Vala EIS Portfolio
The Vala EIS Portfolio was created on the back of the Vala Capital’s team’s experience both as entrepreneurs and investors.
Vala’s founder, Jasper Smith, started, grew and sold his business, PlayJam, for a reported $68 million. Arthur Hughes, ex-CEO of Prebon Yamane (the broker), sold the company for £125 million in 2004.
Collectively, the five members of the Investment Committee have invested more than £27 million of their own money in early-stage businesses and achieved a number of successes, as well as experiencing what it is like to lose one’s own money.
Using this experience, the team will provide expertise and mentoring to the portfolio companies – they will also invest their own money alongside the fund.
The fund will invest across a range of sectors from engineering and fintech to media and food & drink. The fund launched in 2018 and has a simple and competitive charging structure.
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- Invests across a range of sectors, including technology, engineering, media and food & drink
- Target return 2x net of fees and before tax relief – not guaranteed
- Management team has first-hand experience of setting up and exiting businesses and will mentor portfolio companies
- Targets 6-10 portfolio companies (not guaranteed) with Advance Assurance
- Tranches closing regularly, with allotments every three to six months
- Investors should have good visibility of companies likely to be included in each tranche
- Competitive charging structure
- Minimum investment £25,000 – you can apply online
Vala Capital Ltd was founded by Jasper Smith in 2016. The Vala Capital EIS fund was launched in December 2018. Jasper is a successful serial entrepreneur who has enjoyed an interesting and varied career. Starting out as a welder for sculptures, one of Jasper’s first clients offered him a job at a satellite television start-up called Sky. Soon after, Jasper was headhunted to TeleNor to launch its satellite TV services across Scandinavia. Jasper’s first entrepreneurial venture came in the mid-90s when he co-founded The Fantastic Corporation, a pioneer in satellite and broadband data services. The Fantastic Corporation had created software which allowed multimedia files to be sent across the internet.
In 1997 Jasper co-founded Static 2358, a design and digital media company. It was within this business that he launched PlayJam, a developer of interactive games for television platforms, one of the first of its kind. Originally a side-project of Static 2358, PlayJam rose to fame, and became a household name within the UK as the developer behind Sky Digital’s interactive games channel, with hits such as Beehive Bedlam. The business was subsequently sold in 2001 in a deal worth $68 million.
In addition, Jasper has founded or co-founded a number of other businesses including:
- Electra Entertainment, a once widely deployed TV technology platform (closed)
- The Optimistic Network, a media & IP production company (IPO on AIM in 2005 with an initial valuation of £35 million)
- PlayStack, a major games publishing and financing company
- Play.Works a tech company working on post app store tech and games
- Arksen, a company developing semi-autonomous explorer vessels for leisure, research, and commercial purposes
Both Play.Works and Arksen are investee companies within the Vala investment portfolio.
Jasper Smith sits on Vala’s investment committee, alongside Arthur Hughes, Paddy Willis and John Swingewood, who all have previous experience at starting, growing and exiting businesses.
Arthur Hughes is an experienced financier who took over and became Group CEO of broking business Prebon Yamane, which was sold to Collins Stewart Tullett for £125 million in 2004 (and later become Tullett Prebon).
Paddy Willis co-founded baby food company Plum Baby, which became one of the UK’s fastest-growing food start-ups, and was sold to Darwin Private Equity in a deal which valued the company at £10 million. Paddy has since set up The Grocery Accelerator.
John Swingewood was previously Chairman of CentralNic, a domain name registry service that floated on AIM. He was also the founder of DITG and chief executive of Emizon, both of which achieved exits through successful trade sales. Earlier in his career, John held senior roles at BT and BSkyB.
Between them, they have invested more than £27 million of their own money in early-stage businesses and achieved a number of successes, as well as experiencing what it is like to lose one’s own money when things go wrong.
Watch a video interview with Jasper Smith, founder of Vala Capital:
Whilst Jasper’s background is in technology, media and engineering, the Vala EIS portfolio seeks to invest across a range of sectors to provide investors with some diversification.
This fund invests in companies run by skilled entrepreneurs, who in the manager’s view are born to build great businesses, and who often see building their company as their life’s work. Vala aims to back companies and stick with them “through thick and thin”.
In many cases, the investee companies will have already started to sell products or services and require funding to accelerate their growth. In addition to providing funding, Vala acts as a mentor, offering investee companies access to its team’s expertise, network, and experience. Vala sees its role as helping to provide its companies with a competitive edge, supplying the tools each business needs in order to accelerate its success.
In some cases, Vala’s involvement goes further: it helps create, incubate and accelerate the companies before investing. Whilst this could be seen as a conflict of interest, it also means Vala has a real understanding of the businesses and skin in the game.
The Vala Capital EIS Fund targets a return of 2x before EIS tax relief over a minimum of five years. Please note, returns and timeframes are not guaranteed.
The ultimate goal for each portfolio company is to achieve a profitable exit. Exit options include the companies being acquired by other parties (such as a bigger company in the same industry or a private equity firm) or a listing on a stock exchange – the Vala team has previously exited investments through both these routes. Exit options and timeframes are not guaranteed.
At the time of the initial investment, it is impossible to know how long a company might take to reach an exit. However, Vala Capital and the Investment Manager will work closely with the companies during any exit process.
The Vala Capital EIS Fund aims to invest in six to 10 companies, although the exact size of the portfolio may vary. No more than 20% of investors subscriptions is expected to be allotted in any investment round to a single company. To date, the fund has invested £7.5 million across 15 companies (December 2020).
The companies outlined below are historic investments made by the Vala Capital EIS fund in its previous iterations and give a flavour of the types of companies a new investor might expect. EIS funds tend to be managed on a discretionary basis so each individual portfolio is likely to be different.
PlayWorks Digital Limited
PlayWorks is a game and video content developer for instant messenger software and Connected TV devices.
With their entry into the gaming industry, platforms like Facebook Messenger, WhatsApp, and Apple iMessage have created one of the largest gaming networks in the world – with an estimated 3 billion potential users. This is compounded by the success of Connected TV (a television connected to the internet).
PlayWorks believes this audience is relatively overlooked with few competitors. Having launched in 2017, PlayWorks is already the world’s largest provider of games played through TV boxes and connected TVs. In addition, it has managed to establish good partnerships with key industry names such as Facebook, Comcast, Sky, and Amazon.
Vala has invested a total of £1.1 million into the company. PlayWorks will use the funding to expand its development team, accelerate marketing and acquire new IP.
Founded by Jasper Smith, Arksen was established to drive deeper knowledge and research of the ocean through its multi-purpose vessels.
Arksen specialises in high-tech semi-autonomous yachts designed to withstand the harshest ocean conditions safely and comfortably. Jasper Smith describes the yachts as “the Land Rover of the sea with the tech of a Tesla.”
The potential order book currently stands at around £40 million – between three and five are expected to be built a year (they’re all assembled on the Isle of Wight). The company is also linked to the Arksen Foundation, a not-for-profit organisation set up to provide project funding and support for scientific research and create innovative media to inspire a greater understanding of the ocean ecosystem.
Vala Capital first invested in the business in May 2018 and has invested a total of £1.5 million across five funding rounds. The business has seen its share price rise 33% during this time: note past performance is not a guide to the future.
Failure and exit examples
Vala Capital EIS Fund launched in December 2018 and therefore has a limited track record. The fund has not achieved any exits or failures to date.
However, Jasper and the members of the investment committee are serial entrepreneurs and investors. There is a personal track record we can consider.
Including co-investments, the investment committee has provided funding of more than £54 million (of which £27 million was through personal investment) to 53 companies since the 1990s. Of these, 37 have exited with 15 having failed and 22 delivering a total exit value of £167 million. One such exit was Optimistic Network Ltd, a TV production and channels company. The business was founded by Jasper in 2002 with an initial investment of £1.5 million. It subsequently floated on the AIM market in 2005 for £35 million. Please remember past performance is not a guide to the future.
An example of failure is Electra Entertainment Ltd, a technology company focused on creating technology and interactive services for digital televisions and set-top boxes. Electra won early support from leading retailers but ultimately lost out to Freeview. The business accumulated losses of in excess of £5 million and Jasper and his co-investors lost their investment. This experience means the Vala team understands what can, and does, go wrong. It also means they know first-hand what it takes and what it feels like to make and lose their own money.
The performance table below shows the track record of both the Vala EIS fund, and its predecessor, the UK Challenger fund, which pursues the same investment strategy. Vala Capital was founded in 2016, the track record remains limited.
The chart below shows the average performance of the total subscribed into the funds each tax year, based on valuations as at 31 December 2020, expressed on a £100 invested basis. Please note, individual investor portfolios’ performance will deviate from the average.
Source: Vala Capital, as at 31 December 2020. Performance figures are supplied by Vala Capital and are net of all fees, based on Vala Capital’s valuation methodology. Past performance is no guide to future performance. These figures do not include any realised returns (exits) as there have not been any. In the above examples, initial tax relief of up to 30% could also apply. So, for the tax year 2017/18, the total return including initial tax relief would be £145.66 – 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 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, or even be prepared for all companies to fail.
Exit could take considerably longer than the three-year minimum hold period.
Vala Capital has one of the most competitive charging structures of any EIS fund.
A summary of the main charges and savings is shown below. Some of these will be payable by the investor, whilst 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.
|Full initial charge||—|
|Wealth Club initial saving||—|
|Net initial charge through Wealth Club||—||Annual management charge||—|
|Performance fee||20%||Investee company charges|
|Initial charge||6%||Annual charges||—|
More detail on the charges
Timing of the offer
The Vala EIS fund aims to deploy the money within 12 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 Vala EIS Portfolio aims to regularly close tranches, usually every three to six months, potentially giving investors an opportunity to have their funds quickly deployed – not guaranteed.
In our view, there are three appealing aspects to the Vala Capital EIS Fund.
Firstly, the fund gives investors the opportunity to invest alongside a seasoned serial entrepreneur. Jasper has enjoyed several successful ventures during his career (as well as some failures). Most notably, PlayJam, founding and exiting the business for $68 million to a trade buyer, and The Optimistic Network, a business Jasper co-founded, floated on AIM for £35 million. The experience Jasper has gained through his career could benefit the fund and its investors.
Secondly, the fund has a number of experienced advisers who contribute interesting opportunities to the fund and bring additional industry experience.
Thirdly, the Vala Capital EIS fund has a competitive charging structure. Investors are not charged any initial fees, although investee companies are charged arrangement fees which indirectly affect returns, and there are no annual management fees. Vala Capital will only be paid a fee by its investors if the EIS fund performs well, and only after investors receive back their original investment.
For experienced investors looking to complement their existing EIS portfolio with an entrepreneurial offering, Vala Capital could in our view be added to their shortlist.
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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
- £1.0 million sought
- Minimum investment