British Robotics Sidecar Fund
The Sidecar Fund is the third British Robotics SEIS offering. Like its predecessors, the fund targets start-up robotics companies that 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.
To date, the British Robotics SEIS funds have invested over £3.5 million into a portfolio of 18 companies. Of these, nine have graduated into the EIS fund, British Robotics Scale-Up Fund.
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- Hybrid SEIS/EIS offer – a minimum of 75% expected to be invested in SEIS-qualifying companies
- Target return of 3x before tax relief – not guaranteed
- Focus on hardware companies in the robotics sector
- Portfolio of five to seven companies, not guaranteed
- Minimum investment £10,000 and you can apply online
The British Robotics funds are managed by Sapphire Capital Partners LLP. High Growth Robotics (“HGR”), a company focused on supporting UK robotics start-ups, will assist in the investment screening as well as providing mentors to investee companies.
HGR was founded by Dominic Keen in 2016 and has mentored all of the British Robotics funds to date.
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 left Egg to co-found MoPowered (which later became mporium), a mobile commerce business. He was its 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 two others: Alex Pejacsevich and Dr Eric Warner. Alex acts as the investment manager and is primarily responsible for deal sourcing and portfolio management within the SEIS funds. Additionally, he has legal training that should enable him to assist companies with any legal or governance issues. In contrast, Dr Warner will focus more on business development, particularly within the EIS portfolio.
The team also has access to four independent venture partners who have significant technical and industry experience. They will help with sourcing deals as well as assisting and mentoring portfolio companies.
Mr Keen has also recently established RAIA Ventures which will act as an extension of British Robotics. The RAIA fund is capable of taking investments which sit outside of the UK tax-wrappers and could offer an additional source of follow-on funding for those he considers to be the best performing portfolio companies.
Watch a video interview with Dominic Keen of High Growth Robotics:
Across the globe, the robotics industry is reaching a tipping point. For the first time, it is cheaper to own, operate and maintain a robotics system than to use manual labour. Consequently, the adoption of automation and improved productivity is becoming increasingly attractive, particularly to industries such as agriculture and construction which face rising labour costs.
As a result, the British Robotics Sidecar fund will target companies in those sectors capable of addressing practical problems. Ideally, businesses must be able to deliver improved quality and productivity for the same price or better and should be no more than a year away from finalising a product. The investment team will specifically target companies solving repetitive or tedious tasks and those with scope to develop into a platform with multiple applications rather than a single function.
Given the stage of investment, the majority of companies are expected to be pre-revenue although the fund will avoid opportunities it considers too speculative.
Robotics is a niche industry and the specialist nature of the fund may be attractive for founders operating in this area. Indeed, the fund receives a healthy level of deal flow from its university partnerships as well as its existing founder network. The overall number of opportunities may be fewer than those seen by a generalist EIS fund, however the investment team believes it reviews a larger proportion of suitable deals and can be selective with its portfolio.
For companies that fit the brief, the fund will use its network of previous founders and CTOs 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 to investment.
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 that the majority of founding teams are likely to be stronger on technical than commercial matters. To ensure the potential of a business is maximised, the fund assists with operational support, business development and go-to-market strategy.
The fund targets a return of £3 per £1 invested over three to six years, not guaranteed.
It should be noted that while the British Robotics EIS and SEIS fund have the same target returns, the underlying assumptions differ. Within the SEIS portfolio, it is expected that companies may achieve greater returns due to the relatively low entry valuation, however, this is balanced by a higher likelihood of failure. The converse is true of the EIS fund, with lower failure rates and lower growth potential expected (but not guaranteed) .
As these companies will be very early stage, it is anticipated the average holding period should be between 3-6 years, although it could be longer. The most likely exit routes are likely to be a trade sale but other methods such as an IPO may be suitable.
To date, there have been no exits or failures. However, these are high-risk investments so you should expect a number of failures in the portfolio.
Since launching its first SEIS fund in 2017, British Robotics has invested over £3.5 million in 18 SEIS companies and £0.75 million into nine EIS companies.
Investors are expected to receive a portfolio of between five and seven companies. Each will focus on robotics, however, the fund will look to provide some diversification through sector and platform types where possible. The Sidecar fund predominantly targets SEIS opportunities (a minimum of 75%) but here 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.
Flare Bright Limited
Based in Oxfordshire, Flare Bright Limited uses sophisticated machine-learning techniques to provide flight control systems for drones and unmanned gliders where GPS is unavailable.
The company was founded by Dr Kelvin Hamilton, a robotics specialist and entrepreneur. Kelvin spend the majority of his early career developing subsea autonomous robotics (which need to operate without GPS references or external controls) before transferring his experience to aerial applications.
Flare Bright is currently developing its first product, the SnapShot aerial camera. Snapshot is a micro drone which has been designed to capture instant aerial images in adverse weather or constrained aerospace. Furthermore, it is instantly deployable and requires no pre-flight preparation or training.
The British Robotics Sidecar Fund led a £500,000 round into the company alongside grant funding from Innovate UK. The funds will be used to support further R&D and commercial deployments in 2021.
Across the globe, it is estimated around 5 billion people use messaging apps every month. However, despite this popularity, many companies still restrict their communications to websites or separate applications.
To solve this problem, Futr has developed its own ‘chatbot’ which integrates directly with popular messaging apps (like WhatsApp) and voice devices (like Alexa). Not only are its products more accessible to consumers but it has designed its own natural language software, allowing users to simply ‘chat’ their requests.
Its first product, Chatamo, is a self-service platform that can generate a chatbot for sales and services within minutes. Its plug-and-play functionality removes the need for technical expertise while offering almost immediate 24/7 customer support. Alongside this, Futr has secured a number of project contracts within the public sector such as ‘botifying’ the 101 service for some police forces. The company fully launched its enterprise-grade system in May 2020 and has since steadily secured clients through a subscription model. Futr is forecasting annualised recurrent revenues of over £1 million by the end of 2021.
British Robotics first invested through its SEIS fund in 2017 and has since co-invested in a £2.4 million EIS funding round led by Praetura Ventures.
Exit and failure examples
To date, the fund has not achieved any exits or suffered any failures, however, this is partly due to the fact it is still a relatively young portfolio.
The graph below shows the performance of the first three British Robotics SEIS funds if you had invested £100 per tax year.
Source: British Robotics, as at 01 December 2020. Figures are net of all fees. Past performance is no guide to future performance. These figures do not include any realised returns which would be available through loss relief. In the above examples, initial tax relief of up to 50% could also apply. So, for the tax year 2017/18, the total return including initial tax relief would be £269, 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.
The offer is reliant on Dominic Keen so there is considerable key-man risk. Sapphire Capital Partners must be able to scrutinise Dominic Keen’s work.
Exits could take considerably longer than the three year minimum holding period.
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.
|Full initial charge||—|
|Wealth Club initial saving||—|
|Net initial charge through Wealth Club||—||Annual management charge||—|
|Performance fee||25%||Investee company charges|
|Annual charges||See below|
More detail on the charges
Timing of the offer
The fund anticipates taking up to 12 months to deploy the majority of investor capital. However, it may take longer to be fully deployed.
Ideally, the fund will have two closes each year, one in the summer and one towards the end of the tax year.
For experienced investors, this could be an interesting addition to a portfolio. The fund is a specialist within its sector which is likely to be attractive for founders seeking industry expertise. While the core team is very small, the portfolio companies have access to additional support from the fund’s venture partners.
The Robotics industry is an exciting and fast-growing space and there have been some real success stories in robotics to date. However, these are very early-stage companies and there are considerable risks.
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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.
- Target return
- Funds raised / sought
- £2.0 million sought
- Minimum investment