Vala Sustainable Growth EIS

Vala Sustainable Growth is an ESG-focused EIS fund that 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 after its generalist fund, the Better Ventures EIS (formerly Vala EIS Portfolio). Vala Sustainable Growth launched in September 2020, closed its first tranche last year and has deployed £2.2 million across 11 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 and currently manage £11.5 million under EIS (March 2022). 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.

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.

Read important documents and then apply

Highlights

  • 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 £20,000 – you can apply online

The manager

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 that 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 several 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 Mike Penrose, John Swingewood, and Boyd Carson.

Vala has made several key hires recently, including Jonathon Spanos, Head of Ventures Investments. Jonathon previously worked at Virgin StartUp, part of Sir Richard Branson’s Family Office. Jonathon 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. 

Sapphire Capital is the Investment Manager to the fund.

Investment strategy

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. 

Target return

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.

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 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.

Portfolio

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. So far, the fund has deployed £2.2 million across 11 companies.

The companies outlined below are historic investments made by the 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. 

Homethings – Vala Sustainable EISHomethings

Homethings aims to create the next generation of home care products. 

Big brand cleaning products can be diluted by up to 95% with water and are often packaged in single-use plastic bottles. In contrast, Homethings' products are waterless, low toxicity, and packaged in either glass or 100% recycled plastic. A single Homethings' tablet weighs only 5g and makes 500ml of cleaning solution and has over 90% less CO2 emissions than a single-use bottle.

Homethings has two distribution channels, wholesale markets and direct-to-consumer via a subscription offering. Launched in September 2020, the company is generating £850,000 in annualised revenue and was recently featured on Dragons' Den – receiving five offers for investment. 

The fund invested £200,000 into the company in July 2021. 

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 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 fund invested £240,000 into the company in 2021.

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. 

Performance

The fund started making its first investments in April 2021, so it does not yet have a performance track record spanning 12 months. 

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
Performance fee 20%
Investee company charges
Initial charge Up to 5%
Annual charge
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 Vala Sustainable Growth Fund aims to deploy subscriptions typically within 9-12 months from investment.

Our view

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.

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
ESG (Environmental, Social, Governance)
Target return
2.5x
Funds raised / sought
-
Minimum investment
£20,000
Deadline
Discretionary
Last updated: 24 January 2022

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