British Design Fund 4 SEIS/EIS

The British Design Fund (“BDF”) was created to support entrepreneurs in launching and scaling innovative physical products.

BDF’s core team has a strong background within the product, retail, and manufacturing sectors. This experience will be used to help portfolio companies scale their businesses and enter new markets. Each investee company will receive a considerable amount of mentorship from the core team and BDF’s network of industry experts.

This is the fourth EIS/SEIS fund launched by BDF and it aims to invest at least £150,000 in a minimum of 10 companies.

Important: The information on this website is for experienced investors. It is not advice nor a research or 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, so you could get back less than you invest.

Read important documents and then apply

Highlights

  • Invests in the UK product design and manufacturing sectors
  • Investors are expected to hold a minimum of 10 portfolio companies 
  • Mixture of EIS and/or SEIS investments
  • Target return of £3 per £1 invested after six years – not guaranteed
  • £20,000 minimum investment - you can apply online

The manager

BDF was founded in 2017 by a team of experienced design experts and entrepreneurs. The team is headed by Damon Bonser, a serial entrepreneur with over 15 years’ experience in building and running product design and manufacturing businesses. The fund’s chairman and co-founder, John Mathers, is the former CEO of the Design Council and has more than 40 years’ experience within the brand and design industry.

Other founding directors include David Motum, an experienced publisher within the events and media sector; David Kremer, co-founder of Rubik’s Brand Limited; and Jonathan Silverman, an IP specialist. 

BDF has also established its own mentorship programme, led by Adam Sutcliffe, an award-winning product designer and entrepreneur. The scheme brings together a team of industry experts to deliver bespoke support across BDF’s portfolio. 

Twenty20 Mentoring Limited (trading as British Design Fund) acts as the fund mentor, Sapphire Capital is the fund manager.

Investment strategy

The BDF invests in and supports early-stage, purpose-led, product design and manufacturing businesses. It works with entrepreneurs with scalable products who are ready to accelerate growth and build long-term shareholder value.

This iteration of the fund seeks to invest at least £150,000 in each investee company in return for c.5-20% equity, across at least 10 companies. Every company must be purpose-led, with a physical product that satisfies un-met but clearly defined needs. Founders must have excellent knowledge of their market and should be able to demonstrate clear market demand – this can take of the form of pre-orders, early sales or crowdfunding.

BDF will only invest if the company has developed a prototype and secured some level of IP protection. Furthermore, the companies should be realistically capable, in BDF’s view, of trading within 12 months after investment. For this reason, the investment team will avoid businesses with large R&D requirements, such as medical devices, which typically need to go through multiple lengthy clinical trials before they can trade.

Post-investment support – Twenty20 Mentoring Limited

BDF believes early-stage businesses need more than cash to succeed. As such, each investee company will be required to enter into a mentoring agreement with Twenty20 Mentoring Limited. Via Twenty20 Mentoring, the BDF team members will provide a comprehensive range of mentoring services to support the growth of the investee companies. Investee companies will be charged an annual fee equivalent to 4% of the sum invested by BDF per annum for mentoring services. 

Key areas of support provided are:

  • Market entry
  • Sales strategy and execution
  • Design
  • IP protection
  • Manufacturing and product development
  • Brand development
  • Finance and stock control

As part of the support each investee company is assigned a lead mentor, a board observer, and has access to a pool of sector expert mentors and coaches. 

Target return 

The fund targets a return of 3x after six years, however, this is not guaranteed.

Exit strategy

Exits may be achieved through a variety of routes – none of which are guaranteed. This includes trade sale, management buy-out or sale of shares to other shareholders. The target holding period is six years.

Portfolio

To date, BDF has invested c.£2 million into 16 companies (February 2022). 

The target for this fund is a portfolio of at least 10 companies, with approximately £150,000 invested in each. While the fund will only invest in companies with physical products, it is relatively sector agnostic although it is unlikely to invest within the medical sector due to strict clinical regulations.

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.

Matter Industries – British Design Fund.jpgMatter Industries

Synthetic fibres such as polyester and nylon now make up around 60% of clothing textiles. However, these materials contain microfibre plastics – small plastic-based threads thinner than human hair – and as much as 700,000 of these fibres can be released in every machine wash. These plastics not only contaminate ecosystems but also absorb harmful chemicals which can be toxic to aquatic life.

Matter Industries aims to fix the problem at its source – washing machines. Its founder, Adam Root, an award-winning engineer, initially designed a prototype using a £250 ‘will it work’ grant from The Prince’s Trust. Today, the product works as a filter, capturing the microfibres as they leave the machine. Furthermore, installation is simple and can be fitted to any washing machine without the need for a plumber. 

BDF had tracked the company’s growth for two years before investing £150,000 as part of a larger funding round in 2021 alongside US impact investor Builders Vision. This latest investment will help support ongoing product development and expansion of the commercial and engineering teams.

Cyclo – British Design FundCoco Worldwide Ltd (trading as Newlane)

Founded by Josh Cohen and Dominic Cotton (former BBC journalist), Newlane claims to have developed the first truly packable helmet made out of recycled waste.

Using a simple button on the helmet, a user can collapse its top “dome”, reducing the height by 60%, so it can fit in a bag or backpack. Importantly, the helmet surpasses both the EU and US safety standards.

Newlane has generated over £50,000 in pre-orders through an Indiegogo campaign with more 1,600 backers. Furthermore, the team has secured several letters of intent from large delivery companies and bike manufacturers.

BDF invested £125,000 (EIS) into the company in January 2021. The funding has been used to drive the B2C marketing strategy, develop new supply tools, and kick off an initial production run of stock.

Previous exits and failures 

To date, the fund has not achieved any exits nor suffered any failures, however, this is partly due to the fact it is still a relatively young portfolio. These are high-risk investments and you should expect some failures. 

Performance

The first BDF launched in 2017. 

The chart below shows the average performance of the total subscribed into the fund each tax year, based on valuations as at 22 January 2021, expressed on a £100 invested basis. Please note, individual investor portfolios' performance will deviate from the average.

Performance per £100 invested per tax year

Source: BDF, as at 07 February 2021. Past performance is no guide to future performance. These figures do not include any realised returns (exits) as there have not been any. In the above examples, initial tax relief of between 30-50% – remember tax rules can change and tax benefits depend on circumstances.

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 so should only form part of a balanced portfolio and you should not invest money you cannot afford to lose. They also tend to be illiquid and hard to sell and value. Before you invest, please carefully read the Risks and Commitments and the offer documents to ensure you fully understand the risks. 

Tax rules can change and benefits depend on circumstances.

This EIS/SEIS fund invests in early-stage businesses which are more likely to fail than larger ones. So you should expect a number of failures in the portfolio, or even be prepared for all companies to fail.

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
Administration charge
Performance fee 20%
Investee company charges
Initial charge 5%
Annual charges 4%
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 fund anticipates that subscriptions will be substantially invested within 12 months of the final close of the fund, although investments may fall within the 2023/24 tax year period.

The deadline for the offer is currently 27 May 2022, unless extended by the manager.

Our view

The British Design Fund operates in a sector in which the UK is a world leader. The BDF believes that despite this, the sector is underfunded – this is especially true of early-stage businesses – thereby creating an attractive opportunity for investors. 

BDF was set up to exploit such an opportunity, but whether it can capitalise on it and deliver investor returns remains to be seen. The BDF launched its first fund in 2017/18 so it has a limited track record. However, the investment team has considerable industry expertise and significant experience to be able to provide post-investment assistance and mentoring. This is likely to be attractive to founders seeking a supportive venture capital investor. 

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
Consumer
Target return
3x
Funds raised / sought
£2.5 million sought
Minimum investment
£20,000
Deadline
27 May 2022
Last updated: 11 March 2022

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