Praetura EIS Growth Fund

Praetura Group (“Praetura”) has been investing in early-stage businesses since it was founded in 2011. However, Praetura Ventures was set up in 2018 to create an EIS fund management business focused on companies based in the North of England. 

The first EIS fund launched in 2019 and raised £14.5 million on the back of Praetura’s reputation – at that point the largest maiden EIS raise. Subsequent funds have gone on to raise a further £60.5 million. Praetura Ventures also manages £20 million on behalf of British Business Investments Regional Angel Programme, a £20 million Life Sciences fund for Greater Manchester Combined Authority and recently launched a VCT (Praetura Growth VCT). 

The Fund is managed by a large, dedicated venture capital team which, together with other Praetura employees, board members, and Operational Partners, has collectively invested £9.2 million into the EIS funds (March 2024).

• Target return of 2x over 4-7 years, not guaranteed
• Expects to fully deploy capital into a portfolio of 8-10 companies within six months of a soft close date (not guaranteed) 
• Minimum investment of £25,000 – you can apply online 
• Deadline: 30 April 2024 for next close

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. Today it consists of six subsidiary businesses, including Praetura Ventures, which provides a range of operational and financial services. The Group currently has lent or invested over £1 billion, including nearly £150 million of venture investments.

Praetura has a nine-strong investment team led by Managing Partner David Foreman, as well as a five-strong portfolio team responsible for post-investment support. Praetura’s network of eight Operational Partners – a rotating bench of senior industry executives and experienced entrepreneurs who mentor the portfolio – includes members with experience at companies such as JD Sports, AO.com, and Dr Martens. Praetura staff and Operational Partners have personally invested £9.2 million into the EIS funds (March 2024).

Praetura has developed its own reporting software, which helps the team understand its portfolio companies. As well as supporting investment and portfolio management decisions, this enables the manager to produce high-calibre investor communications, which we consider some of the best in the industry.

Before your subscription is invested, the cash will be held by the custodian, Mainspring Nominees Limited. Shares will be held by the nominee, MNL Nominees Limited.

Investment strategy

The North of England accounts for around 20% of the UK’s population, economic output, and active companies but just 7% of the UK’s venture capital investment. Praetura believes there is a funding gap of between £700 million and £1.4 billion a year for early-stage businesses in the region. The Praetura EIS Fund aims to capitalise on this opportunity.

The manager favours B2B business models, as they typically provide access to larger clients and stickier revenue streams. Companies must be scalable and able to demonstrate momentum at the point of investment, with the potential of doubling revenues each year thereafter. 

The portfolio is likely to be weighted towards technology and healthcare, although the team will consider any sector. To aid diversification, the portfolio will be split between seed capital (annual revenue up to £500k), development capital (£500k to £2m revenue) and growth capital (over £2 million revenue). The investment team believes this should give investors a more balanced risk/return potential.

Praetura reviews over 100 opportunities each month, sourced through its partnerships with accountancy firms and accelerator programmes, which can provide external validation. Praetura aims to be one of the first institutional investors at the point of investment, looking to lead rounds of £1 million to £3 million and to take an initial equity stake of 5-30%. In addition, Praetura anticipates committing around 30% of funds to follow-on investments.

Once a company receives investment, Praetura will offer strategic support through a range of services, including access to its Operational Partners programme, corporate partnerships, and Praetura’s in-house financial reporting platform which is integrated into each business. 

The fund targets a return of 2x before tax relief over 4–7 years – not guaranteed. 

Portfolio

Since launching its EIS funds in 2019, Praetura has invested £65.1 million in 39 companies. Investors are expected to receive a portfolio of 8–10 companies.

Below are previous portfolio company examples. 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. 

Sprout.ai – recent investment

You take out insurance hoping never to need it, but if you need to make a claim, quick, accurate, and efficient claim handling can make life easier at a stressful time. 

However, historically claims management has been a manual, slow and laborious process, open to human error. That could be both costly for insurers and frustrating for customers. 

Sprout.ai’s claims management software automates much of the process, reading, verifying, and cross-referencing evidence and policy data before making an informed recommendation. The technology can extract information from a range of sources and file types, from images to PDFs of anything from typed notes to handwritten Japanese. Sprout.ai’s AI-driven algorithms can reportedly settle over 50% of claims in minutes with 97% accuracy, allowing human claims handlers to focus on more complicated cases thereby reducing handling costs by up to 50%.

The company already provides services to insurers such as MetLife, Zurich, and Generali and is looking to expand into North America as well as introduce new insurance lines.

The Praetura EIS Growth Fund invested £1 million in October 2023 as part of a £5.4 million funding round alongside Amadeus Capital Partners and Octopus Ventures.

Peak

Founded in 2014 by Richard Potter (CEO), David Leitch (COO) and Atul Sharma (CTO), Peak provides the building blocks so technical and commercial teams can adopt AI applications at scale. Its platform helps businesses harness the potential of AI to grow revenues, increase profits and increase efficiency. 

The company now has over 200 employees in six offices around the world. It has delivered significant commercial benefits – from improving the efficiency of SpeedyHire’s distribution network to optimising inventory management for B&M. Other clients have included the likes of PepsiCo, ASOS, KFC and Nike.

Praetura originally invested £1 million in June 2016, based on a pre-money valuation of £4 million, to support R&D and recruit the company’s first data scientists. Praetura has made a number of subsequent investments, most recently in August 2021 as part of a $75 million round alongside global investors, including the Softbank Vision Fund. Based on this transaction, the Praetura EIS investments are showing an average unrealised gain of 2.1x. Past performance is not a guide to the future. 

Examples of previous exits and failures

The Praetura EIS funds have yet to see an exit. However, the team achieved five successful exits from its previous EIS-qualifying investments – including Lloyd’s broker EC3 (see below) – with five failures and one exit below cost. Past performance is not a guide to the future. 

EC3 Brokers – example of previous exit

The company was founded by Danny Driscoll after a multi-decade career in the insurance market which included positions at Integro, Gallagher and Aon. EC3 launched with a book of business acquired from Gallagher and quickly won clients after gaining FCA permissions. The company was profitable within its first year and grew to operate across a wide range of specialist insurance sectors, including cyber insurance, business interruption and specie (protecting high-value, portable items – such as jewels and cash).

Praetura invested a total of £600,000, with the first investment in 2014. In 2017, the business was acquired by its senior management through an MBO. This provided Praetura investors with a full exit at a 19.2x realised return. Five years after the exit (November 2022), the business entered administration. Past performance is not a guide to the future. 

Dr Fertility – example of previous failure 

As with any early-stage investment, not all will work out. An example is Dr Fertility.

The company was founded 2017, initially as an e-commerce site for fertility-related products and educational content before turning to a digital healthcare model. The platform allowed people to book an online consultation with a fertility doctor or nurse, conduct home diagnostic testing and access emotional support via coaching from qualified nurses.

Despite generating £2.5 million of revenue and serving nearly 70,000 customers, the company was forced into liquidation in 2023 after struggling to raise further funding in a tougher venture capital environment.

The Praetura EIS funds invested £750,000, across two funding rounds in 2020/21 and 2021/22, which have been written down to zero.

Performance

Praetura’s EIS fund was launched in 2019 and has since raised £74.9 million and invested in 39 companies. 

The chart below shows the average performance of EIS investments made in each full tax year from 2019/20 to 2023/24. The chart is based on the latest valuations provided by the manager, expressed on a £100 invested basis. Please note, individual investor portfolios’ performance will deviate from the average.

Performance of Praetura EIS Growth Fund after launch per £100 invested

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 detail.

Our view

Praetura Ventures has ambitions to become one of the UK’s leading venture capital businesses. It has built a well-resourced, professional venture capital team and a reputation as a committed regional investor – most of its portfolio is outside London and the South East. This focus, combined with the team’s post-investment support, helps Praetura attract deal flow from across the UK. 

The fund looks to back eight to 10 early-stage companies across a variety of sectors. Each business must have demonstrated both a scalable business model and increasing revenues or other signs of early momentum at the point of investment. 

The Praetura EIS fund has not achieved any profitable exits. However, Praetura has been investing in early-stage companies for over a decade and experienced some success prior to launching the EIS fund. Additionally, investors may value the quality of Praetura’s investor communications.

Wealth Club aims to make it easier for experienced investors to find information on – and apply for – investments. You should base your investment decision on the offer documents and ensure you have read and fully understand them before investing. The information on this webpage is a marketing communication. It is not advice or a personal or research recommendation to buy any of the investments mentioned, nor does it include any opinion as to the present or future value or price of these investments. It does not satisfy legal requirements promoting investment research independence and is thus not subject to prohibitions on dealing ahead of its dissemination.