Fuel Ventures SEIS Fund
As at 14 April 2022, the Fuel Ventures SEIS Fund is closed.
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Fuel Ventures, the well regarded early-stage investor behind the popular Fuel Ventures Scale-up EIS and Follow-on EIS funds, has launched the second tranche of its SEIS fund.
Fuel Ventures aims to back fast-growing digital businesses and use its first-hand operational experience to accelerate their growth. Three previous investments appeared in the Deloitte Fast50 2021, a list of the UK’s fastest-growing private technology companies.
Fuel Ventures was set up and is run by Mark Pearson, founder of MyVoucherCodes, the online voucher code business. Mark reportedly sold myVoucherCodes for £55 million in 2014. He’s since invested personally in several early-stage digital businesses and set up Fuel Ventures in 2013.
The first SEIS tranche launched in January 2021 and has to date invested £3.2 million into 24 companies (February 2022).
Prior to launching its SEIS fund, Fuel completed 17 SEIS-qualifying investments which now show an average unrealised return of 6.22x (January 2022). One company is worth more than 20x, eight are worth more than 5x, three 2.5x–5x, and one is held at cost. Please note past performance is not a guide to the future.
The Fuel Ventures SEIS Fund (tranche 2) will seek to invest in at least 10 and up to 60-80 businesses, depending on fund size. Fuel Ventures targets companies it believes have global potential and are run by exceptional founders. The most successful may then receive follow-on investment from Fuel Ventures’ EIS funds.
- Focus on very early-stage digital businesses with global potential
- Founder Mark Pearson will personally invest a minimum of 5% of the total amount subscribed into the fund
- Fuel has a good track record to date: note past performance is not a guide to the future
- Targets at least 10, but potentially up to 60-80, companies with an expected holding period of ten years or longer – not guaranteed
- £8 million maximum capacity
- Minimum investment: £20,000, you can apply online
Mark Pearson’s background is not that of a typical fund manager. He left school to become a chef at 16. By 19 he had won a national catering competition and begun working at Claridge’s restaurant, at the time under Gordon Ramsay. Three years later, he was running three gastropubs in south London.
In 2006, he founded online voucher code company MyVoucherCodes and subsequently sold it – as part of parent company Markco Media – in a deal reportedly worth up to £55 million. At that point, the business had revenues of over £12 million and employed more than 120 people.
Whilst running MyVoucherCodes, Mark made personal investments into nine technology and software businesses run by talented founders, which Mark felt he could help scale up. Many have been successful and delivered substantial returns on investment. An early example is Paddle, now one of the UK’s fastest-growing private technology companies.
Since its inception in 2013, Fuel Ventures has raised more than £85 million and invested in over 60 companies. It runs three complementary funds: Fuel Ventures SEIS fund, which invests in very early-stage seed funding rounds, Fuel Ventures Scale-up EIS fund, which invests in early-stage companies between Seed and Series A funding rounds, and the Fuel Ventures Follow-on EIS fund, which seeks to provide follow-on investment to the strongest-performing companies from previous portfolios.
Fuel Ventures continues to expand its team, which now consists of 24 individuals (up from 11 in December 2020) and is led by five senior team members. Mark Pearson serves as Managing Partner alongside two partners and two principals, each with backgrounds in venture capital, private equity, and entrepreneurship.
Mark Pearson will be personally investing up to 5% of the total amount raised for the fund.
Fuel Ventures is the investment advisor to the fund. The investment manager is Sapphire Capital Partners LLP.
The SEIS fund will follow the same core investment strategy employed across the Fuel Ventures EIS funds, albeit at an earlier stage. It will invest in very early-stage digital businesses Fuel Ventures believes have the potential to scale globally and are managed by exceptional founders. It seeks marketplaces, platforms and Software as a Service (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.
Central to the investment strategy is Fuel Ventures’ hands-on approach. From the beginning, the investment team aims to create value by using its experience to help companies build products and services people want and need and expand internationally, maximising the potential value for acquisition or listing opportunities – not guaranteed.
Fuel Ventures’ SEIS Fund seeks to invest at the “pre-Seed” stage, with the potential of supporting their growth 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 investors from which to choose. This may provide the SEIS fund, and subsequently the later-stage EIS funds, with enhanced deal flow, although this is not guaranteed.
The manager is targeting a return of £5 per £1 invested after 10 years, net of all costs and performance fees, not guaranteed.
The fund expects to hold investments 10 years or more (not guaranteed). Following any sale of qualifying shares in a company, the sale proceeds will be paid out to investors, so any distributions from the fund are likely to be paid over a period of time, not guaranteed.
Fuel Ventures has indicated it is developing a secondary market for investors in its funds. If so, this might provide additional exit opportunities for investors who wish to sell their holdings, provided a buyer can be found.
Given the high-risk nature of SEIS investing, Fuel Ventures is keen to build a diversified portfolio.
In the current tranche, investors are expected to receive a portfolio of at least 10 and up to 60-80 SEIS-qualifying companies. The size of the portfolio will largely depend on the total raised in the tranche (target of up to £8 million).
Since closing its first tranche in 2021, the fund has invested £3.2 million into 24 companies. Fuel expects the first tranche to be fully deployed within the current tax year.
Below are portfolio company examples from the first. 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.
Glorify is all-in-one design software that helps individuals and small businesses create professional branding and imaging.
The platform offers a range of stock libraries, providing users with access to millions of free images, icons, and design options. So, with only minimal experience, businesses can transform images and products into customised, professional designs in just a few clicks. In addition, Glorify has a pipeline of new features it expects to roll out shortly, including animation capabilities and a global branding kit.
The service has already attracted more than 180,000 users, having only launched in 2020, and operates via a subscription model in addition to a limited free offering.
The fund invested £150,000 into the business in July 2021.
With the boom in remote working, access to tech support has never been more important. To meet this need, NerdApp has created a network of carefully vetted technicians able to offer on-demand remote or on-site IT support within minutes.
Through its service, users can “book a Nerd” for simple issues such as setting up Netflix all the way up to end-user support for businesses. Currently, the company is active in 34 countries, has a network of more than 200 technicians and a resolution rate of 99.1%.
The fund invested £150,000 into the business in October 2021.
Examples of previous exits and failures
The SEIS fund launched its first tranche in January 2021, so the track record remains limited. It has not experienced any exits or failures to date. Please note, SEIS investments are very high risk, and you should expect some failures.
The first tranche of the SEIS fund, launched in January 2021, has invested £3.2 million into 24 companies. All these investments are currently held at cost.
Prior to launching the SEIS fund, Fuel invested in 17 companies that were SEIS-qualifying at the time of its initial investment.
The average unrealised return from those 17 investments currently stands at 6.22x (January 2022): one investment is worth more than 20x, eight more than 5x, three 2.5–5x and one is held at cost – see the performance by tax year below. Past performance is not a guide to the future.
Performance of Fuel Ventures' previous SEIS-qualifying investments per £100 invested in each tax year
Source: Fuel Ventures, as at 5 January 2022. Performance figures are supplied by Fuel Ventures and are net of all fees, based on Fuel Ventures’ valuation methodology. Past performance is no guide to future performance. These figures do not include any realised returns (exits) as there have not been any.
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 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.
The fund relies heavily on the knowledge and experience of Mark Pearson. He appears wholly committed to Fuel Ventures, but there is key-person risk. Equally, as the number of companies grows, he will not be able to provide the same level of coaching and support to all Fuel Ventures portfolio companies.
This 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.
Any exit is likely to take considerably longer than three years: the fund has an expected minimum 10-year lifetime.
Investors in the current tranche could receive a portfolio of at least 10, but up to 60-80, companies and a corresponding number of SEIS 3 certificates (one per company).
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.
|Full initial charge||—|
|Wealth Club initial saving||—|
|Net initial charge through Wealth Club||—||Annual management charge||1%|
|Performance fee||30%||Investee company charges|
|Initial charge||—||Annual charge||1%|
More detail on the charges
Timing of the offer
Fuel Ventures anticipates taking up to 12 months to fully deploy investor capital. This is not guaranteed; it may take longer.
Fuel has been investing in SEIS companies since 2015, completing 17 SEIS-qualifying investments before launching its dedicated fund.
In our view, the SEIS fund is a natural addition to Fuel Ventures’ existing offering. The fund seeks to build a diversified, but high-risk, portfolio of at least 10 and up to 60-80 SEIS-qualifying digital technology companies.
Fuel Ventures has shown an ability to identify and back some of the UK’s fastest-growing digital startups. This has created an encouraging early track record: nine of the 17 SEIS qualifying investments are currently valued at over 5x unrealised return. However, please note, these are long-term, high-risk investments and past performance is not a guide to the future.
Mark Pearson has a clear passion for digital businesses. He has a wealth of experience in building such companies, having previously grown MyVoucherCodes.co.uk from the ground to a £12 million revenue company, which he sold via its parent for a reported £55 million. Mark is actively involved in each portfolio company, lending his expertise and experience and will invest in the fund on the same terms as investors.
Fuel Ventures’ investment strategy of focusing on marketplaces, platforms and SaaS companies, providing hands-on support to its investee companies, and potentially follow-on funding from Fuel’s EIS funds, could prove a compelling combination for attracting 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 – 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.
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