Better Ventures EIS

The Better Ventures EIS fund (previously the Vala EIS Portfolio) was created to capitalise on the Vala Capital 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. 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. 

Using this experience, the team will provide expertise and mentoring to the portfolio companies while also investing their own money alongside the fund.

The fund will invest across a range of sectors from technology and engineering through to lifestyle and wellness. Following a rebrand in 2021, the investment team will also look to select companies committed to achieving sustainability targets.

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.

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Highlights

  • Invests across a range of sectors, including technology, engineering, media and food & drink
  • Target return 2.5x 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 8-12 portfolio companies (not guaranteed) with Advance Assurance
  • Tranches closing regularly, with allotments every three to six months 
  • Minimum investment £20,000 – you can apply online

The manager

Vala Capital Ltd was founded by Jasper Smith in 2016, with the Vala Capital EIS fund 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, John Swingewood and Boyd Carson. Between them, they have experience leading significant financial services businesses and chairing AIM-quoted companies, as well as founding and exiting multiple businesses of their own. The committee has collectively 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. 

Vala has made a number of key hires recently, including Jonathon Spanos, Head of Ventures Investments. Jonathon previously worked at Virgin StartUp, part of Sir Richard Branson’s Family Office. Jonathan will be responsible for all investment activities across Vala’s portfolio. Other hires include Lian Michelson (Investment Director) and Sharfaz Fawmy (Investment Analyst) – taking the total team up to 16 members.

Vala Capital acts as the Investment Adviser and Sapphire Capital is the regulated Fund Manager.

Watch a video interview with Jasper Smith, founder of Vala Capital:

Investment strategy

The Better Ventures EIS fund looks to build on the experience of Vala’s seasoned team of venture professionals. Accordingly, Vala will focus on sectors it knows best, with opportunities expected to range from technology and engineering through to lifestyle and wellness.

Vala looks to back entrepreneurs it believes were born to build great businesses, and who often see building their company as their life’s mission. While each company is unique, the fund will target businesses with the following characteristics:

  • Capital efficient
  • Highly scalable
  • Technology driven or enabled
  • Innovative or proprietary ideas with high barriers to entry
  • Fast monetisation models – capable of generating revenue quickly

Each potential company will undergo a detailed sustainability assessment and must commit to measuring and reporting progress to receive investment. Vala will work closely with each business to agree sustainability targets and objectives, with progress reviewed annually and future funding depending on improvement and commitment to change.

It is anticipated the majority of investee companies will have already started to sell products or services and require funding to accelerate their growth. 

However, in some cases, Vala’s involvement goes further in what the company describes as “venture building”. Vala will develop and back new businesses identified by the investment committee as transformational ideas and exceptional talent. In these cases the manager will create, incubate, and accelerate the companies before investing. While 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. To date, five companies within the portfolio have been venture builds.

Target return

The Vala Capital EIS Fund targets a return of 2.5x before EIS tax relief over a minimum of seven years. Please note, returns and timeframes are not guaranteed.

Exit strategy

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. 

Portfolio

The Better Ventures EIS fund aims to invest in eight to 12 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 £8.4 million across 17 companies (January 2022).

The companies outlined below are historic investments made by the Better Ventures 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.

Good Club – Vala Sustainable Growth EISGood Club

Good Club was established in 2018 with the aim of providing sustainable and affordable groceries straight to the consumer’s door. 

Launched by Ben Patten (former CEO of Farmdrop), Good Club cuts out the middleman so customers have access to hundreds of sustainable products at supermarket prices. As well as sourcing responsibly, the company is trialling ‘zero waste groceries’ which will see the introduction of returnable and reusable packaging to significantly reduce plastic waste. 

The business operates through a members-only model, similar to wholesale chains like Costco. In return, members receive prices up to 40% lower than the recommended retail price, free monthly deliveries, and zero waste packaging. 

The fund invested £100,000 into the company in December 2020.

Arksen – Vala EIS PortfolioArksen

Founded by Jasper Smith, Arksen is an example of Vala’s “venture building strategy”. It was established to drive deeper knowledge and research of the ocean through its multi-purpose vessels.

Arksen specialises in high-tech 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, with between three and five vessels expected to be built a year (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 April 2018 and has invested a total of £1.68 million across seven funding rounds. The business has seen its share price rise 215% during this time (October 2021): note past performance is not a guide to the future. 

Failure and exit examples

To date, the Better Ventures EIS Fund has not achieved any positive exits, however, the fund only launched in December 2018 so the portfolio is still relatively young.

Kuber Ventures – example of previous failure

As can be expected, not all investments work out. One example is Kuber Ventures. 

Launched in 2013, Kuber Ventures was a digital investment platform which focused on tax-efficient products.

The platform looked to provide a user-friendly portal for investing in and monitoring multiple products. In addition, the company offered a white-labelled product for private banks and other financial institutions.

However, following the pandemic and a period of challenging market conditions, the company entered liquidation in October 2021. Vala invested approximately £650,000 into the business, this has subsequently been written down to nil. 

Performance

The performance table below shows the track record of both the Better Ventures 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 01 December 2021, expressed on a £100 invested basis. Please note, individual investor portfolios’ performance will deviate from the average.

Performance per £100 invested per tax year

Source: Vala Capital, as at 01 December 2021. 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 – 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, 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.

Investor charges
Full initial charge
Wealth Club initial saving
Net initial charge through Wealth Club
Annual management charge 1.5%
Administration charge
Dealing charge
Performance fee 20%
Investee company charges
Initial charge 5%
Annual charges
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 Better Ventures 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 next fund close is expected to be 30 September 2022.

Our view

The Better Ventures EIS 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. 

While the fund is generalist, it aims to capitalise on the experience of Jasper and the wider investment team and will operate in sectors where Vala believes it can contribute interesting opportunities and bring additional industry experience. 

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.

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
Various
Target return
2.5x
Funds raised / sought
-
Minimum investment
£20,000
Deadline
30 Sep 2022 for next close
Last updated: 17 March 2022

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