British Robotics Start-Up Fund

The Start-Up Fund is the British Robotics SEIS offering. Like its predecessors, the fund targets start-up robotics companies the manager believes can offer substantial productivity gains or cost savings through automation or labour replacement. The majority of these deals will be sourced through university robotics departments and industry contracts. 

This is a hybrid SEIS/EIS offer – a minimum of 60% is expected to be invested in SEIS-qualifying companies, although this is not guaranteed. To date, the British Robotics SEIS funds have invested £5.9 million into 41 companies, of which £4.7 million (80%) was SEIS-qualifying (January 2024).

• Target return of 3x over a holding period of 10 years – not guaranteed
  
• Targets a portfolio of seven to 12 companies aiming to deploy within 12 months of each closing date, not guaranteed
• Minimum investment £10,000 – you can apply online
• Next deadline: 30 September 2024

The manager

The British Robotics funds are managed by Sapphire Capital Partners LLP. High Growth Robotics Ltd (“HGR”) – a company focused on supporting UK robotics start-ups – will assist in the investment screening and mentor investee companies.

HGR was founded by Dominic Keen in 2016 and has mentored all of the British Robotics funds to date. It currently has £12.3 million in assets under management (January 2024).

An engineer by trade, Dominic has been advising early-stage technology companies for over two decades. He began his career assisting technology start-ups with go-to-market strategies before becoming Head of Venturing at Egg, the UK’s first internet bank. In 2006, Dominic co-founded MoPowered (which later became mporium), a mobile commerce business. He was CEO for almost a decade and led the company through its IPO in 2013 until its acquisition of Fast Web Media Ltd in 2015. Just over a year later, Dominic founded High Growth Robotics.

Dominic is supported by Alex Pejacsevich. Alex acts as the investment manager and is primarily responsible for deal sourcing and portfolio management within the SEIS funds. Together, they have also built a network of chair-people, mentors, and ‘business-builders’ who have significant technical and industry experience. They will help with sourcing deals as well as assisting and mentoring portfolio companies.

Before your subscription is invested into shares, the cash will be held by the custodian, Woodside Corporate Services Limited. Shares will be held by the nominee, WCS Nominees Limited. 

Investment strategy

Increasing constraints on the supply of labour and raw materials mean businesses are under greater pressure to improve productivity and automation. Consequently, technologies that allow “more to be done with less”, through the use of robotics or artificial intelligence, are in high demand.

The fund targets companies seeking to deliver large-scale productivity improvements through defensible and autonomous products. British Robotics favours capital-efficient projects and focuses on a ‘new class’ of robotics startups, combining sophisticated software with low-cost, off-the-shelf hardware. Under this model, product complexity is minimised, lead time is reduced, and the technology can remain affordable. 

Given the fund’s focus on SEIS-qualifying investments (a planned minimum of 60% of the portfolio) most companies are expected to be pre-revenue although the fund will avoid opportunities it considers too speculative. The fund sources deals through its own network as well as through its relationships with universities, accelerators, and publicly funded institutions. 

For companies that fit the brief, the fund will use its network of industry partners to conduct technical due diligence. In the meantime, the investment team will assess the commercial prospects and market opportunity. This process typically takes between 3-4 months from initial introduction.

Once a company has received investment, a significant proportion of the fund’s resources will be dedicated to management and mentorship. This is necessary given most founding teams are likely to be stronger on technical than commercial matters. The fund also assists with operational support, business development and go-to-market strategy. 

Portfolio

Since launching its first SEIS fund in 2017, British Robotics has invested £5.9 million in 41 investee companies through previous iterations of the Start-Up Fund. Of this, £4.7 million was SEIS-qualifying and £1.2 million EIS-qualifying.

Investors are expected to receive a portfolio of seven to 12 companies. Each will involve robotics or applied artificial intelligence; however, the fund will look to provide some diversification through sector and platform types where possible. The Start-Up Fund predominantly targets SEIS opportunities (a minimum of 60%, not guaranteed) but there is potential for a small proportion of the fund to be invested under EIS.

Below are portfolio company examples from previous iterations of the British Robotics funds. 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.

ACUA Ocean – recent investment

ACUA Ocean (“ACUA”) is developing a long-endurance uncrewed surface vessel, powered by liquid hydrogen.

Autonomous vessels have the potential to increase the scope and scalability of maritime operations by deploying for longer and requiring few, if any, crew members. According to ACUA, while some vessels exist, most have limited endurance or payload capabilities, making them unsuitable for true offshore operations. To travel further, many resort to high-emission diesel generators but ACUA avoids this issue by powering its vessels with liquid hydrogen, reducing operational CO2 emissions by more than 99% and offering greater reliability. 

ACUA’s vessel, which is being constructed in collaboration with Southampton Marine & Maritime Institute, will have a payload capacity of nearly 4.5 tonnes and can travel at four knots for over 40 days. It can be used for a range of monitoring tasks, from defence capabilities and border patrols through to environmental monitoring and protection.

The company launched as part of a government program to support the research, design, and development of zero-emission technology and infrastructure in the UK. As part of the scheme, ACUA received just under £250,000 in grant funding from the Department of Transport and Innovate UK. 

In May 2023, the company announced its intention to merge with HydroSurv. Both companies specialise in autonomous maritime systems and the merger will combine their expertise and technologies. 

The British Robotics Startup Fund originally invested £94,000 in the company in 2023 and has since provided further funding, taking its total investment to £189,000.

Muddy Machines

In Britain alone, 60,000 seasonal workers are required each year during harvest season, however, recent labour shortages have resulted in crop losses and millions of pounds of food wastage. 

Muddy Machines aims to tackle this. It is developing a robot that can harvest crops. 

The company’s first prototype, Sprout, is an autonomous harvesting robot. Sprout was originally developed and tested on an asparagus farm, one of the most labour-intensive crops. Through a combination of advanced sensor technology and cutting-edge AI, Sprout can accurately harvest for up to 16 hours a day. Multiple machines can also operate in a “herd”, offering a flexible approach to labour shortages.

Recently, the company was named 15th in the Startups 100 – the UK’s longest running index of promising startups. It has also seen significant government backing, receiving £3 million across five grants from the Department for Environment, Food, and Rural Affairs (DEFRA) and Innovate UK. 

The British Robotics Startup Funds have invested a total of £150,000 in the business, the holding is currently valued at c.£770,000. Past performance is not a guide to the future. 

Exit and failure examples

To date, British Robotics has not achieved any positive exits. However, failures tend to come before successes and to date the British Robotics funds have seen two. Tethered Drone Systems is an example. 

Based on technology spun out of the University of Southampton, Tethered Drone Systems developed continuously flying aerial systems for security and communication applications. The drones connected to a mobile ground station using a specialised tether, rather than relying on a traditional battery power supply, allowing almost indefinite flight time. 

However, the business was heavily dependent on a single customer, a branch of the armed services. At the start of 2022, an anticipated contract worth over £1 million was reallocated towards more immediate national defence priorities. As such, the business could no longer operate as a going concern and the company appointed liquidators in January 2023. 

British Robotics funds invested c.£260,000 into the company and the holding was completely written off.

Performance

The chart below shows the average performance of the total subscribed into the SEIS focused British Robotics 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/SEIS 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/SEIS 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 holding period; equally, an exit within three years could impact tax relief. 

To claim tax relief, you will need EIS3/SEIS3 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/SEIS-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. 

The offer is reliant on Dominic Keen so there is considerable key-person risk. Sapphire Capital Partners must be able to scrutinise Dominic Keen’s work.

Charges

A summary of the main charges 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 British Robotics Start-Up Fund specialises in early-stage companies within the robotics and artificial intelligence sectors. 

The fund offers exposure to both software and hardware opportunities. The investment team has followed the same strategy for over seven years and has consistently deployed capital within this mandate so far. 

Robotics is a niche industry and the specialist nature of the fund may be attractive for founders operating in this area. While the overall number of opportunities may be lower than those seen by a generalist fund, the investment team believes it reviews a larger proportion of suitable deals and can be selective with its portfolio. 

The team is experienced and has developed a network of industry partners to provide deal flow and to assist with technical due diligence and mentoring roles. However, at only two members, it is particularly small and has significant key-person risk in Dominic Keen, who oversees the portfolio. 

For experienced investors, this could be an interesting addition to a portfolio. However, these are very early-stage companies and there are considerable risks.

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.