Fuel Ventures SEIS Fund

New “Meet the manager” video – watch below

Fuel Ventures was set up and is run by Mark Pearson, founder of MyVoucherCodes, the online voucher code business. Since 2013, Fuel Ventures has invested £184.8 million into 148 EIS and SEIS-qualifying companies.

The SEIS Fund follows a similar strategy to Fuel Ventures’ EIS funds – to back fast-growing Software as a Service (SaaS) businesses, online platforms, and marketplaces – but at a much earlier stage.

Since launching its first SEIS fund in January 2021, Fuel has made £13.3 million of SEIS investments, currently valued at £15.9 million (January 2024). Past performance is not a guide to the future.

  • Target return 5x over 10 years – high risk and not guaranteed 
  • Targets 10-40 companies
  • Minimum investment £20,000 – you can apply online
  • Next deadline: 26 April 2024 for next close

Important: The information on this website is for experienced investors. It is not a 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: you could lose all the money you invest.


The manager

Fuel Ventures was founded in 2013 by successful entrepreneur Mark Pearson. He had previously founded online voucher code company, MyVoucherCodes, sold as part of parent company Markco Media for a reported £55 million. Whilst running MyVoucherCodes, Mark made personal investments in nine early-stage technology and software businesses. Fuel Ventures was born as a result of his experience with these businesses. 

Since its inception, Fuel has invested £184.8 million into 148 EIS and SEIS-qualifying companies – typically early-stage marketplaces, platforms and SaaS businesses – across its four funds: the SEIS fund, Follow-on EIS FundScale-Up EIS Fund and the Fuel Ventures VCT

Fuel Ventures has circa 23 full-time staff. There are seven investment professionals: three dedicated to EIS/VCT and four to SEIS. Both investment teams are overseen by Mark, who has the final say on investment decisions. An independent advisory committee adds challenge and rigour to the investment process. In addition, a fundraising team helps raise capital both for Fuel’s funds and its portfolio companies, whilst a talent team assists founders with hiring. 

Mark has historically invested between 5%-10% into each SEIS fund and has committed up to 5% in the current iteration. 

Fuel Ventures is the investment advisor to the fund. The investment manager is Sapphire Capital Partners LLP.

Before your subscription is invested, the cash will be held by the custodian, Mainspring Nominees Limited. Shares will be held by the nominee, MNL Nominees Limited.

What is the difference between the Fuel Ventures funds?

Fuel Ventures operates three funds, one SEIS and two EIS, each targeting investments in young digital businesses at different funding stages.

  • The Fuel Ventures SEIS fund invests in very early‑stage pre-seed funding rounds
  • The Fuel Ventures Scale‑up EIS fund invests in early-stage companies between Seed and Series A funding rounds, which could include deal flow from the SEIS fund
  • The Fuel Ventures Follow‑on EIS fund seeks to provide follow-on funding to what the manager considers to be the strongest performing companies from the SEIS and Scale‑up EIS funds. Fuel Ventures can also use its discretion to invest in new companies it believes are attractive.
  • The Fuel Ventures VCT is a new VCT focusing on early-stage digital businesses backed by Fuel’s other funds. It aims to invest in early-stage, revenue-generating, digital businesses, usually marketplaces, platforms, and SaaS companies. 

Meet the manager – watch our interview with Fuel founder Mark Pearson:

 

Investment strategy

The SEIS Fund follows the same core investment strategy employed across the Fuel Ventures EIS funds, albeit at an earlier stage. It invests in digital businesses Fuel Ventures believes have the potential to scale globally and are managed by exceptional founders. It seeks marketplaces, online platforms and SaaS companies. Fuel Ventures considers these businesses attractive as they tend to be easily scalable, have low costs per unit sold and, once a product generates revenue, typically growth is limited only by market demand, not by the ability of the business to supply it. 

Fuel Ventures aims to create value for investors by taking a hands-on approach, using its sector experience to help companies build products and services people want and need, and expand internationally. Note that as the number of companies backed by Fuel Ventures increases each year, any potential added value may be diluted without continued expansion of the team. 

Fuel Ventures’ SEIS Fund seeks to invest at the “pre-Seed” stage, with the potential of supporting investee companies with follow-on investments through its established EIS funds. 

Fuel Ventures’ hands-on support, combined with its ability to invest at an early stage and follow its money, may help attract the best entrepreneurs, who often have a pick of potential investors. This may provide the SEIS Fund, and subsequently the later-stage EIS funds, with enhanced deal flow, although this is not guaranteed.

Portfolio

Given the high-risk nature of SEIS investing, Fuel Ventures aims to build a diversified portfolio.

In the current tranche of the SEIS fund, investors are expected to receive a portfolio of at least 10 and up to 40 SEIS-qualifying companies – largely depending on the total raised in the tranche.

Across all its SEIS funds, Fuel Ventures has invested £13.3 million in 82 companies. Those investments are currently valued at £15.9 million (January 2024). 

Below are portfolio company examples from the previous funds. They are outlined to give a flavour of the types of companies you might expect but will not form part of a new investor’s portfolio. 

Correcto-Fuel-SEIS.jpgCorrecto

Correcto has developed an online language correction tool for written Spanish – the fourth most spoken language in the world. Using artificial intelligence, Correcto helps users write with impact by improving language and spelling in real time. 

Founded in 2021, the business achieved over 120,000 downloads in its first two years and now has 70,000 active users located across the US, Argentina, Colombia, Mexico and Spain. 

Fuel Ventures backed the business through its first SEIS fund in December 2021, investing £150,000. In September 2023, the business announced it had completed a €6.5 million funding round led by Octopus Ventures to invest in further AI and product development. Fuel’s investment is now valued at 6.5x  initial investment cost (January 2024). Past performance is not a guide to the future.

Claimit-Fuel-SEIS.jpgClaimit Software – recent investment

According to Claimit, up to 20% of courier invoices have errors. For businesses that use multiple couriers, the process of querying shipping invoices and managing claims can become a significant administrative burden. 

It is a problem serial entrepreneurs Andy and Dave Walker have experienced first-hand after noticing their teams were spending days at a time filing claims. In July 2023, the pair founded Claimit, a courier claims platform, to make the process of reconciling invoices and making claims more efficient using artificial intelligence. The platform claims it can reduce monthly shipping costs by as much as 15%.

The Fuel Ventures SEIS fund invested £242k in the business in October 2023 alongside venture investors Plug and Play Tech Centre and HEARTFELT_. 

Examples of previous exits and failures

The SEIS Fund is still comparatively young, having launched its first tranche in January 2021, so the track record remains limited and it has yet to experience any cash exits.

However, as is to be expected when investing in young businesses, failures often precede successes, and to date the funds has experienced one failure (detailed below). Please note, SEIS investments are very high risk, and you should expect some failures. 

Hibana – example of previous failure 

Hibana was founded during the COVID pandemic, by successful entrepreneur Peter Dakin and brand strategist Nick O’Quinn. They aimed to create a marketplace for independent brands, replicating the shop browsing that had disappeared during lockdown. 

By May 2021, when Fuel Ventures invested £115,000 through its SEIS fund, the website already listed over 75 brands from across the UK. 

While Fuel continues to believe both the technology and the founders were strong, the route to market proved more difficult than expected and cost of acquiring customers too high. As a result, Hibana became insolvent and dissolved in July 2022 having not been able to raise further investment. 

Performance

Fuel has backed a total of 100 SEIS-qualifying companies: 18 through its EIS funds and 82 through the SEIS fund, which launched in January 2021.

Of these 100, 27 are valued above cost, at an average unrealised return of 6.6x, while 65 are held at cost, one is held below cost and seven have failed.  Past performance is not a guide to the future.

The chart below shows the performance of SEIS qualifying investments made through the EIS fund for tax years 2015/16–2020/21 and made through the SEIS fund thereafter. The chart is based on the latest valuations provided by the manager, expressed on a £100 invested basis. Please note, individual investor portfolios’ performance will deviate from the average.

Performance of SEIS-qualifying investments per £100 (18 companies)

Performance of Fuel SEIS Fund after launch per £100 invested (77 companies)

Source: Fuel Ventures, as at 29 January 2024. Past performance is not a guide to future performance. The chart shows realised returns (where share proceeds have been returned to investors as cash) and unrealised returns (where cash has not yet been returned and the value of the investments is based on the manager’s own valuation methodology). There is no ready market for unlisted shares. The figures shown are net of all fees and do not include any income tax relief or loss relief.

Risks – important

This, like all investments available through Wealth Club, is only for experienced investors happy to make their own investment decisions without advice. 

SEIS investments are high-risk and should only form part of a balanced portfolio. As must be expected with early-stage investments, some or even all of the companies in the portfolio could fail: the fewer the companies included in the portfolio, the higher the risk of loss if things don’t go to plan. You should not invest money you cannot afford to lose.

There is no ready market for unlisted SEIS shares: they are illiquid and hard to sell and value. There will need to be an exit for you to receive a realised return on your investment. Exits are likely to take considerably longer than the three-year minimum SEIS holding period; equally, an exit within three years could impact tax relief.

To claim tax relief, you will need SEIS3 certificates, normally issued once shares have been allotted. This can take several months: please check the deployment timescales carefully. Tax reliefs depend on the portfolio companies maintaining their SEIS-qualifying status. Remember, tax rules can change and benefits depend on circumstances.

Before you invest, please carefully read the Risks and Commitments and the offer documents to ensure you fully understand the risks. 

The fund relies heavily on the knowledge and experience of Mark Pearson. He is wholly committed to Fuel Ventures, but there is key-person risk. As the number of companies grows, he will not be able to provide the same level of coaching and support to all.

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 5%
Wealth Club initial saving
Net initial charge through Wealth Club
Annual management charge
Administration charge
Dealing charge
Performance fee 30%
Investee company charges
Initial charge
Annual charge 1%
The fees and charges above are stated exclusive of VAT, which applies in some cases, as determined by the manager. Please check the VAT position carefully in the provider documents. 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

Our view

In our view, the SEIS fund is a natural addition to Fuel Ventures’ existing offering. 

Previous SEIS funds have now invested over £10 million and enabled Fuel Ventures to build a portfolio of 82 SEIS-qualifying companies. This has helped establish Fuel Ventures as a destination for entrepreneurs seeking SEIS funding.

Fuel Ventures’ investment strategy of focusing on marketplaces, platforms and SaaS companies, providing hands-on support, and potentially follow-on funding from Fuel’s EIS funds, could prove a compelling combination to attract high-calibre entrepreneurs.

The offer could appeal to experienced investors looking to complement a wider investment portfolio with exposure to a selection of early-stage digital businesses under SEIS.

Wealth Club aims to make it easier for experienced investors to find information on – and apply for – investments. You should base your investment decision on the offer documents and ensure you have read and fully understand them before investing. The information on this webpage is a marketing communication. It is not advice or a personal or research recommendation to buy any of the investments mentioned, nor does it include any opinion as to the present or future value or price of these investments. 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
5x
Funds raised / sought
-
Minimum investment
£20,000
Deadline
26 Apr 2024 for 2024/25 deployment
Last updated: 28 February 2024

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