praetura invests across a range of sectors, including MedTech, Energy, FinTech, Artificial Intelligence, HR and Retail. Praetura favours B2B business models, as they typically provide access to larger clients and stickier revenue streams. The fund will consider businesses across a range of maturities, however, companies must be able to demonstrate some degree of commercial traction and revenue generation. Additionally, Praetura will not invest in companies lacking good financial reporting, as this is crucial to its performance assessments. Investee companies must have a qualified Finance Director in place before investment. 

To aid diversification, the portfolio will be split between start-up capital (companies valued less than £5 million), development capital (companies valued £5–£20 million) and growth capital (companies valued over £20 million). The investment team believes this should give investors a more balanced risk/return potential. 

Due to its strong regional network, Praetura does not do any outbound deal sourcing. Instead, it relies on its partnerships with accountancy firms and accelerator programmes to provide opportunities as this has the added benefit of external validation. Using this method, the investment team reviews over 100 opportunities each month. In addition, Praetura anticipates committing around 30% of funds to follow-on investments.

Once a company receives investment, Praetura will look to offer comprehensive strategic support. One area where Praetura looks to add value is financial reporting. Through collaboration with its own portfolio company, Peak, Praetura has developed bespoke financial reporting software which is integrated into each business. The software helps the businesses maintain a high level of reporting capability, which in turn allows the portfolio team to monitor KPIs, assess risk and analyse the performance of each company and the portfolio as a whole.

Target return

The fund targets a return of 2x before tax relief over 5–7 years (not guaranteed). 

Exit strategy

As is typical, likely exits routes are expected to be trade sales or IPOs although this is not guaranteed. In addition, while venture capital is typically underserved in the North, there is a strong private equity sector, which could be a potential exit route – again, not guaranteed.

Portfolio

The fund is sector-agnostic. Current examples of sectors include energy & environment, advanced manufacturing, and health & life sciences. 

Across both Praetura Group and Praetura Ventures’ EIS funds, the group has invested a total of £88 million in 42 businesses. Investors in this fund are expected to receive a portfolio of 8–10 companies, with investments ranging from £1–2 million into each.

Below are portfolio company examples from previous EIS qualifying investments made by Praetura Group. They are outlined to give a flavour of the types of companies you might expect but are unlikely to be part of a new investor's portfolio. 

Coadjute – Praetura EISCoadjute – recent investment

Anyone who’s ever bought a house will know the pain of chasing estate agents and solicitors up and down the chain. This is the problem Coadjute set out to address, with a blockchain-based network that connects all the parties in a transaction in real-time.

Coadjute’s system connects to a wide range of existing property software platforms, so updates in one system are fed through to the rest of the chain. That not only allows buyers to stay up to date but reduces the time estate agents and other participants spend on the phone, cutting costs and speeding up the entire house-buying process.

Praetura led a £6 million funding round in November 2021 alongside several US venture capital firms, at a valuation of £12.0 million. Coadjute plans to use the funds to roll out the network across the UK over 24 months, expanding the sales and marketing teams and bringing mortgage brokers and lenders into the network.

Peak – Praetura EISPeak

Peak was founded in 2014 by Richard Potter (CEO), David Leitch (COO) and Atul Sharma (CTO). Peak has since developed an AI System that can help companies grow sales, manage supply, meet demand and minimise costs. The company has signed up big-name customers, including Pepsi, ASOS, KFC and Nike and now employs over 200 people in six offices around the world. 

Praetura originally invested £1 million in the business in June 2016, based on a pre-money valuation of £4 million, to support R&D and recruit the company’s first Data Scientists. Since then, the company has been able to demonstrate significant commercial benefits for clients – with sales rising in the region of 28% in some cases and costs falling.

Praetura has invested a further £3.1 million through the Preatura EIS Growth Fund, most recently in January 2021. In August 2021 Peak announced that it had raised $75 million from a range of global investors, including the Softbank Vision Fund. Based on this transaction, the Preatura EIS Growth Fund investments are showing an average unrealised gain of 2.53x. Past performance is not a guide to the future. 

Inspired Energy – Praetura EIS Growth FundInspired Energy – example of previous exit

Inspired Energy was Praetura’s first EIS-qualifying investment. Established in 2000, it has become one of the largest energy consultancies in the UK. 

The company works with commercial, industrial, and public sector businesses to help them understand and manage energy usage effectively. In particular, it specialises in securing supply contracts as well as working with businesses to integrate sustainable practices. 

Praetura invested in the company in 2011 due to its scalability, strong traction within the market, and healthy recurring revenues. The turning point proved to be the company’s listing on AIM in November 2011, which allowed it to pursue an aggressive buy-and-build strategy that generated significant shareholder value. Based on an initial investment of £1.3 million, Praetura investors received £21.5 million in distributions, representing an unusually high 16x return. However, please note, past performance is not a guide to the future. 

Big Red – example of previous failure 

As can be expected, not all investments work out. Big Red is an example. Praetura first invested in 2014. Big Red was an e-commerce business selling some 50,000 products a month at its peak despite being virtually stockless. The Praetura team was impressed by Big Red’s CFO, with whom the team had worked previously whilst CFO at MyProtein (later acquired by The Hut Group). Despite fairly rapid growth, Big Red was overly dependent upon Amazon. In 2017 Amazon updated its platform terms and set customer service requirements Big Red was not able to achieve. This led to the loss of Amazon preferred status and consequently a significant drop in sales to such degree revenues were insufficient to support the business large-scale infrastructure.

Despite bringing in new management to mitigate the loss of Amazon and target other markets, the business was unable to recover. After losing the support of management and investors, it entered liquidation. Praetura realised a return of 0.3x on its original £2 million investment.

Performance

Since 2011, Praetura has raised £88 million and invested in 42 EIS-qualifying companies, achieving nine exits, four of which were profitable. In aggregate, Praetura has returned £48.6 million to investors and has a remaining portfolio balance of £145.0 million before tax relief. Please note, past performance is not a guide to the future.

The chart below shows the average performance of the total subscribed into Praetura’s EIS-qualifying investments over the previous 10 tax years, based on valuations as at 31 December 2021, expressed on a £100 invested basis. Please note, individual investor portfolios’ performance will deviate from the average.

For investments made more than five years ago (2012/13–2015/16), on average, for every £100 invested, investors would have received realised returns of £129.61 and a portfolio balance of £259.88. Past performance is not a guide to the future.

Performance per £100 invested in each tax year 

(Praetura's EIS-qualifying investments until 2019/20; Praetura EIS Growth Fund thereafter)

Source: Praetura Ventures, as at 31 December 2021. The Praetura EIS growth fund launched in 2019. The chart shows the performance of EIS-qualifying investments made by Praetura (tax years 2012/13 to 2018/19) and the performance of the Praetura EIS Growth Fund (tax years 2019/20 to 2021/22). Figures are net of all fees. Past performance is not a guide to the future. These figures do not include any realised returns which would be available through loss relief. In the above examples, initial tax relief of up to 30% could also apply. Remember tax rules can change and tax benefits depend on circumstances.

Risks – important

This, like all investments available through Wealth Club, is only for experienced investors happy to make their own investment decisions without advice. 

EIS investments are high-risk and should only form part of a balanced portfolio. As must be expected with early-stage investments, some or even all of the companies in the portfolio could fail: the fewer the companies included in the portfolio, the higher the risk of loss if things don’t go to plan. You should not invest money you cannot afford to lose.

There is no ready market for unlisted EIS shares: they are illiquid and hard to sell and value. There will need to be an “exit” for you to receive a realised return on your investment. Exits are likely to take considerably longer than the three-year minimum EIS holding period; equally, an exit within three years could impact tax relief.

To claim tax relief, you will need EIS3 certificates, normally issued once shares have been allotted. This can take several months: please check the deployment timescales carefully. Tax reliefs depend on the portfolio companies maintaining their EIS-qualifying status. Remember, tax rules can change and benefits depend on circumstances.

Before you invest, please carefully read the Risks and Commitments and the offer documents to ensure you fully understand the risks. 

Charges

A summary of the main charges and savings is shown below. Some of these will be payable by the investor, others by the investee companies. The investment may have additional charges and expenses: please see the provider documents, including the Key Information Document, for more details.

Investor charges
Full initial charge 2.5%
Wealth Club initial saving
Net initial charge through Wealth Club 2.5%
Annual management charge 2%
Administration charge See below
Dealing charge
Performance fee 20%
Investee company charges
Initial charge Up to 4%
Annual charge 1%+
All fees and charges are stated exclusive of VAT, which may be applicable in some cases. Any fees and charges payable by the investee companies or the underlying businesses do not directly come out of your investment. However, they will effectively reduce the returns generated by investee companies and therefore impact your investment.

More detail on the charges

Timing of the offer

The Praetura EIS Growth fund aims to deploy the money within six months of a soft close date. As is typical with EIS investments, it may not be possible to have all funds deployed before a deadline such as the end of the tax year.

Our view

Praetura Ventures has ambitions to become one of the UK’s leading venture capital businesses. Following a sizeable investment from its parent company, it has built a well resourced and highly professional venture capital team – one of the UK’s largest. 

The investment track record seems promising. Of the 42 EIS-qualifying businesses backed by Praetura to date, there have been four profitable exits, several other portfolio companies showing encouraging progress, as reflected in the strong unrealised returns. Please note, past performance is not a guide to the future. 

The fund looks to back eight to ten early-stage companies, and is therefore high risk, across a variety of sectors. Each business must have demonstrated commercial traction and be revenue generating at the point of investment. Once invested, Praetura looks to provide strategic support to scale its investee companies; this is bolstered by Praetura's network of Venture Partners. 

Additionally, investors may value the quality of Praetura’s investor communications, which are market leading in our view.

Read important documents and then apply

Wealth Club aims to make it easier for experienced investors to find information on – and apply for – tax-efficient investments. You should base your investment decision on the provider's documents and ensure you have read and fully understand them before investing. This review is a marketing communication. It is not advice or a personal or research recommendation to buy the investment mentioned. It does not satisfy legal requirements promoting investment research independence and is thus not subject to prohibitions on dealing ahead of its dissemination.

The details

Type
Fund
Sector
Technology
Target return
2x
Funds raised / sought
£30.0 million sought
Minimum investment
£25,000
Deadline
Discretionary
Last updated: 1 February 2022

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