Daedalus KERB SEIS Fund

Deadline: 30 Jun 2018

The Daedalus KERB SEIS fund hopes to develop successful street food vendors into permanent restaurant businesses. To do so, Daedalus has partnered with leading restaurant and catering industry professionals to help identify the best street-food businesses capable of progressing into small restaurant chains.

Highlights

  • Experienced restaurant advisory team includes industry experts and Michelin-award winning chefs
  • Opportunity to capitalise on emerging consumer dining trends using trade insights gathered from KERB’s six London street markets  
  • Large deal network with access to over 80 traders
  • Investee companies must have advanced assurance
  • Planned target return of 3x original investment (not guaranteed)
  • Minimum investment £10,000

The offer

Street-food stalls are an ever-increasing consumer favourite. Every day, thousands flock to food markets across the UK to experience quick, diverse and exciting cuisines. The more successful traders have the potential to put down roots as established brick and mortar restaurants. 

KERB Food is a leading London street-food market operator. It has six markets in the city (from Paddington to Camden Market) and unrivalled access to over 80 different food vendors. Kerb’s market at Camden operates 364 days a year and is responsible for over £9 million of food sales annually, with its most successful traders generating turnover in excess of £300K per annum from 6ft x 10ft stalls.

KERB has joined forces with Daedalus Partners LLP to create the KERB SEIS fund, to take the more successful traders to the next level. 

It is seeking to raise a maximum of £1.5 million, with a targeted portfolio of 4 to 10 individual companies, depending on the funds raised. The capital will be used to invest in opening the first restaurant site for each investee company. 

The selection process begins with identifying the most successful vendors across the six KERB food markets. Each trader uses KERB’s EPOS (Electronic Point of Sale) system to provide continuous data regarding the latest trends and popularity of individual vendors. Importantly, this allows KERB to assess the effective appeal and viability of each business, and provides valuable insight into the concept potential, consumer popularity and feasibility of developing a fixed site business. The investment selection is then further whittled down by the management team.

The fund hopes to return 3x the original investment. However, this is not guaranteed: capital is at risk. 

The management team

As well as KERB itself which provides street food expertise, there are two other elements to the management team. 

The first is the Restaurant Adviser to the fund. A key figure is Jonathan Kaye, the founder of Prezzo and the current CEO of Richoux Group PLC, which operates 17 restaurants across three different brands.  Further restaurant experience will be provided by the joint partnership of chefs Jon Rotherham and Tom Harris, who recently established the well-regarded Marksman restaurant in Hackney.

The second is the investment manager, Daedalus Partners. Daedalus was co-founded by Stephen Norton in 2011. A chartered accountant, Norton was the previous Head of Finance at FilmFour and has now managed over £130 million in EIS and SEIS qualifying investments. Daedalus has a good track record in the industry, having successfully funded the new restaurant business, Harris, Rotheram & Co. Limited. In 2015, the company re-launched the Marksman restaurant in London, which then went onto beat 500 pubs across the UK and Ireland to win the Michelin Pub of the Year 2016. 

Daedalus has also successfully established SEIS funds in the technology and media sectors. Its Tesseract Interactive SEIS fund focuses on video game development and has had a number of successes including the video game, Calvino Noir, which received significant featuring on the IOS App Store.  

Please note, these are previous examples in different sectors: they should not be regarded as an indication of future performance. 

The opportunity

Over the past five years the food truck business has seen a revenue increase of 12.4% and grown into a £1.2 billion industry. The industry already has several success stories of small vendors developing multi-site established chains. Two examples are Pizza Pilgrims and Meat Liquor.  

Pizza Pilgrims began as a £10/day market stall but by focusing on authentic Italian cuisine and establishing a loyal customer base they have grown the business from a single mobile truck to 8 permanent pizzerias across London and Oxford.

Meat Liquor is one of the largest success stories to come out of the restaurant pop-up movement. The company started with a £3000 burger van but now has over 11 locations across England and is expecting to generate a turnover of £12 million this year.

To support the companies as they grow, a member of the management team will take a seat on the company board. Each company will benefit from continued industry and business expertise provided by the advisory team.

Target Return and exit strategy

The target return is 3x the original investment after a period of 3 to 5 years however this is not guaranteed. A performance fee will be paid once investors receive 125p per 100p invested in each company. 

The management team expect to be able to offer a range of exit options. If successful, each trader will be launching a physical restaurant and then looking to establish multiple sites within a 1-5 year timeframe. For those that achieve this, a trade sale or management buyout are likely strategies. 

Currently, Daedalus are managing the exit of their first EIS/SEIS funds by way of share capital reduction. However, this is not indicative of future success. Exit and timeframes are not guaranteed.

Risks

As with all SEIS, this is a very high risk offer. SEIS companies are small and therefore are at greater risk of failing than larger companies. Capital is at risk: you should not invest money you cannot afford to lose. Furthermore, SEIS investments are illiquid and as such as harder to sell. To receive the full tax benefits from an SEIS investment, an investor must hold the shares for a minimum period of three years. Tax rules can change and tax benefits depend on circumstances. 

Specific risks with this offer are:

  • Loss of capital: there is no guarantee that a popular street food concept will translate to a successful permanent restaurant.
  • Key person risk: the majority of street-food vendors are founded by individuals or a small group. If a key founder were unable to continue within the business it may not be possible to replace them.
  • Competition: casual dining companies experience heavy competition. There is no guarantee that a business will maintain success throughout the term of the investment and other companies can impact upon profitability. 

Fees

There is an initial charge of 6%. There is a fixed annual Monitoring Fee of £2,250 and an annual custodian fee of 0.15%. These fees are paid by the investee companies. There is a performance fee of 25% once investors have received a return of at least 1.25x their gross investment.  Please see the provider’s documents, including Key Information Document, for more details on the fees.

Our View

The street food market could be an exciting place to invest. Investors to this fund will benefit from a dedicated management and advisory team who will provide selected companies with advantages not typically available to the competition. In addition, the broad industry network available will allow for exclusive business insights and capitalisation on emerging market trends.

The fund also benefits from a thorough selection process, only vendors with the most potential for profitability and growth are considered. 

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. May 2018

The details

Type
Fund
Sector
Leisure
Target return
3x investment
Funds raised / sought
£1.5 million sought
Minimum investment
£10,000
Deadline
30 Jun 2018

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