British Robotics Sidecar Fund

You’ve probably had dealings with a robot recently. Whether it’s contacting your mobile phone provider, having an online order picked for you, or even getting a prescription dispensed from a pharmacy, chances are a robot has been involved. 

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 it is to use manual labour. The global robotics industry is forecast to expand from $34.1 billion in 2016 to $226.2 billion by 2021.

What’s bad news for workers could be good news for investors, especially for those prepared to take some risk.

That’s why Dominic Keen launched the British Robotics Sidecar Fund, in conjunction with Sapphire Capital Partners LLP. It is an SEIS/EIS fund that invests in and supports UK robotic startups. It follows on from the British Robotics SEIS Funds which launched in 2016 and 2017.

The UK – alongside Canada, Japan, South Korean and the US – is at the forefront of robotics. UK universities are home to some of the best robotics labs and incubators in the world. The fund affords investors exposure to a fast-growing sector that is otherwise hard to access. Much of the development in British robotics to date has happened within universities or large corporations. 

Highlights

  • Hybrid SEIS/EIS offer – with a minimum of 75% invested in SEIS-qualifying companies
  • Targeting 3x return before tax relief – not guaranteed
  • A portfolio of five to seven early-stage robotics companies, not guaranteed
  • A fast-growing sector, capitalising on Britain’s strength in robotics development 
  • Minimum investment £10,000

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 apply

The offer

The fund is the brainchild of Dominic Keen, a British technology entrepreneur who holds a Masters in Engineering from Cambridge University. His company, High Growth Robotics ("HGR"), sources deals for the fund. He began his career in venture capital and in 2006 founded software business mPorium. Dominic has experience both in robotics and in developing early-stage businesses.

Watch a video interview with Dominic Keen of Britbots:

This video was recorded in September 2018

Investors can expect a portfolio of five to seven early-stage robotics companies. The majority will be invested in new SEIS-qualifying opportunities, with the remainder used to provide scale-up funding to EIS companies from the first two funds’ portfolio or other eligible EIS-qualifying companies. In the last three years, around 80% of the SEIS portfolio has received follow-on funding. Where possible, the fund will aim to mirror the British Robotics Seed Fund 2.

Investee companies will have an emphasis on Robotics as a Service (RaaS), a relatively new concept. Historically, robots were built to perform a single task such as welding a car door. The hardware was costly and the robots could not develop beyond the task they were designed to perform. A company would buy, maintain and repair a robot and then ultimately be responsible for disposing of the equipment.

However, with cloud computing and global open source code developers are now able to program and control robots remotely. This has brought about the concept of Robots as a Service. Instead of buying a robot or a fleet of robots, a company can pay a monthly service fee or subscription to a robotics firm, based on the output they need to accomplish. The customer does not suffer from a capital-intensive outlay and can develop its own automatic processes rather than relying on pre-built solutions.

Falling hardware costs (thanks to 3D printing and improved modelling) coupled with more advanced cognitive computing technology have begun to deliver RaaS as a reality.

The fund aims to deploy between £95,000 to £130,000 per investment alongside co-investment partners and government grants. Note the hybrid nature of the fund means the tax relief should be a blend of mainly SEIS but some EIS relief.

Investment strategy 

Mr Keen looks for businesses with four characteristics: 

  1. Passionate, competent entrepreneurial management teams 
  2. Credible business concepts and strategy
  3. A reasonable level of business risk
  4. Potential for lucrative exits

The business model must have the potential to deliver at least 200% performance improvement versus existing solutions to the same problem.

Companies will be sourced mainly through the relationships Mr Keen has with over 14 universities, including Imperial College Dyson Robotics Laboratory, Oxford Robotics Research and Cambridge Computer Vision and Robotics. The arrangements they have are non-exclusive. Before finalising an investment, HGR takes a view on whether the company will require minimum capital investment from a prospective buyer. The business must be able to generate revenues within twelve months of the first investment and aim to achieve an exit within eight years - these are the characteristics sought, although not all will deliver that. 

The investee companies are likely to be spread across a range of activities: healthcare, farming, agriculture, logistics, construction and civil engineering and low-volume manufacturing.

After investing, HGR will support and mentor the companies and help them with the commercial aspects of developing a business.

Businesses that fail will be wound up or HGR will attempt to sell the IP. However, there is unlikely to be much value in the IP of the businesses which don’t pan out as expected. 

There are several exit options, including a listing, trade sale or a sale of the entire portfolio - exit options and timeframes are not guaranteed. 

Performance 

The Sidecar fund is in its second year; the first fund deployed capital but there is no track record of exits; past performance figures are not available. 

Example portfolio companies

Note these are examples only from the first fund and may not be held by the fund. They should not be regarded as an indication of the performance of future investments in the fund.

Tethered Drone Systems

One of the biggest constraints of free-flying drones is their limited flight time. However, Tethered Drone Systems has bypassed this concern by designing a lightweight tether which can transmit ground generated power to maintain stable and continuous flight. The technology has potential in a number of sectors such as aerial surveillance, communications and broadcasting. 

Zoa Robotics

Zoa Robotics creates low-cost highly mobile four-legged robots. The robots have been designed to transport materials and inspect unmanned facilities. The team is currently preparing for tests with three industrial trial customers which should begin this year.

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 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

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.

Specific risks with this offer are as follows: 

  • High risk of losing capital – By definition, this is a high-risk investment which could result in a total loss, as well as having the potential to deliver high returns. In a portfolio of five companies, one might do very well (although there are no guarantees), but the others – or even all of them – might fail. 
  • No track record – As this a new offer, there is no performance history.
  • Follow-on funding – Investments of this nature often require follow-on funding. The additional funding rounds could carry dilution risk for existing investors.
  • Key man risk – The offer is reliant on Dominic Keen. There is no investment committee so Sapphire Capital Partners must be able to scrutinise Dominic Keen’s work.

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.

The British Robotics Sidecar Fund has informed us it aims to allot subscriptions received before 31 March 2020 in the 2019/20 tax year. This means the investment could be eligible for carry back to 2018/19. Please note, this is not guaranteed.

Our view

This is undoubtedly an exciting and fast-growing space. There have been some real success stories in robotics to date – although, please remember 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
31 Mar 2020
Last updated: 6 April 2019

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