Foresight WAE Technology EIS

The Foresight WAE Technology EIS fund (formerly Foresight Williams Technology EIS) is managed by a collaboration between the Foresight Group, a £11.9 billion specialist asset manager, and WAE, a spinout of Williams Grand Prix Engineering (March 2024).

The service aims to invest in early-stage, high-growth technology and engineering businesses where Foresight and WAE’s combined experience and technical expertise might offer a distinct advantage. The two companies have been working together since 2015 and launched an EIS fund the following year, followed by a new share class in the Foresight Technology VCT in 2019. 

In 2022 the Foresight WAE Technology EIS fund announced its first two exits: Codeplay in June for a 16x return (detailed below) and Flusso in August for a 3.0x return. 

To date the EIS fund has invested £52.2 million into 35 companies. It has generated exit proceeds of £21.5 million and has a remaining portfolio balance of £59.1 million (December 2023).

• The fund has not set a specific target return – although investee companies must have the potential to deliver 10x return (not guaranteed) 
• Targets a minimum of six portfolio companies (not guaranteed)
• The fund aims to deploy funds over 18 months from cohort close 
• £10,000 minimum investment – you can apply online 
• Deadline: 28 June 2024 for next close

The manager

The EIS fund is managed by Foresight Group. Foresight Group has c.£11.9 billion of assets under management, of which £1.6 billion is within its private equity division, which manages the Foresight VCTs, EIS, and institutional private equity funds (March 2024).

WAE (formerly Williams Advanced Engineering) is the technical adviser to the fund. It was formed in 2010 when Williams Grand Prix Engineering Limited spun out its specialist engineering division into a separate company. The business has since grown to around 1,000 employees. In 2022, WAE was acquired by Fortescue Metals Group (FMG), an Australian mining company with whom it had worked to develop a battery operated mining vehicle. WAE remains based at the same Oxford campus as Williams Grand Prix Engineering.

The core investment team responsible for managing the EIS and VCT is made up of 10 investment professionals: four from Foresight Group and six from WAE. The team is overseen by separate investment committees from Foresight Group and WAE. The investment team can also draw on the wider experience of Foresight Group’s c.60-strong private equity team and technical expertise from three venture partners.

Before your subscription is deployed, the cash will be held by the custodian, Woodside Corporate Services Limited. Once allotted, shares will be held by the depositary, NCM Depositary Services Limited.

Investment strategy

The Foresight WAE Technology EIS aims to invest in early-stage companies with strong intellectual property. They should operate in attractive, substantive markets where the manager believes WAE’s technology, engineering, commercial and promotional support may offer a distinct advantage. 

The team looks for certain qualities when evaluating potential opportunities. For instance, investee companies must demonstrate they have developed innovative technology that offers clear advantages to the end consumer as well as a roadmap towards commercialisation. The team avoids highly capital-intensive models, preferring to focus on companies commercialising and licensing IP as this strategy should allow them to scale more efficiently.

While the fund is sector agnostic, most opportunities are expected to align with the following themes:

• Semiconductors
  
• Future of mobility
• Future of manufacturing
• AR, VR, and immersive technologies
• Robotics 
• Future of computing
• Advanced simulation
• Medtech and scientific instrumentation

Companies must demonstrate they have developed innovative technology that offers clear advantages to the end consumer as well as a roadmap towards commercialisation within 24 months. Target markets should be in excess of £100 million per annum, and investee companies must be run by ambitious and experienced management teams.

The team will look for opportunities where WAE can add value, in particular, its technical expertise should provide the team with enhanced due diligence on potential investee companies. WAE will also provide pro bono advice and support, and discounted-rate consulting to help companies develop, optimise or solve engineering problems. Foresight believes its access to this specialist technical knowledge has on occasion been instrumental in winning competitive funding rounds for investors in both the EIS and VCT. 

The fund expects to invest between £500,000 and £3 million per company, and each should have the potential to return 10x on exit – not guaranteed. 

Portfolio

The EIS fund targets a minimum portfolio of six companies with funds fully deployed over 18 months (not guaranteed).

Since launching, the fund has invested £52.2 million into 35 companies (December 2023).

Below are portfolio company examples from previous iterations of the fund. They are outlined to give a flavour of the types of companies you might expect but are unlikely to be part of a new investor’s portfolio.

VyperCore – recent investment

Founded in June 2022, VyperCore is building on more than a decade of research to redesign computer processing capacity.

The company’s co-founder and CTO, Ed Nutting, developed its “data accelerator card”, during his time at the University of Bristol. Essentially, it improves processing speeds by transferring a memory-intensive task from software applications to its proprietary hardware. This can improve security, significantly reduce CPU demand, and boost software performance by up to 10x. 

The technology works with all leading processor designs and does not require a change to the existing codebase, making integration simple. The company already has proof of concept, with a view to building and selling their data card within the next two to three years.

The company completed a £4 million funding round in April 2023. The Foresight WAE EIS Fund invested c.£400,000 alongside co-investors Octopus Ventures, Science Create Ventures, British Growth Fund, and Silicon Roundabout Ventures. In July 2023, the company announced it had opened its first two design centres, in Bristol and Cambridge respectively, two cities at the heart of the UK’s semiconductor design industry. 

Refeyn

Identifying and measuring protein molecules is an integral part of life sciences research, particularly in the development of new medicines. Refeyn is commercialising a disruptive technology that uses light to measure a molecule’s mass (mass photometry). The patented technology was invented at – and spun out from – the University of Oxford and allows users to characterise molecules significantly faster and at a lower cost than existing techniques. 

The company has now launched several industrial models of its mass photometery instrument and a gene therapy focused product. The technology proved particularly valuable in Covid-19 research, overcoming some of the problems in analysing SARS CoV-2 spike (S) protein. 

The EIS Fund first invested £1 million in February 2019 alongside Oxford Sciences Innovation. In 2020 the EIS invested an additional £1.8 million as part of a larger round led by Northpond Ventures, a $1 billion US Life Sciences fund, Oxford Sciences Innovation, the University of Oxford, and Hong Kong-based Horizon Ventures. 

A successful Series B round in April 2022, in which Foresight participated, means the EIS fund's initial investment is now held at 6.4x cost. Past performance is not a guide to the future.

Codeplay – example of recent exit

Codeplay was founded in 2002 by CEO Andrew Richards to develop tools allowing software to run across multiple pieces of hardware systems.

The company started out working on video games but has since developed tools to allow AI processes to be run across systems from multiple providers – promoting competition from manufacturers of less expensive chips. 

The Foresight WAE Technology EIS first invested in April 2018. Post investment, Foresight WAE assisted the company in refining its strategy, making experienced hires and accessing the automotive market – opening up an industry which is traditionally difficult to access for smaller companies. 

In June 2022, computer chip giant Intel announced plans to buy Codeplay, resulting in a 16x return for the EIS fund. The fund realised gains worth £16.6 million. Past performance is not a guide to the future.

Example of previous failure

As is to be expected when investing in early stage businesses, not all investments work out, and to date the Foresight WAE EIS Fund has had one failure, FreeFlow Technologies.

FreeFlow developed a light power-to-weight E-Bike motor, resulting in an e-bike that looked and rode like a normal bike. At its core was an innovative, patent protected transmission system that could be serviced at any bike shop in the world with standard tools.

The Foresight WAE Technology EIS invested £1.7 million in 2018, with a further small investment in 2018 to help the company to accelerate commercialisation and optimise the e-bike system. However, the company was ultimately not successful and entered administration in early 2024.

Performance

Since launch in 2016, the EIS fund has invested £52.2 million into 35 companies and generated exit proceeds of £21.5 million, with a remaining portfolio balance of £59.1 million (December 2023). Past performance is not a guide to the future. 

The chart below shows the average performance of the total subscribed into the funds in each full tax year from 2012/13 (or from when the current strategy was adopted if later) to 2022/23. The chart is based on the latest valuations provided by the manager, expressed on a £100 invested basis. Please note, individual investor portfolios’ performance will deviate from the average.

Performance per £100 invested in each tax year

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.

Our view

The Foresight WAE Technology EIS aims to offer investors exposure to a portfolio of at least six early companies developing technologies within hardware and engineering. Meanwhile, the combination of a large asset manager and a cutting-edge advanced engineering business could make the fund a compelling destination for deep-tech entrepreneurs seeking funding.

The strategy has enjoyed some early successes. It has invested alongside some of the world's leading venture capital investors and achieved its first two exits, delivering £21.5 million in proceeds. Please remember past performance is not a guide to the future and that, as with all EIS investments, there will also be failures.

We believe the distinct and disciplined sector focus sets the Foresight WAE Technology EIS apart from many peers and could make it an interesting addition to a portfolio for seasoned EIS investors. However, you should form your own view and it is also worth bearing in mind that companies in the sectors in which the fund operates tend to take longer to mature – potentially requiring greater patience from investors.

Wealth Club aims to make it easier for experienced investors to find information on – and apply for – investments. You should base your investment decision on the offer documents and ensure you have read and fully understand them before investing. The information on this webpage is a marketing communication. It is not advice or a personal or research recommendation to buy any of the investments mentioned, nor does it include any opinion as to the present or future value or price of these investments. It does not satisfy legal requirements promoting investment research independence and is thus not subject to prohibitions on dealing ahead of its dissemination.