Vala Sustainable Growth EIS
The Vala Sustainable Growth is a new ESG-focused EIS fund. It aims to invest in early-stage companies with the potential to make an impact on sustainability challenges and currently falling within a ‘funding gap’.
This is Vala’s second EIS fund and follows the launch of its generalist fund, the Vala EIS Portfolio in 2018. Vala currently manages £10.2 million under EIS across 17 companies.
Vala was founded by Jasper Smith, a successful serial entrepreneur. Jasper and the wider Vala investment team have decades of experience in setting up and exiting early-stage businesses. Recent additions to the team should also provide valuable sector expertise and industry knowledge.
The fund will target early-stage companies, typically at the Series A/B stage but may also consider seed investments. To receive investment, companies must be able to demonstrate that sustainability is intrinsic to their aims as well as provide sufficient evidence of growth prospects and ability to generate value for investors.
- ESG focus: invests in early-stage companies aiming to address sustainability challenges
- Portfolio companies must fall into one of the following themes: technology for planetary health, sustainable consumption & commerce, or improving access to societal needs
- Experienced team with a history of growing and exiting early-stage businesses
- Target return 2.5x net of fees and before tax relief – not guaranteed
- Targets 6-10 portfolio companies (not guaranteed)
- Minimum investment £25,000 – you can apply online
Vala Capital Ltd (“Vala”) is the Investment Adviser to the fund.
Vala was founded in 2016 by Jasper Smith, 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
Jasper Smith sits on the fund’s investment committee, alongside Max Middleton, Mike Penrose, John Swingewood, and Boyd Carson.
Max Middleton is an investment manager at Vala Capital and will be responsible for managing due diligence, investment execution, and operations for the fund. Max previously worked for The Ingenious Group, where he focused on investments within energy, transportation, and resource efficiency.
Mike Penrose previously held roles as Executive Director of UNICEF UK, Chair of Soccer Aid, and Global Humanitarian Director at Save the Children. He has since worked as a commercial ESG (Environmental, Social, and Governance) consultant for a number of financial institutions and businesses to help them achieve their ESG investment objectives.
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.
Boyd Carson is the managing partner of Sapphire Capital Partners (the fund’s Investment Manager). He is a chartered accountant and was a former director of PwC in New York. Sapphire Capital Partners currently manages multiple EIS and SEIS funds.
Consumers are becoming increasingly selective, often choosing to pay a premium for ethical products and services. A report commissioned by Co-op shows ethical consumer spending in the UK hit record levels in 2018, with the market worth £41.1bn (compared to £11.2bn in 1999). Vala believes this transition into sustainable living could create major investment opportunities as companies seek to align themselves with changing consumer appetites.
To define its investment strategy, Vala has selected three sustainability themes it believes companies are best placed to address. They are:
- Technology for planetary health: this includes energy production, consumption, and storage as well as improving efficiencies in industrial processes and farming.
- Sustainable consumption and commerce: helping consumers with sustainable choices, making products more durable, and improving recyclability.
- Fairer access to social goods: access to education, improving food supplies as well as providing clean water and sanitation.
To receive investment in the fund, an investee company must demonstrate it is innovating in at least one of these key areas. In addition, Vala will assess the company’s growth and development prospects and its potential to build value for investors.
The fund will typically target early-stage businesses that have already received some level of seed investment. However, it may consider startups or businesses that are still pre-revenue.
The fund targets a return of 2.5x before EIS tax relief. The expected holding period is a minimum of five years. Please note return 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 larger 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.
The fund targets a portfolio size of between six to 10 companies, although the exact size may vary. No more than 20% of subscriptions is expected to be committed to any single company in each investment round.
Vala has identified a number of companies whose activities it believes would be a good fit for the fund. The following EIS-qualifying companies have previously received investment from Vala. Please note, new investors may have exposure to different companies.
Hydrogen Power Generation Solutions Ltd (HPGS)
HPGS, trading under the name VN-HPG, has developed and patented an Electro Hydrogen Generator for use in natural gas power stations.
The technology will allow gas-fired power stations to produce hydrogen and oxygen much more efficiently than traditional methods. The hydrogen can then be used to replace a significant percentage of conventional fuel, which reduces emissions, as well as increasing the burn efficiency of the gas turbine to lower the energy cost.
HPGS has been developing this technology for seven years. It has already completed prototype trials which were successful and validated by the Keith Scott, Professor of Electrochemical Engineering at Newcastle University.
The company recently raised £200,000 and received matched grant funding from the Engineering and Physical Sciences Research Council. The funding will support academic research and validation of the EHG technology, with the goal of accelerating commercialisation.
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 thousands 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 company raised just over £400,000 in a crowdfunding campaign in 2019.
Failure and exit examples
As the fund launched in 2020, it has not achieved any exits or failures to date.
The track record of Jasper and the team is, however, a good one, although past performance is not a guide to the future. The investment committee has provided funding of more than £30 million to 35 companies since the 1990s. Fourteen of them have failed and 21 delivered a successful exit, with a total exit value of £143.3 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.
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 fund launched in 2020 so it does not yet have a full year’s performance data.
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 / 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, or even be prepared for all companies to fail.
Future funding rounds may dilute existing investments.
Exits could take considerably longer than the three-year minimum holding period.
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||2.5%|
|Wealth Club initial saving||2.5%|
|Net initial charge through Wealth Club||—||Annual management charge||1.5%|
|Performance fee||20%||Investee company charges|
|Initial charge||Up to 5%|
More detail on the charges
Timing of the offer
The Vala Sustainable Growth Fund aims to deploy subscriptions typically within 12 months from investment.
The next deadline is expected to be 31 December 2021.
The Vala investment team is headed up by an experienced entrepreneur, Jasper Smith, who has a history of growing and exiting early-stage businesses. This is the investment team’s second EIS fund, launched to address the growing investment opportunity arising from companies operating more sustainable business models.
There is momentum within the industry for ESG investments and Vala believes it has identified a clear funding gap that complements its existing experience in growth investing. Furthermore, recent additions to the team should provide sector expertise to ensure investee companies fit the brief.
Whilst Vala has yet to build a track record within this mandate, the team – and Jasper Smith in particular – have a strong background in early-stage investing. As one of the few EIS funds dedicated to sustainable and ethical investments, it may appeal to experienced investors targeting a dedicated ESG strategy.
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.
- ESG (Environmental, Social, Governance)
- Target return
- Funds raised / sought
- Minimum investment
- 31 Dec 2021