Blackfinch Spring VCT

Blackfinch Spring VCT is managed by Blackfinch Ventures, a tax-efficient investment house with over £700 million assets under management and administration. 

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 £25.4 million, of which £21.7 million is invested in a portfolio of 22 early-stage companies, and £3.7 million is in cash (June 2023). 

In the three years to March 2024, the VCT achieved a NAV total return of 11.7%. Past performance is not a guide to the future. 

• Seeking to raise up to £20 million with a £10 million overallotment facility 
  
• Initial dividend target of 5% starting 2024 (not guaranteed)
• Available for 2024/25 tax year
• Minimum investment: £3,000
• Deadline: 24 June 2024 (5pm) for next allotment in the 2024/25 tax year

The manager

Founded in 2004, Blackfinch Group has over £700 million under management (June 2023). 

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 £93.7 million under management (June 2023).

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 comprises seven investment professionals, an operations manager and an in-house legal counsel.

In addition, Blackfinch Ventures has an external network of Venture Partners: 104 experienced senior professionals and entrepreneurs, who can provide deal flow and advice to the investment team, as well as serve as a non-executive directors for investee companies. Currently, 20 Venture Partners have been appointed to company boards. 

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 six months, the VCT invested in two new companies, both co-investments with the EIS fund (June 2023).

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 £25.4 million, of which £21.7 million is invested in a portfolio of 22 early-stage companies, whilst £3.7 million is in cash (June 2023).

In the six months to June 2023, the VCT invested £3.6 million across 12 follow-on and two 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 55.7% of net assets.

Illuma 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 already counts some of the world’s biggest advertisers such as Coca-Cola, AT&T, and Sky, as clients. In 2023, Illuma signed an agreement with the Guardian newspaper to support contextual advertising on its website while protecting its intellectual property.

Blackfinch first invested in 2021, since then, the business has grown revenues nearly 4x. To date, the VCT has invested £1.2 million, currently valued at £2.1 million, 8.1% of net assets (June 2023). Past performance is not a guide to the future.

Up Learn — recent investment

Up Learn is a tutoring platform that combines the latest learning research with its AI-adaptive technology to help students achieve top grades.

The platform incorporates principles from over 70 cognitive learning techniques, such as spaced repetition, gamification, and interleaved learning (mixing topics), to optimise studying. Up Learn claims that an hour a day can take its students from zero to A*/A in just 8-16 weeks. It even offers a money-back guarantee to every student, regardless of starting point. 

The company currently runs a hybrid model – selling to both schools and individuals. In the last year, Up Learn had over 15,000 customers, with 97% of students who completed its course achieving an A* or A. 

The VCT invested £360,000 in March 2023, alongside Blackfinch EIS Fund. The funding will be used to help the company expand from A-levels into the larger GCSE market.

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% from 2024, please note dividends are variable and not guaranteed. Dividend payments will depend on the VCT achieving any positive exits and realising profits – not guaranteed.

In the three years to March 2024, the VCT achieved a NAV total return of 11.7%. 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)

Dividend reinvestment scheme

There is no dividend reinvestment scheme. 

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.

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 for next allotment in the 2024/25 tax year: 24 June 2024 (5pm)
  
• Final allotment in 2024/25 tax year: 21 August 2024 (5pm)
  

Our view

The VCT has made good progress in developing its portfolio. Its net assets now stand at over £25 million and the portfolio has grown to 22 investments, with a focus on tech-enabled businesses operating in the B2B market. 

The team’s ability to maintain its rate of deal flow while sticking to its proposed strategy is encouraging and has been supported by co-investment and follow-on opportunities from Blackfinch’s EIS service.

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, this is still a young VCT. Concentration risk is likely to be higher while it continues to build its portfolio.

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.