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 has 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.
All the members of the Praetura Ventures team, as well as other Praetura employees, board members, and non-executives, have collectively invested more than £3.5 million into the EIS funds.
Praetura is now seeking to establish an evergreen EIS fund with two soft closes per year to deploy investors’ capital. The fund will target regional businesses, predominantly in the North where Praetura is based.
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- 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 based in the North
- Target portfolio of 8 -10 companies, 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
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. Since then, Praetura has gone from strength to strength, earning a reputation as one of the North’s leading venture capital investors. Past performance is not a guide to the future.
In 2018 Praetura set up Praetura Ventures, a subsidiary business that specialises in EIS investments. A year later, Praetura’s first EIS fund was launched, breaking the record for the largest maiden EIS fundraise. The group’s investment has helped ensure Praetura Ventures is well resourced, its 25-strong investment team is one of the largest in the UK with separate investment management and portfolio management sub-teams.
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. Every member of the investment team has personally invested into Praetura’s first two EIS funds, collectively contributing over £3.5 million.
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 business. The combined group has £230 million assets under management.
Venture Partners network
To complement the team, the group has established a network of over 40 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 on specific deals. To date, Venture Partners have invested more than £7 million into Praetura’s EIS funds.
The North of England accounts for 23% of the UK’s population, 20.9% of all new business formations and 19.4% 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 exists to exploit this opportunity. The majority 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 stages of maturity, 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 startup 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 split between risk and 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 expects to review up to 80 opportunities each month. In addition, Praetura anticipates committing around 30% of funds raised 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.
The fund is targeting a return of 2x before tax relief over a period of 5-7 years (not guaranteed).
As is typical, likely exits routes are expected to be trade sales or IPOs although this is 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, not guaranteed.
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 £66.2 million across 34 businesses. Investors in this fund are expected to receive a portfolio of 8-10 companies, with investments ranging from £1 million to £2 million.
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.
Patchwork (recent investment)
Founded by two doctors, Anas Nader and Jing Ouyang, Patchwork is trying to help address the NHS staffing crisis. In 2018, empty shifts cost the NHS more than £5.6 billion in temporary staffing agency fees.
Patchwork’s platform offers hospital staff the chance to work flexibly. Once integrated within a hospital, it acts as a hub, allowing staffing managers to broadcast shifts in real-time, digitise timesheets and monitor finances. Healthcare workers can book shifts instantly, work across multiple organisations and keep track of their pay.
Patchwork completed its first trial at Chelsea and Westminster Hospital. Over 43,000 shifts were booked through the platform and the hospital saved £1.2 million in agency fees. Today, the platform works with more than 30 hospitals and over 10,000 clinicians across the UK.
Praetura led a £3 million investment round in 2020, committing £1.9 million alongside other investors. The funding will allow Patchwork to establish more partnerships with NHS Trusts across England and Wales and roll out its software to GPs and the private medical sector.
As online shopping becomes increasingly popular, more and more pressure is being placed on delivery infrastructure. Retailers are expected to offer flexible delivery options, detailed tracking information and simple return procedures. However, building and maintaining these systems can be challenging, particularly for small or independent businesses.
To solve this, Sorted has developed a straightforward delivery management platform. Improved consumer experience helps drive higher revenues while improving basket conversion and customer loyalty. Today, Sorted operates in 12 countries, including the US, and is used by a number of leading brands such as ASOS and Lush.
Praetura has supported the company for seven years and provided its first investment which helped develop its platform. In total, Praetura has invested £15 million, £0.8 million of which through the EIS fund. Most recently, the company raised £15 million in a Series-B funding round led by Merian Chrysalis Investment Trust, alongside Praetura and NVM Private Equity.
Inspired Energy (example of previous exit)
Inspired Energy was Praetura’s first EIS-qualifying investment. Established in 2000, Inspired Energy 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 which 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 with any EIS company, these are high-risk investments and not all will work out as planned. Big Red is an example of a failure. 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.
Since 2011, Praetura has invested a total of £66.2 million into 34 EIS-qualifying companies, achieving eight exits, four of which were profitable. In aggregate, Praetura has returned £48.6 million to investors and has a remaining portfolio balance of £91.9 million before tax relief. Please note, past performance is not a guide to the future.
The chart below shows the performance of Praetura’s EIS-qualifying investments based on £100 invested in each tax year (21 May 2020).
Please note, the performance data shown prior to 2019/20 tax year refers to the performance track record of Praetura Group's EIS-qualifying investments, not investments held in the EIS fund, which only launched in 2019.
For investments made more than five years ago (2011/12–2014/15), on average, for every £100 invested, investors would have received £496.19 in realised returns, not including initial tax relief, and would have a portfolio balance of £161.29 remaining. Please note this is heavily skewed by returns generated in the 2011/12 tax year from Inspired Energy. Past performance is not a guide to the future.
Source: Praetura Ventures. The chart shows the performance of EIS-qualifying investments made by Praetura rather than investments made by the EIS fund, which launched in 2019. Figures are net of all fees. Past performance is no guide to future performance. 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. So, for the tax year 2015/16, the total return including initial tax relief would be £302.38, 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 and SEIS investments are high-risk so should only form part of a balanced portfolio and you should not invest money you cannot afford to lose. They also tend to be illiquid and hard to sell and value. Before you invest, please carefully read the Risks and Commitments and the offer documents to ensure you fully understand the risks.
Tax rules can change and benefits depend on circumstances.
This EIS fund invests in early-stage businesses which are more likely to fail than larger ones. So you should expect a number of failures in the portfolio.
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.
For investments received before 21 August 2020, investors will receive a discount of 1% to the initial charge.
|Full initial charge||2.5%|
|Wealth Club initial saving||1%|
|Net initial charge through Wealth Club||1.5%||Annual management charge||2%|
|Administration charge||See below|
|Performance fee||20%||Investee company charges|
|Initial charge||Up to 4%||Annual charge||1%+|
More detail on the charges
Timing of the offer
The Praetura EIS Growth fund aims to deploy the money within 6 months from investment. 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.
The next deadline for the fund is 21 August 2020, to be eligible for a 1% initial charge discount.
Praetura Ventures has ambitions to become one of the UK’s leading venture capital businesses. Following a sizable 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 34 businesses backed by Praetura to date, there have been four profitable exits, with the remaining portfolio 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 amongst the strongest we have seen.
Read important documents and 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.
- Target return
- Funds raised / sought
- £30.0 million sought
- Minimum investment
- 21 Aug 2020 for 1% discount