Fuel Ventures SEIS Fund

Fuel Ventures, the well regarded early-stage investor behind the popular Fuel Ventures Follow-on EIS Fund, has launched its first SEIS fund. 

Fuel Ventures was set up and is run by Mark Pearson, founder of MyVoucherCodes, the online voucher code business. Mark reportedly sold myVoucherCodes, via its parent company, for £55 million in 2014. He’s since invested personally in several early-stage digital businesses and set up Fuel Ventures in 2013. Fuel’s track record over this limited period (unrealised gains) has been impressive, although past performance is not a guide to the future.

Fuel Ventures aims to back some of the UK’s fastest-growing digital businesses and use its first-hand operational experience to mentor and accelerate their growth. Since its inception, Fuel Ventures has invested more than £50 million into 40 investee companies. 

17 of these were SEIS qualifying at the time of Fuel’s first investment and now show an average unrealised return of 4.6x (December 2020). One company is worth more than 10x, seven are worth more than 5x, three are worth 2.5–5x. Please note past performance is no guide to the future.   

The Fuel Ventures SEIS Fund will seek to invest in 20-30 SEIS qualifying digital technology businesses that Fuel Ventures believes have global potential and are run by exceptional founders. The most successful may then receive follow-on investment from Fuel Ventures Scale-up and Follow-on EIS funds. 

There is a maximum capacity of £4.5 million: the fund will close when it raises £4.5 million or on 31 March 2021. Please note: this fund is not expected to allot shares before the end of the 2020/21 tax year.

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

  • 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 by investors into the fund
  • Fuel has a good track record to date: note past performance is not a guide to the future
  • Targets 20-30 investee companies with an expected holding period of ten years or longer – not guaranteed
  • Aims to be fully invested within 12 months (not guaranteed)
  • £4.5 million maximum capacity
  • Exclusive minimum investment £10,000 (normally £25,000 for non-advised investors), you can apply online

The manager

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 had begun working at Claridge’s restaurant, at the time under Gordon Ramsay. Three years later, Mark 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. One example is Paddle, an ecommerce platform which helps developers distribute their software globally. Paddle ranked twelfth in the 2020 Sunday Times Sage Tech Track 100, which ranks Britain’s 100 private tech companies with the fastest-growing sales, having reported average three-year sales growth of 159.62%. Mark was the first seed investor into the business in 2014 and sold his stake in 2019 realising a return of 17x. He also achieved profitable exits from two other investments: Last Second Tickets (9x) and Playlists.net (4x). Fuel Ventures was born as a result of Mark’s experience with these early-stage businesses.

Mark is supported by a team of twelve experienced investment professionals with backgrounds in venture capital, private equity and entrepreneurship. Fuel Ventures has an independent advisory committee to add challenge and rigour to the investment process.

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

Watch our latest video interview with Mark Pearson of Fuel Ventures (please note the video is based on the Follow-On EIS Fund):

Investment strategy

The SEIS fund will follow the same core investment strategy employed across the Fuel Ventures EIS funds, albeit at an earlier stage. The fund will invest in very early-stage digital businesses that have the potential to scale globally, and which it believes are managed by exceptional founders. In particular, it seeks marketplaces, platforms and Software as a Service (SaaS) companies. Fuel Ventures believes these businesses are 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 the ability of the business to supply it.

Central to the investment strategy is the active role Mark Pearson takes in helping management teams grow their businesses. Drawing from Mark’s experience, Fuel Ventures helps investee companies build products and services people want and need, and then looks to help grow these businesses internationally, maximising the potential value for acquisition or listing opportunities.   

Fuel Ventures’ SEIS Fund seeks to invest at the “Pre-Seed” round of funding, with the potential of providing some of them with follow-on investments through its established EIS funds. By investing early in companies, the team hopes to support its investee companies from the start and help them progress.

Fuel Ventures’ hands-on support and its ability to invest at an early stage and follow its money, may prove attractive when seeking to 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. 

Target return

The manager is targeting a return of £5 per £1 invested, net of all costs and performance fees, not guaranteed. 

Exit strategy

Fuel Ventures will provide hands-on support to investee companies to build their products and services and to help grow the business internationally. The fund expects to hold investments ten 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. This might provide additional exit opportunities for investors who wish to sell their holdings, provided a buyer can be found. 

Portfolio

The target portfolio for each investor will be 20-30 investee companies. Given the high-risk nature of SEIS investing, Fuel Ventures is keen to build a diversified portfolio.

Below are portfolio company examples from previous iterations of Fuel Ventures Scale-up EIS fund. The examples listed were SEIS qualifying at the time of Fuel’s original investment. They are outlined to give a flavour of the types of companies you might expect. These examples will not form part of a new investor's portfolio.  

The Moot Group – Fuel VenturesThe Moot Group 

The Moot Group is an online marketplace which owns and operates multiple brands. It is the fastest growing premium homeware retailer in the UK. The business was started in 2018 by serial tech entrepreneur Nick Moutter, who had spent 15 years in marketing technology, driving sales for companies and brands online.

The group is best known for Olivias.com, which provides both interior designers and consumers with well designed and affordable premium products – a stylish alternative to the high street. Olivia’s has hit a £10 million revenue run rate in 2020, an 11x increase year on year. The business is aiming to deliver £30 million in annual revenues by 2022 and grow market share in a £117 billion market.  

Fuel Ventures initially invested £550,000 in September 2019 at a £2.2 million pre-money valuation. At the time the business was SEIS qualifying. The Moot Group has recently attracted additional funding at a £19.3 million valuation, equivalent to an unrealised return of 6.1x on Fuel Ventures’ initial investment (December 2020). Please note past performance is no guide to the future. 

Moteefe – Fuel Ventures EISMoteefe

Moteefe is a leading social commerce platform providing digital marketers and influencers with an instant opportunity to sell customised on-demand products globally. The platform collects orders, processes payments, and handles production and logistics, offering an efficient end-to-end service for users. 

According to the Deloitte Fast 50, Moteefe is one of the fastest-growing technology company in the UK. Moteefe has grown gross sales from £2.9 million in the year to December 2016 to £32 million in the year to December 2019. 

Fuel Ventures initially invested in early 2016 at a £2 million pre-money valuation and followed on in 2017 as part of a larger £2.5 million funding round, at a £7 million pre-money valuation. In its most recent round, Moteefe raised £2.5m at a £58m valuation, a substantial valuation uplift on both Fuel Ventures’ initial and follow-on investments. Past performance is not a guide to the future. 

Examples of previous exits and failures

To date, Fuel Ventures has not achieved any positive exits, however, this is partly due to the fact it is still a relatively young portfolio. 

As with any SEIS investment, due to the high-risk nature of early-stage investing, some investments will not work out.  

Fuel Ventures has yet to have a failure from its 17 SEIS qualifying investee companies. However, a failure from within the later-stage EIS portfolio is Admedo. 

Admedo was a technology company seeking to bring greater transparency and control to programmatic advertising. Its proprietary Demand Side Platform (DSP) was developed to democratise the programmatic landscape and provide marketers, agencies, and publishers with a straightforward and customisable way to benefit from the technology. Fuel Ventures invested £550,000 in December 2017. Admedo went into administration in June 2020 as a result of cash flow issues. 

Performance

As at December 2020 Fuel Ventures has invested in 40 companies, 17 of which were SEIS qualifying at the time of Fuel’s first investment. 

The average unrealised return from those 17 investments currently stands at 4.6x. One investment is worth more than 10x its initial investment, seven more than 5x, three 2.5–5x. Please note past performance is no guide to the future.   

Please note, the Fuel Ventures SEIS Fund launched in January 2021. It does not have a performance track record. The performance chart below shows the return profile of Fuel Ventures 17 SEIS qualifying investments only.

Source: Fuel Ventures, as at 21 December 2020. 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.  

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.

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
Dealing charge
Performance fee 20%
Investee company charges
Initial charge 4.5%
Annual charge 2%
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

Fuel Ventures anticipates taking up to 12 months to fully deploy investor capital. This is not guaranteed; it may take longer. The fund is not expected to allot shares before the end of the 2020/21 tax year. 

This is a capacity-constrained fund. There is a maximum capacity of £4.5 million. The fund will close when it raises £4.5 million or on 31 March 2021. 

Our view

17 of Fuel Ventures’ 40 investee companies were SEIS qualifying at the time of Fuel Ventures’ first investment. This SEIS fund should be a natural addition to Fuel Ventures’ existing offering. The fund seeks to build a diversified, but high-risk, portfolio of 20 to 30 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: eight of the 17 investments are currently valued at over 5x unrealised return. However, please note, Fuel Ventures is yet to achieve a successful exit and return capital to investors. These are long-term 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. 

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
5x
Funds raised / sought
£4.5 million sought
Minimum investment
£10,000
Deadline
31 Mar 2021
Last updated: 19 January 2021

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