Arrive RLC Ventures SEIS Tech Fund III

The Arrive RLC Ventures SEIS Tech Fund III aims to invest in early-stage technology companies it believes have the potential to become global businesses.

The fund looks for companies across a range of growth stages and within three key areas: work, play, and finance. 

Investee companies should preferably be headquartered in the UK and have a proportion of their operations based outside the UK. RLC Ventures believes this could give investee companies a significant cost advantage over rivals as well as access to a wider pool of talent and consumers.

RLC Ventures, the investment adviser, started investing in 2016 and has enjoyed some success. A recent exit of Betting Metrics saw early investors from the first fund achieve realised returns of up to 38x on their initial investment, whilst investors from the second fund received 3.8x – note this is an exceptional exit on a small investment and past performance is not a guide to the future.

RLC Ventures is a relative newcomer to EIS/SEIS, which is, however, starting to gain industry recognition and investor support.

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 technology companies with operations outside the UK
  • Management team is required to invest personally
  • Targeting companies within the following sectors: work, play, and finance
  • Target return of £2.60 per £1 invested, not guaranteed
  • Minimum investment £50,000 - you can apply online
  • Please note, to apply you will also need to become an "elective professional client" of SFC Capital Partners before your investment is accepted

The manager

RLC Ventures, the investment adviser to the fund, is led by Reece Chowdhry, a former management consultant. Mr Chowdhry has been investing in startups for over 10 years and has a personal portfolio of 40 companies. He also mentors companies in the Mayor of London Business Start-up Entrepreneurs Programme. 

Mr Chowdhry is assisted by a core investment team of five, including his father, Jeff Chowdhry, who was appointed to RLC Ventures as Chairman to add institutional rigour and oversight. Mr Chowdhry (senior) has considerable industry knowledge having held senior positions at BMO Global Asset Management (previously F&C). As Head of Emerging Markets at BMO, he was responsible for managing over £5 billion in the emerging markets sector.

Alongside the investment team, RLC Ventures is supported by an independent advisory board of 12. Each adviser typically has a background in entrepreneurship or within a specific industry.

RLC Ventures requires its management team to invest 2.5% of total funds raised into every company, to align interests with those of investors. So far, the team has committed over £1 million.

The manager of the fund is SFC Capital Partners Ltd.

Watch a video interview with CEO Reece Chowdhry:

Investment strategy

RLC Ventures has launched two previous EIS/SEIS funds. In total, it has raised £5.2 million and invested in 28 companies.

This fund will follow a similar investment strategy as previous iterations. Ideally, RLC Ventures will look for companies headquartered in the UK with established offshore operations (from Eastern Europe to South America). Often one of the most expensive aspects for a young business is technology development. By establishing this function outside the UK, companies may be able to significantly reduce costs – providing they can maintain their operations across long distances and potentially different time zones. For instance, recent investee company Greendeck claims its software development costs are 10x lower in India than in the UK, with no reduction in speed or quality. 

While RLC Ventures prefers companies to adopt this strategy, it will make exceptions if a business can demonstrate comparable levels of capital efficiency and scalability.

It is anticipated most investment opportunities will be sourced through angel networks, introducers and RLC Ventures’ scout network. In a year, the team expects to see around 2,500 deals in total with an average of 50 deals a week getting through to the screening process. For these, additional due diligence will take place with external consultants to provide an investment paper for the independent advisory committee. The committee must reach a majority decision before an investment can be accepted.

Post-investment, RLC Ventures looks to support founders on growth strategy, fundraising, recruitment and financial management.

Target return 

The manager is targeting a return of £2.60 per £1 invested, net of all costs and performance fees, not guaranteed. 

Exit strategy

RLC Ventures will consider a company’s exit route before deciding to invest. It is the intention of the fund to realise exits within a holding period of 5–8 years; however, exit routes and timeframes cannot be guaranteed.

Portfolio

RLC Ventures aims to offer a portfolio of companies split between three growth stages: early revenue, revenue-generating, and scaling. It is expected that the majority of the portfolio will fall into the revenue-generating category (70% ) with the remainder split equally between early revenue and scale-up opportunities.

Investee companies should fit into at least one of the following categories: work, play and finance. 

RLC Ventures aims to provide investors with a portfolio of 10 to 15 companies. The maximum allocation per company is 15%.

The companies outlined below are historic investments made by the RLC Ventures EIS funds. Note these are previous EIS investee companies and may not form part of a new investor’s portfolio. They are outlined to give examples of the types of companies an investor might expect.

Condense Reality – Arrive SEIS Tech Fund IIICondense Reality

The Condense Reality team has worked together for the better part of 10 years, having previously sold its last business, SecondSync, to Twitter in 2014. 

Condense Reality aims to help produce real-time volumetric video capabilities for broadcasters, sports events and content studios through its selection of software tools. Broadcasters are increasingly looking to differentiate their content due to increased competition in the broadcast space from new entrants. Volumetric video can capture a three-dimensional space, such as a location or performance, and can be viewed on flat screens as well as using 3D displays and VR goggles. In 2021 Condense Reality is focused on delivering a Boxing Match for BT. 

RLC Ventures invested in Q2 2020. The funding will be used to help build the team and develop the technology offering. Aside from selling to broadcasters, Condense Reality will also look to serve individual content production studios.

Dorm – Arrive SEIS Tech Fund IIIDorm

Whilst working together at VC-backed Sweatcoin, Ranbir Arora (Dorm’s CEO) and Taras Polischuk (COO) noticed a number of their friends weren’t enjoying their jobs or feeling fulfilled by their careers. 

In early 2020, they set out to change this. Launched in December 2020, the Dorm platform uses podcasts and content from the world’s leading entrepreneurs, YouTubers and venture capitalists to guide students on how to launch their own careers in these fields; featuring guests such as the founders of Snapchat, top music labels and leading YouTube channels. 

RLC Ventures was introduced to the business through an existing portfolio founder and invested because of the strength of the founding team and the size of the potential market. RLC Ventures was the lead investor in a £750k funding round, alongside Silicon Valley’s Social Starts, Plug n Play, The Fund and Playfair Capital.

Betting Metrics – Arrive SEIS Tech Fund IIIBetting Metrics (example of previous exit)

To date, RLC Ventures has achieved one exit. Betting Metrics is a sports betting software that combines all betting activities under one roof, often described as the Bloomberg of sports betting. Betting Metrics provides entertaining and educational content, fast and accurate odds comparison, bet placement, automated bet tracker, advanced analytical, bankroll tools and a marketplace where punters can buy and sell tips, all accompanied with customer support.

RLC was the sole external investor into the business across multiple funding rounds through RLC’s previous two funds. The funding was used to develop the product and prove the business model. The company was acquired by GameLounge via a trade sale in 2020. Investors saw a strong return on their original small investment: 38x  after two years for Fund 1 and 3.8x after seven months for Fund 2. RLC’s aggregate £155,000 investment generated proceeds of £1.45 million. Since the exit was achieved within the three-year minimum holding period, investors were unable to claim tax relief. Please note, past performance is not a guide to the future. 

Examples of previous failures

There have been no failures to date, but the funds have only been active for a short period. Realistically, failures are likely and Mr Chowdhry anticipates that at this stage of investing a failure rate of 50% could be expected. Please note, past performance is not a guide to future.

Performance

Since its inception, RLC Ventures has launched three funds including this one. 

The annual performance track record of RLC Ventures across its two previous EIS/SEIS funds in the relevant tax year, per £100 invested, since launch is shown below.

Source: RLC Ventures, as at October 2020. Figures are net of all fees. Past performance is no guide to future performance. These figures do not include any realised returns which would be available through loss relief. In the above examples, initial tax relief could also apply. So, for the tax year 2017/18, the total return including initial tax relief (£33.52) would be £363.98 (the £36 tax relief is a blend of SEIS and EIS initial tax reliefs), remember 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.

EIS 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.

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

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 0%*
Wealth Club initial saving
Net initial charge through Wealth Club 0%
Annual management charge 1.6%
Administration charge
Performance fee 20%
Investee company charges
Initial charge
Annual charges
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

The fund anticipates taking between 12 to 18 months to fully deploy investor capital following the closing dates. However, it may take longer. As is typical with EIS and SEIS investments, it may not be possible to have all funds deployed before a deadline such as the end of the tax year.

Our view

In our view, the investment strategy adopted by Arrive SEIS Technology Fund 3 is an interesting one. It has a focus on software within three key categories: play, work and finance. 

The question now is whether RLC Ventures can continue to execute its investment strategy as the business grows. Early backers of RLC Ventures have been well rewarded and Reece Chowdhry is committed to building this promising early track record, although past performance is not a guide to the future. 

The investment team benefits from the appointment of Jeff Chowdhry as Chairman. Mr Chowdhry is an experienced operator and is well aligned to the success of his son’s business. With over £1 million personally invested in RLC Ventures portfolio companies to date, and with a commitment to invest personally in each investee company, this father-and-son-led team is building an offering experienced investors may find appealing.

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
2.6x
Funds raised / sought
-
Minimum investment
£50,000
Deadline
Discretionary
Last updated: 6 January 2021

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