Blackfinch Spring VCT

Blackfinch Spring VCT is managed by Blackfinch Ventures, a division of Blackfinch Group, which has over £800 million assets under management (September 2024). 

The VCT launched in 2020 and targets tech-enabled businesses with the potential to grow quickly by disrupting their end markets. The VCT invests in a mixture of follow-on and co-investment deals alongside Blackfinch’s EIS Fund.

The VCT has net assets of £41.3 million, of which £34.2 million is invested in a portfolio of 30 early-stage companies, and £7.1 million is in net cash (June 2024). 

In the three years to June 2024, the VCT achieved a NAV total return of 16.4%. Past performance is not a guide to the future. 

  • Seeking to raise up to £20 million with a £20 million overallotment facility  
  • Target dividend of 5% of NAV – variable and not guaranteed 
  • Available for the 2024/25 and 2025/26 tax years
  • Minimum investment: £3,000 – you can apply online
  • Deadline: 25 Oct for first allotment

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

Founded in 2004, Blackfinch Group has over £800 million under management (September 2024). 

The group launched its first EIS fund in 2015, focusing on asset-backed or media investments. In 2017, to adapt to new EIS rules, Blackfinch started its transition towards growth-style investments: it made changes to its team and launched Blackfinch Ventures. Blackfinch Ventures has around £97 million under management (September 2024).

Since April 2019, Blackfinch Ventures has been overseen by Reuben Wilcock, who previously worked as an IP specialist for the University of Southampton as well as founding and running the accelerator programme Future Worlds. Blackfinch has continued to expand its Ventures team, which now includes 11 investment professionals.

In addition, Blackfinch Ventures has an external network of Venture Partners: 117 experienced senior professionals and entrepreneurs, who can provide deal flow and advice to the investment team, as well as serve as non-executive directors for portfolio companies. Currently, c.90% of companies have a Venture Partner on their board. 

Investment strategy

The VCT aims to invest in early-stage technology-enabled companies that have a strong focus on R&D and innovation and have already met milestones set in previous investment rounds. Companies will also need to show evidence of product-market fit, often via revenue, and an ability to acquire new customers. 

Blackfinch intends to invest across a variety of sectors and stages of maturity, although it prefers Series A funding rounds. As the portfolio continues to develop, the trust is likely to favour follow-on investments and co-investment opportunities with Blackfinch’s EIS Fund. In the last year, the VCT invested in eight companies in follow-on deals or co-investments with the EIS fund (June 2024).

Deals are sourced from Blackfinch’s distribution network as well as accelerator programmes such as Future Worlds. Blackfinch receives between 1,000-2,000 leads each year, from which the VCT is expected to select approximately 5-15.

Blackfinch assesses companies’ financials, technology, and VCT eligibility. After investment, each company is monitored by a board observer from Blackfinch, and a non-executive director may also be appointed from Blackfinch’s network of Venture Partners. Blackfinch’s portfolio team will work together with NEDs to collect monthly financial and KPI data from the companies. 

Current portfolio overview

The VCT has net assets of £29.4 million, of which £25.8 million is invested in a portfolio of 25 early-stage companies, whilst £3.6 million is in cash (December 2023).

In the 12 months to December 2023, the VCT invested £5.1 million across 13 follow-on and five new investments.

The portfolio is invested across a variety of technology companies engaged in a range of activities from human resources to marketing and business supply chain management. There is a strong focus on business-to-business, with only a small number of companies targeting consumers. That said, the VCT is still comparatively young and is building up its portfolio, which is currently relatively concentrated, with the top 10 holdings accounting for 53.7% of net assets.

Illuma-blackfinch-spring-vct.jpgIlluma Technology — largest holding

For decades, websites and online advertisers have relied on information collected through digital third-party cookies to target users. However, with cookies laws tightening and Google, Mozilla, and Apple announcing plans to phase-out support over privacy concerns, advertisers are looking at alternatives to connect with the right audiences. 

Illuma circumvents this. It bases targeting on content rather than people. Its AI technology analyses webpages to find the content most relevant to its adverts. It then continually monitors engagement and uses these patterns to optimise campaigns in real time.

The business has received investment from venture capital firm Praetura Ventures and counts some of the world’s biggest advertisers such as Procter & Gamble and Sky as clients. In August 2024, Illuma announced a partnership with News UK, the publisher of titles such as The Sun and The Times, to help identify additional brand-safe advertising opportunities, delivering an increase of over 10% on average in early trials. 

Blackfinch first invested in 2021, since then, the business has grown revenues sevenfold, with 50% of revenues coming from the US. To date, the VCT has invested £1.2 million, currently valued at £4.6 million, 11.1% of net assets (June 2024). Past performance is not a guide to the future.

Beyond-words-blackfinch-vct.jpgLSTN (trading as BeyondWords) — recent investment

BeyondWords converts written content, such as blogs or articles, into natural-sounding speech. 

The company uses a natural language processing algorithm to enable an AI voice to narrate like a human: determine which elements should be read and the correct delivery.  

BeyondWord’s voice library offers instant access to over 550 AI voices. Each is distinct, varying by accent and tone, so companies can find the best match for their content. It also offers a ‘voice cloning’ service which has been supported by the likes of Audible and Innovate UK. This option allows companies to create their own unique voice, usually based on the author or a particular speaker. 

More than 100 publishers worldwide use BeyondWord’s services, including The Japan Times, Sky, and Fox.

Blackfinch initially invested in the business through its EIS Fund in March 2021. Since then, the company has grown revenues over 4x and demonstrated an ability to scale cost-effectively, leading Blackfinch to invest a further £1 million through the VCT over the last year. 

Exit track record

The VCT is still comparatively young, 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 VCT has experienced one failure (detailed below).

Movebubble

Movebubble was a rental app that aimed to tackle some of the biggest issues renters have when searching for new homes. Rather than spending hours dealing with bad landlords and estate agents, the platform helped renters search through thousands of properties, see video walkthroughs of potential homes, and make offers 24/7.

While the business initially performed well during the first lockdown, it suffered in the second, leading to the departure of the founding CEO. Blackfinch supported the company in appointing a new CEO and provided a small additional investment to fund a recovery plan. However, despite good progress, revenue continued to decline, and the company could not secure a rescue deal.

The company appointed a liquidator in May 2022, resulting in a loss of the full investment value of £0.55 million for the VCT.

Performance and dividends

The VCT targets a dividend yield of 5% of NAV and recently paid its first dividend in April 2024. A further dividend of 2.6p is expected to be paid in December 2024. Please note dividends are variable and not guaranteed. 

The dividends are being paid despite the VCT not yet reporting any positive exits and are funded from the conversion of the VCT’s share premium account. However, the VCT board believe it is “supported by increases in the value of investments that [the board] expect to be realised in future ” – not guaranteed.

In the three years to June 2024, the VCT achieved a NAV total return of 16.4%. Past performance is not a guide to the future. Note, we show VCT returns over a five-year period as a minimum, where possible. Where a VCT has followed the same investment strategy for longer, we also show returns over 10 years.

NAV and cumulative dividends per share over five years (p)

Source: Morningstar. Past performance is no guide to the future. Dividends are variable and not guaranteed. The bar chart shows net asset value and cumulative dividends per share for the period 31/12/2020 – 30/06/2024.

Source: Morningstar. Past performance is not a guide to the future. Dividends are not guaranteed. The graph shows the dividends paid per calendar year to 30/06/2024.

Dividend yield history (% of starting NAV)

Calendar year Dividend as % of NAV
2019
2020
2021
2022
2023
YTD 2.5%

Source: Morningstar. Dividend yields are based on the dividends paid over the period divided by the starting NAV of the VCT in each period. Past performance is no guide to the future.

Dividend reinvestment scheme

The VCT intends to operate a dividend investment scheme that allows shareholders to reinvest future cash dividend payments in new shares if desired. As these are new shares they should be eligible for tax relief (you will need to claim this on your tax return or directly with HMRC) and the shares will count towards the VCT annual subscription limit. 

Share buyback policy

The VCT may operate a buyback policy at a 5% discount to the shares’ net asset value. This is not guaranteed – please see the offer documents for details.

Discount history

VCT shares are traded on the London Stock Exchange. Similar to investment trusts, the share price can fluctuate and can be different from the VCT’s net asset value (NAV), i.e. the value of the VCT’s underlying investments. The difference between the share price of a VCT and its net asset value per share is called a discount.

Investors should note the VCT has less than a five year track record. Trading of the VCTs shares will be immaterial and any consideration of the share price movements in relation to the net asset value per share will be inconclusive. The discount history will be published once the VCT has a five year track record.

Investors looking to sell their VCT shares may get a better price using the VCT’s share buyback facility, although this is not guaranteed.

Risks: important

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

VCTs 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. 

To retain the tax benefits, VCTs should be held for at least five years. If you sell VCT shares and reinvest in new shares of the same VCT (including any mergers) within six months, tax relief can be restricted. Tax rules can change and benefits depend on circumstances.

Charges and savings 

A summary of the main charges and savings is shown below. The net initial charge shown includes the Wealth Club saving and any early bird discount. The investment may have additional charges and expenses: please see the provider documents including the Key Information Document for more details, offer price and share allotment calculation methodology.

Please note, capacity – for the offer or any early bird savings – can be reached early, and we may not be notified of this by the VCT in real time.

Full initial charge 5.5%
Early bird discount 1.5%
Wealth Club initial saving 3%
Existing investor discount 1%
Net initial charge through Wealth Club (new investors) 1%
Net initial charge through Wealth Club (existing investors) 0%
Annual management charge 2.5%
Annual administration charge 0.3%
Performance fee 20%
Annual rebate from Wealth Club 0.15%

More detail on the charges

Annual rebate when you invest through Wealth Club

The Blackfinch Spring VCT offer includes an annual rebate for Wealth Club investors, payable for the first three years. This is a rebate of our renewal commission and should be equivalent to a percentage (shown in the table above) of the net asset value of the offer shares issued to you when you invest. Terms and conditions apply.

Deadlines

  • Deadline: first allotment 25 Oct 2024 (5pm) 
  • Deadline: 27 Jan 2025 (5pm) for 1.5% initial saving
  • Deadline: 3 Apr 2025 (5pm) for 1% early bird saving 
  • Deadline: 20 Aug 2025 (5pm) for 1% loyalty discount - existing investors 

Our view

The VCT has made good progress in developing its portfolio – now including 30 tech-enabled, mostly B2B, businesses. 

The team’s ability to maintain its rate of deployment, while sticking to its proposed strategy is encouraging and has been supported by co-investment and follow-on opportunities from Blackfinch’s EIS service. However, concentration risk is likely to remain high while it continues to build its portfolio.

While it may still be too early to draw conclusions on the merits of this offer, Blackfinch has a track record of being able to both attract and deploy capital efficiently. However, please note that although this young VCT has started paying dividends, it has yet to achieve any positive exits.

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
Generalist
Target dividend
5% of NAV
Initial charge
5.5%
Initial saving via Wealth Club
4.5% (5.5% existing investors)
Net initial charge
1% (0% existing investors)
Annual rebate
0.15%
Funds raised / sought
£1.2 million / £20.0 million
Deadline
25 Oct (5pm) for Oct 2024 allotment
Last updated: 11 September 2024

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