Deepbridge Technology Growth EIS
In the November Budget, the Chancellor effectively gave his seal of approval to EIS investing in knowledge-intensive companies. This is precisely the type of company the Deepbridge Technology Growth EIS invests in – and has been doing so for years.
- Technology-focused EIS fund
- Invest in a portfolio of selected companies with high growth potential
- Experienced management, who are required to invest their own money in the offer
- Pay no initial charge through Wealth Club
- £10,000 minimum investment
This EIS is evergreen, and is continually seeking investors’ funds. It invests in later-stage, growth-orientated technology companies.
Deepbridge targets businesses in three key sectors: energy and resource innovation, medical technologies, and high-growth IT-based technologies.
Investee companies must have significant market potential. Ideally they should already be in the process of commercialising the product or service they’ve developed and have identified revenue streams. They should own robust intellectual property or a patented product, which can provide some value if the business doesn't work out.
Watch an exclusive video interview with Deepbridge managing partner Ian Warwick:
Portfolio company examples
AlgaeCytes has developed a patented process that exploits freshwater algae grown in controlled conditions to produce Omega 3, biomass rich in proteins and clean water, leaving no waste. AlgaeCytes thus benefits from two sources of revenue: the treatment of water discharged from industrial process and the production of Omega 3, currently largely produced from a limited and depleting fish population. AlgaeCytes is in negotiations with a number of large corporations involved in food, drink or healthcare products markets. In October 2017 it upscaled its production facilities, allowing it to increase production ten-fold and meet the needs of larger clients.
vTime is the world's first virtual reality social network. It allows users to connect, chat and share with friends and family in virtual destinations using only their phone, a virtual reality headset, and earphones with a built-in microphone.
Despite still being in development, it already has thousands of users across the world who use 3D avatars for anything from talking with their friends to having business meetings online. vTime is currently developing content with and for the likes of Google, Microsoft and Facebook.
VoxSmart has developed patented technology which captures, records, stores, transcribes and analyses all calls, messages and voicemail on mobile devices, regardless of the manufacturer or operator, without the need for infrastructure changes (as is the case with VoxSmart’s competitors). The target market is financial services firms, which are already required to record and retain client calls for six months. From 2018 many of these firms will need to do this for five years. It is estimated 7 million European and US companies will need to comply with the new rules. Voxsmart is already in partnership or in discussion with global enterprise mobile providers.
Zilico develops medical diagnostic devices. It launched its flagship product, ZedScan, in 2013 and began commercialising it in 2014. ZedScan is a diagnostic device that helps prevent and treat cervical cancer much more objectively and accurately than current diagnostic methods. A number of UK hospitals have already adopted it and agreements with medical technology distributors are in place in the UK, Ireland, Australia, Netherlands, Bulgaria, Israel, Bahrain and Thailand. New products are in the pipeline, applying the same diagnostic technology to other types of cancer, starting with oral, anal, oesophageal and bowel cancer.
Deepbridge Capital was set up by Ian Warwick. Initially he intended to launch an unquoted growth technology fund. However, after the rules changed to allow investments of up to £5 million in an individual company, he considered EIS more appropriate.
Mr Warwick has had a varied career: he was in the Royal Navy, then an oil engineer in Houston and worked for one of the biggest printer companies before settling on technology start-ups in New York. When he founded Deepbridge, he didn’t have experience of managing money but he and his founding partners all had experience in technology and in listing and floating businesses.
Deepbridge’s investment team is required to invest their own money in the portfolio companies. If the portfolio loses money, they lose money, so there’s an added incentive to apply a tight investment selection process and help businesses achieve their objectives.
The portfolio aims to deliver a return of £1.60 for every £1 invested over three to four years. If you take into account EIS 30% income tax relief, that’s £1.60 for every £0.70 effectively invested. Please note though: returns are not guaranteed. Capital is at risk and you could get back less than you invest. Moreover, tax benefits depend on circumstances and tax rules can change.
Before Deepbridge invests, it tries to identify potential buyers for investee companies, but there is no set exit strategy. So far there have been no exits, nor failures, although they are possible, indeed likely as with any portfolio of this nature.
This is a high risk offer. These are early-stage technology businesses, so they will be more prone to failure than later stage, more mature businesses. It is also likely they will require multiple rounds of funding thus diluting the stakes of earlier investors. These are long-term investments.
The usual risks with unquoted companies exist with this EIS offer. For instance, EIS investments are illiquid and capital is at risk. Investors should only invest money they can afford to lose.
The underlying investee companies will pay a fee of 2% per annum to Deepbridge. There is a 2.5% corporate advisory and arrangement fee, paid from the underlying companies. In addition, there is a dealing fee of 0.65% for sales and purchases charged to underlying investee companies and a further 0.5% per annum custody fee. Finally, there is a performance fee equivalent to 20% of the profit from each individual company with a minimum hurdle of £1.20 per £1 invested prior to any performance fee being applicable. VAT is charged where applicable.
When you invest via Wealth Club, you pay no initial fees from the subscription, so you should receive tax relief on the full amount. Deepbridge fees are paid by the investee companies.
This is an interesting, albeit higher-risk EIS offer. The core team comes with many years of experience in investing in, managing and floating businesses.
Wealth Club aims to highlight investments we believe have merit, but you should form your own view. You should decide based 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. 21 December 2017
Read important documents and apply
- Target return
- £1.60 per £1 invested
- Funds raised / sought
- £32.8 million raised
- Minimum investment