Haatch Ventures Seed Enterprise Investment Fund

£500k capacity left (18 October) – planned deployment in the current tax year

This is the second SEIS fund from Haatch Ventures. The first, which launched in February 2021, was oversubscribed and raised £2.2 million in three weeks.

The second fund seeks to raise up to £1.5 million, of which £1 million has been exclusively reserved for Wealth Club investors. The fund seeks to invest in a portfolio of 10–15 disruptive SEIS-qualifying digital companies. 

The fund is managed by the same team behind the Haatch EIS fund: four successful entrepreneurs who have between them founded, grown and sold businesses worth over $150 million. 

The team will invest where it believes it can use its considerable experience to add value – Haatch refers to this as its ‘Smart Money’ approach. It plans to invest in at least 10 early-stage SEIS qualifying companies in sectors the team knows well, such as software-as-a-service, on-demand, gig-economy and digital consumer. The SEIS fund may also provide deal flow for the EIS fund.

Of the 40 companies backed by Haatch overall since 2013, 28 were SEIS qualifying at the time of Haatch’s first investment. Of these one has achieved an outstanding exit and two have failed. The remaining portfolio companies are performing well in Haatch Ventures’ view: four have raised further funding, achieving an average 3.2x unrealised uplift on the original investment cost whilst the other 21 are very recent investments so are still held at cost. Past performance is not a guide to the future. 

Capital is expected to be deployed within this tax year for applications received by 1 November 2021, subject to £1.5 million capacity, or once the £1.5 million capacity has been reached. As at 18 October, there is £500k capacity left. 

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

Highlights

  • Focus on early-stage disruptive digital businesses 
  • Managed by a team of four successful entrepreneurs
  • Co-invest with the four partners, who have personally invested 13.51% of EIS fund subscriptions, and 5.12% of SEIS subscriptions to date. 
  • ‘Smart Money’ investment approach
  • Target portfolio of 10–15 SEIS qualifying investee companies – not guaranteed
  • Aims to be fully invested within 12 months of fund close – not guaranteed
  • Target return of £10 per £1 invested – high risk and not guaranteed
  • Minimum investment £10,000
  • You can apply online – please note, you will also need to become an “elective professional client” of Haatch Ventures before your investment is accepted

The manager

Haatch’s history goes back to 2013 when Scott Weavers-Wright and Fred Soneya started an angel co-investment joint venture called Haatch Angel. Haatch Ventures LLP launched in 2018 to manage the EIS fund. In 2021, it launched its first SEIS fund.

Scott and Fred met when working at Kiddicare.com, an online baby care retailer co-founded by Scott, which grew to become one of the UK’s largest ecommerce businesses. 

In 2011 Kiddicare.com was acquired by supermarket Morrisons for £70 million, with the intention of using Kiddicare’s technology platform to develop Morrisons’ online offering. 

Post-acquisition, Scott became the Chief Architect and Managing Director of Morrisons.com, whilst Fred was responsible for a number of high-profile, large-scale innovation projects. 

Kiddicare was at that time a world leader in technology and worked closely with selected worldwide start-ups – a community known as the Kiddicare start-up programme – many of which subsequently became very successful, with three achieving exits in excess of $1 billion. 

Haatch Angel was founded on the back of that programme, essentially as a vehicle for Scott’s and Fred’s angel investments. 

Shortly after starting Haatch, in 2014 Scott founded retail cloud platform Elevaate. Its technology allows suppliers and online retailers to manage online promotional activity. The business was founded with a £30,000 investment and was sold four years later for $25.7 million to Quotient Technology Inc, a US-listed technology business based in Mountain View, California.

Haatch Ventures, founded in 2018, is an extension of Scott’s and Fred’s angel investing under the Haatch Angel brand. It was set up to enable investors to benefit from their knowledge and experience of investing in disruptive UK technology with the benefit of EIS (and SEIS) relief. 

Haatch Ventures investment team consists of four experienced entrepreneurs – Scott and Fred, plus Simon Penson and Mark Bennett. Collectively they have built and sold businesses worth more than $150 million. 

Simon joined Haatch in 2019 and is best known for starting content marketing agency Zazzle Media. In under six years, and as the sole founder, Simon grew the business from the corner of his living room into an international media agency. The business merged with another agency, Stickyeyes, in 2015 to form the UK’s largest independent search and content marketing agency. The following year the merged business was sold to one of the world’s largest media agencies, Interpublic Group, in a deal worth up to £37 million. Simon is now working full-time with Haatch Ventures, using his wealth of experience in marketing and building profitable start-ups to add value to the Haatch portfolio.

Mark is Vice President, Android GTM at Google and previously led the international business for Google Play. Before this Mark was managing director of Blinkbox Music, the music streaming service, which he helped grow to 2.5 million users in 18 months. Mark is a partner in the fund and will use his scaling-up experience to add value to the Haatch portfolio.

The four partners have invested in each of the EIS fund tranches to date and currently account for 13.5% of the fund's total subscriptions, and 5.4% of the SEIS fund. The team plans to invest in further tranches of the EIS fund as well as the SEIS fund.

Watch a video interview with Simon Penson, partner at Haatch Ventures, discussing the SEIS fund:

 

Investment strategy

There are three elements to the investment strategy:

1. Digital transformation

Haatch seeks to back entrepreneurs who are building disruptive digital businesses. The team’s core focus is on software-as-a-service, on-demand, gig-economy and digital consumer business models. These are business models the team knows well and to which it can add value as supportive shareholders. 

2. Early stage

The SEIS fund will look to invest at a very early stage, with an opportunity to provide follow-on investment from the Haatch Ventures EIS Fund. Haatch believes its sweet spot is companies with a product and some early traction in the market, much the same as the companies that were part of the original Kiddicare start-up programme. 

3. ‘Smart Money’

Haatch will become a corporate director of each investee company, so any one member of the investment team can attend board meetings. Haatch looks to take an active role and add value to its investments – from supporting investee companies’ pitches to potential clients to using its network and connections to make potentially valuable introductions. Haatch believes its four partners complement each other: each has a technical product background which enables Haatch to support portfolio companies.

Haatch is in regular communication with its investee businesses. More detailed work is often required at the beginning of an investment when the Haatch team can spend a few days per month with investee companies.

Target return

The fund has a target return of 10x after five to ten years, before tax relief. Please note this is a very ambitious target return and is not guaranteed. 

Exit strategy

Haatch aims to invest in highly scalable digital companies where it believes its Smart Money approach will add value to accelerate growth, create significant shareholder value and generate exit opportunities. The expected holding period is between five and ten years (not guaranteed). Following any sale of qualifying shares in a company, 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.

Portfolio

The fund aims to invest in a portfolio of 10–15 SEIS-qualifying companies. 

The first SEIS fund, which launched in February 2021, has to date deployed capital into 11 SEIS qualifying companies. 

The companies outlined below are historic investments made by the Haatch Ventures SEIS Fund in its previous iterations and give a flavour of the types of companies a new investor might expect. 

Nuon – Haatch SEISNuon Ai 

Founded in 2020, Nuon Ai plans to be the world’s first AI-powered, real-time, insurance pricing software as a service. Its three founders have worked together for 20 years across a number of insurance technology companies and have achieved two exits to date. The business is developing a platform that should help insurers achieve better pricing and improve underwriting performance.

In a 2019 McKinsey report, it is claimed 60% of insurance contracts are sold at or near cost, whilst a further 20% result in losses of $1 billion. Due to falling bond yields, insurers can no longer rely on bond investment income to make up the shortfall. Nuon Ai believes this is leading insurers to place greater emphasis on underwriting profit and demand more advanced solutions to improve pricing intelligence. Insurers currently spend $20 billion per annum on data and analytics, the market is expected to grow by 10% per annum.

Haatch Ventures invested £150k into the business in August 2021. The business intends to use funds raised to implement a pilot of its platform with live customers, hire additional AI, product and marketing experts and expand its product suite. 

Diode – Haatch SEISDiode Energy

Diode aims to remove the complexities businesses face when switching their vehicle fleet to electric. 

Its innovative web-based software platform, BusinessCharge, provides an all-in-one solution for businesses, employees and consumers to assess their electric vehicle (EV) suitability and manage the procurement of charging infrastructure. Each employee completes a driver suitability survey and receives a personalised EV readiness report full of information, tips, and guidance to help them make an informed decision on whether to switch to an electric vehicle. BusinessCharge then provides businesses with a tailored charge point roll-out plan and arranges the procurement of charge points through an automated tender process.

The business received a £146k grant from Innovate UK in October 2020, Haatch Ventures invested in the business as part of a £150k seed round in May 2021 at a £2.1 million post-money valuation. 

Example of previous exit

The EIS fund (launched in 2018) has not achieved any exits to date. However, Haatch has one notable exit under its belt. In 2014, Haatch Angel invested £30,000 into a business called Elevaate, which was founded by Scott Weavers-Wright. 

Elevaate’s software increases online monetisation programmes by enhancing relationships between suppliers and online retailers. The company’s technology platform grew to power supplier sponsorship programmes globally and boasted a number of blue-chip clients and retail technology award wins. The business was acquired by Quotient Technologies for $25.7 million. The original £30,000 investment returned 276x its investment (£8.3 million). Please note, this is an unusual exit example and the founder of Elevaate is also the founder of Haatch. The £30,000 invested acquired a large initial stake in the business and qualified for SEIS relief. Past performance is not a guide to the future.

Snapd (example of previous failure)

As with any SEIS company, these are high-risk investments and not all will work out as planned. Snapd is an example of an SEIS-qualifying company that failed. Snapd created a photo-messaging app allowing friends to send snaps and capture their reactions as they viewed the image. Haatch loved the concept; however, it quickly became apparent the founders were not dedicated to the project. The business was written off in 2015.

Performance

The SEIS fund launched in February 2021, it does not yet have a historic track record.

Of the 40 companies backed by Haatch overall since 2013, 28 were SEIS qualifying at the time of Haatch’s first investment. Of these one has achieved an outstanding exit and two have failed. The remaining portfolio companies are performing well in Haatch Ventures’ view: four have raised further funding, achieving an average 3.2x unrealised uplift on the original investment cost whilst the other 21 are very recent investments so are still held at cost. Past performance is not a guide to the future. 

The chart below shows the Haatch Ventures EIS fund track record: note this is for EIS investments.

Source: Haatch Ventures LLP, as at 15 September 2021. This is for the Haatch Ventures EIS fund as SEIS performance data is not available. Performance figures are supplied by Haatch Ventures and are net of all fees. Past performance is not a guide to future performance. These figures do not include any realised returns (exits) as there have not been any. In the above examples, initial tax relief of up to 30% could also apply. Note tax reliefs of up to 50% could apply to the SEIS fund. 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.

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 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.

Exit could take considerably longer than the three-year minimum holding period.

Charges

The charging structure of this fund is different from that of most of its peers. There is an investor initial charge of 10% but there are no annual fees or on-going management charges – neither to investors nor investee companies. The manager believes this structure could be more beneficial in the long term. Please note: tax relief should be available on the amount invested, after deduction of the initial charge. 

A summary of the main charges is shown below. 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 10%
Wealth Club initial saving
Net initial charge through Wealth Club 10%
Annual management charge
Administration charge
Dealing charge
Performance fee 25–30%
Investee company charges
Initial charge
Annual charge
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 

Haatch Ventures anticipates being able to deploy investor capital within the current tax year – not guaranteed.

The fund is expected to close on 1 November 2021, or once it has raised its £1.5 million capacity.

Our view

In our view, for those happy with the significant risks of SEIS, this could be an attractive opportunity to invest alongside a team of experienced entrepreneurs who have founded, grown and sold businesses, achieving exits worth more than $150 million between them within ecommerce, retail technology, and digital marketing. The prospect of receiving investment and mentoring from the Haatch team may also prove an enticing prospect for entrepreneurs seeking SEIS funding and may lead to enhanced deal flow (not guaranteed).

The fund is expected to build a portfolio of 10–15 very early-stage companies, in sectors the team knows well, and into businesses to which the team believes it can add value. The Haatch track record is encouraging: a number of Haatch’s earlier SEIS-qualifying investee companies appear to be doing well. The team’s ‘Smart Money’ investment could add value to investee companies and could potentially enhance returns for investors, although this is not guaranteed: remember these are unrealised returns currently and past performance is no guide to the future.

The offer could appeal to experienced investors looking to invest in a portfolio of SEIS companies alongside a credible team of experienced entrepreneurs.

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
10x
Funds raised / sought
£1.2 million / £1.5 million
Minimum investment
£10,000
Deadline
1 Nov 2021 for allotment in 2021/22
Last updated: 27 September 2021

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