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 Sidecar (SEIS) and Scale-Up (EIS) funds have invested over £3.5 million into a portfolio of 24 companies. Of these, 16 have graduated into the EIS fund, British Robotics Scale-Up Fund.

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.

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Highlights

  • 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 manager

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 Alex Pejacsevich. 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. 

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:

 

Investment strategy

Across the globe, the robotics industry is reaching a tipping point. It is now in some cases 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, most 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 most 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. 

Target return

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) .

Exit strategy

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 expected to be a trade sale but other methods such as an IPO may be avaiable. 

To date, there have been no exits or failures. However, these are high-risk investments so you should expect several failures in the portfolio.

Portfolio

Since launching its first SEIS fund in 2017, British Robotics has invested over £3.5 million in 24 investee companies, 16 of which have received funding from the EIS fund. 

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. 

Muddy Machines – BritbotsMuddy Machines

Muddy Machines was founded in 2020 by Florian Richter and Chris Chavasse.

The company is developing a robot that can harvest crops, tackling the current labour-intensive approach to harvesting. In Britain alone, 80,000 migrant workers are required each year during harvest season. Florian's family owns a large farm in Portugal and started Muddy Machines to help bring modern technologies to agriculture. Chris previously held engineering roles in robotics divisions of Dyson and Deliveroo.

 The company’s first prototype is an asparagus harvesting robot, called Sprout. Asparagus harvesting is thought to be one of the most labour-intensive crops to harvest. Asparagus can grow 16 cm in a single day during its 12-week season and therefore requires daily harvesting. For the past year, Muddy Machines has been testing and developing Sprout on a farm in Herefordshire which produces over half the asparagus grown in the UK. Sprout can now identify and distinguish asparagus spears from weeds, as well as grab and cut individual spears. The business now seeks to increase its harvesting speed and up-time in the field.

The fund first invested £130k into the business in March 2021, as part of a £430k funding round. Funds are expected to be used to support further research and development.

Humanising Autonomy – BritbotsHumanising Autonomy

Humanising Autonomy is a predictive AI company that aims to improve the way vehicles and systems interact with people in any environment.

Its software combines behavioural psychology, statistical AI, and novel deep learning models to predict human behaviour and intent using only visual camera footage (dash cameras, CCTV, infrastructure cameras, on-board vehicle cameras).

It can identify more than 150 characteristics of human behaviour, 10x more than current alternative techniques, allowing for faster, more accurate and robust predictions of intent and improving the road safety and journey times of autonomous vehicles as a result.

The fund first invested £80k in April 2018 as part of a £320k funding round at a £1.3 million pre-money valuation. Since then, the business has secured paid trials and partnerships with companies such as Airbus, Daimler, Arriva, Siemens and Nissan, as well as Transport for London. Humanising Autonomy raised $5 million in June 2019 at a £11 million valuation and has since raised a further $11 million in October 2021. The investment is currently valued at 13.8x investment cost. Past performance is no guide to the future.

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. 

Performance

The chart below shows the average performance of the total subscribed into the fund each tax year, based on valuations as 16 November 2021, expressed on a £100 invested basis. Please note, individual investor portfolios’ performance will deviate from the average.

Source: British Robotics, as at 16 November 2021. 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. 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-person 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.

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. 

Investor charges
Full initial charge
Wealth Club initial saving
Net initial charge through Wealth Club
Annual management charge
Administration charge
Performance fee 25%
Investee company charges
Initial charge 3.9%
Annual charges See below
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 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.

 Our view

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 capital. While the core team is very small, the fund has a track record of providing investors with a portfolio of interesting, very early-stage, robotics-based businesses.

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.

Read important documents and 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
Technology
Target return
3x
Funds raised / sought
£2.0 million sought
Minimum investment
£10,000
Deadline
Discretionary
Last updated: 1 December 2021

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