British Smaller Companies VCTs

Offer closed - Register your interest

As at 11 November 2021 the British Smaller Companies VCTs have stopped accepting applications, having reached their £60 million fundraising target.

Please register your interest below to receive an alert as and when the VCT re-opens for subscription. Alternatively, see other VCT offers that are currently open. 

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Previous offer review

Below is our review of the previous offer, which closed in November 2021. As an when a new offer will open, the review on this page will be updated. 

British Smaller Companies VCT (BSC) and British Smaller Companies VCT 2 (BSC2) are longstanding generalist VCTs managed by YFM Equity Partners, with net assets of £127.8 million and £89.0 million respectively (June 2021). 

The two VCTs have shared the same investment strategy since 2010. Once renowned for management buyout deals, since 2015, the VCTs have focused exclusively on growth capital investments. One of them, Matillion, became the sixth VCT-backed unicorn in September 2021 and is currently the largest holding within both VCTs.

Over the five years to 30 June 2021, the two VCTs have generated a NAV total return of 52.73% (BSC) and 51.28% (BSC2) and paid total dividends per share of 45.25p (BSC) and 21.0p (BSC2). Past performance is not a guide to the future; dividends are variable and not guaranteed.

The VCTs give investors exposure to 39 companies – 36 of which shared between the two VCTs – across a range of sectors, with a bias towards technology (June 2021). 

The current offer is seeking to raise £40 million with a £20 million overallotment facility. 

The British Smaller Companies VCTs have historically been popular. Previous offers have typically reached capacity within a shareholders’ priority period. The current offer is larger and open to both existing and new investors from launch. If you are interested, consider acting promptly. The manager has informed us there is no current expectation to launch another full offer until the 2023/24 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.


  • Two of the longest-established VCTs with a loyal following
  • Combined net asset value of £216.8 million (30 June 2021)
  • Highly concentrated portfolio with a bias towards technology
  • Experienced management team, over £355 million assets under management
  • Available only for this tax year (2021/22)
  • Strong track record to date – past performance is not a guide to the future 
  • Minimum investment £6,000 

The manager

The British Smaller Companies VCTs are among the longest-standing VCTs – BSC launched in 1996 and BSC2 in 2001. Both have built a loyal following amongst investors.

Established in Yorkshire in 1982, YFM Private Equity (“YFM”), the investment adviser, is a specialist private equity business independently owned by the senior management and investment team. It has a strong regional presence with offices in Leeds, London, Manchester, and Birmingham, and has over £355 million in assets under management. YFM has been investing in young, fast-growing companies for over 35 years. It was one of the first asset managers to launch a VCT and is now one of the most recognised and well-regarded names in the industry. 

The investment team is led by managing director, David Hall. Mr Hall, a chartered accountant, joined YFM in 2000 and has over 30 years of private equity, venture capital, and fund management experience. The team continues to expand and today there are 26 investment professionals, subdivided between New Investments (North), New Investments (South), and a Portfolio team, responsible for providing support to investee companies. In 2020, YFM strengthened the team considerably with six new hires: a new head of growth, two new investment directors, a new portfolio director, and two new investment managers. YFM has made a further four hires to the investment team in 2021, with plans to further expand the team in due course.

Meet the manager – Watch a video interview with David Hall, managing director of YFM:


Investment strategy

Historically, the two VCTs pursued different investment strategies, resulting in different portfolios. BSC focused on management buyouts and growth capital deals, whilst BSC2 focused on very early-stage technology companies. 

Since 2010 the VCTs have co-invested alongside one another. Since the 2015 VCT rule changes, which prohibited new management buyout investments, the VCTs have followed the same growth capital investment strategy.

The VCTs seek to invest in companies that require funding to support future growth. Typically, a company will be headquartered in the UK and have ambitions to expand internationally. Founders must demonstrate a clear strategy and have a plan to scale the business. 

The VCTs will seek to invest £2 to £6 million into companies with at least £1 million in turnover. There is no requirement for investee companies to be profitable at the point of investment. 

Whilst the VCTs will consider investments in any sector, there is a strong bias towards technology. Exposure to manufacturing, a sector popular within the old management buyout strategy, has reduced substantially. Technology now accounts for four-fifths of new investments.

Exit track record

Both VCTs have a history of exits. Over the last three financial years to 31 March 2021 (BSC), 31 December 2020 (BSC2), they have generated combined exit proceeds of £67.7 million on an investment cost of £33.0 million. Past performance is not a guide to the future.

A recent example of an exit in July 2021 is Deep Secure. 

Deep Secure – British Smaller Companies VCTsDeep Secure – example of previous exit

Founded in 2009, Deep Secure offers cybersecurity products and services to help organisations protect against cyberattacks delivered via malware. Its unique Threat Removal technology protects from known and unknown malware in documents and images. In contrast to other defences, including antivirus scanners and sandboxing, it does not rely on being able to detect threats but instead transforms content to render it safe. Deep Secure solutions are used by government, defence & intelligence, law enforcement, critical national infrastructure and finance organisations worldwide. 

YFM Equity Partners backed Deep Secure in December 2009, investing a total of £4.0 million across YFM funds, BSC (£1.0m) and BSC2 (£0.5m). The business was the second-largest holding in both VCTs as at 30 June 2021. The company was sold to Forcepoint Federal LLC, a global cyber security business, in July 2021, delivering a total return of 6.5x investment cost. Past performance is not a guide to the future. 

Hutchinson Networks – example of previous failure

As can be expected, not all investments worked out. One example is Hutchinson Networks. Established in 2011, the business delivered IT network solutions including a secure, in-house developed multi-cloud platform and a network operation centre to blue-chip and SME customers, both in the UK and internationally.

The company experienced a period of rapid growth as a result of significant new contract wins and forecast this trajectory to continue in 2019 and beyond. Unfortunately, some of the larger contracts suffered delays which resulted in increased funding needs. Although there was still demand for the services, YFM believed the level of additional funding required was such the investment would not generate an adequate return. Consequently, with no other funding forthcoming, the business failed. The VCTs had invested £2.2 million.

Covid-19 impact

The pandemic has had a material effect on the performance of the VCTs’ investments within the Retail & Hospitality and Travel sectors, where valuations have been marked down substantially. ACC Aviation, an aircraft charter and leasing brokerage, and Traveltek, a software provider to the travel industry, were marked down by 23.5% and 45.2% respectively. Three investee companies within the retail & hospitality sector; Tonkotsu, Friska, and Frescobol also experienced material markdowns. Friska subsequently went into administration.

However, a large proportion of the VCTs’ assets is held within data & analytics and software sectors, which have been less affected by the Covid-19 disruption. One holding in particular, Matillion, the largest holding within each VCT, has thrived.

At the onset of the Covid-19 pandemic the trusts’ NAVs fell from 76.1p (BSC) and 55.2p (BSC2) on 31 December 2019 to a low of 64.5p (BSC) and 46.4p (BSC2) in March/April 2020. However, following a strong recovery led primarily by the VCTs’ Data & Analytics exposure, the trusts’ NAVs have risen to 75.8p (BSC) and 63.5p (BSC2) as at 30 June 2021. In addition, BSC paid 6p in dividends between March 2020 and June 2021, and BSC2 paid 5.0p – past performance not a guide to the future; dividends are variable and not guaranteed.

Portfolio overview

The BSC and BSC2 VCTs have net assets of £127.8 million and £89.0 million respectively (June 2021). 

Due to the performance of Matillion, the largest holding of both VCTs, the two VCTs currently have highly concentrated portfolios. The top 10 holdings account for 53.7% (BSC) and 58.5% (BSC2) of their respective net assets. Matillion accounts for 23.6% to 30.4% of net assets. In June 2021, the manager reported its intention to sell 20% of each VCT’s stake in Matillion in the Series E funding round in September 2021. 

The VCTs chiefly invest across five sectors: data & analytics, software, business services, new media, and retail & brands. Exposure to data & analytics and software has grown considerably: the two sectors now account for 51% to 58.4% of net assets in BSC and BSC2 respectively.

The current sector breakdown is shown below.

Sector breakdown

Source: YFM. As at June 2021.

Example of portfolio companies

Matillion – British Smaller Companies VCTsMatillion – largest holding 

Founded in 2010, and with dual headquarters in Manchester and Denver and several offices across the US, Matillion is one of the world’s leading cloud data integration platforms. Its software allows customers to extract data from a wide number of data sources, load it into cloud data warehouses, and transform it into useful, analytics-ready data.

Customers reportedly include Cisco, Siemens, Novartis, Amazon and Accenture.

Today Matillion is one of the UK’s fastest-growing private technology companies, featured in the Deloitte Fast 50, with 922% revenue growth over the last four years.

In 2021, cloud-based data storage and analytics giant (and top-ranked in Forbes’ Cloud 100 2020) Snowflake named Matillion data integration partner of the year. Matillion also entered into a solution partnership with global software pioneer, €800 million revenue Software AG. 

The British Smaller Companies VCTs first backed the business in November 2016, investing £3.5 million, and a further £0.88 million later, as part of a larger investment round with some high-profile US technology investors (Battery Ventures, Sapphire Ventures, Scale Venture Partners). Matillion has since completed several investment rounds from the same US investors. In September 2021, Matillion became the sixth VCT-backed unicorn, after completing its Series E funding round, raising $150 million at a $1.5 billion valuation.

The business is the largest holding within both VCTs, accounting for 23.6% (BSC) and 30.4% (BSC2) of net assets (June 2021). In June, the VCTs announced the intention to sell one-fifth of their stake in the business in the Series E funding round.

Vypr – British Smaller Companies VCTVypr Validation Technologies – recent investment

Founded in 2013, Vypr has built a validation platform that helps product developers, marketers, manufacturers and retailers save time and costs on new product development.

Through Vypr, they can test each of the many variables that make up the end product: from initial concepts to product naming, from branding and packaging to marketing messages.

Vypr has also developed a number of additional products such as an analytics tool for profiling multiple products within a given category or classification; a function that assesses consumer value perception of products and models pricing elasticity; and a brand sentiment tracker. The business currently works with retailers including The Co-op Food, Starbucks, and brands such as Weetabix and Müller. 

The business is based in Manchester, has a 15-strong team and expanded its consumer panel into France and Germany in 2020.

The VCTs invested a total of £2.5 million (£1.5 million BSC, £1.0 million BSC2) in January 2021 at a pre-money valuation of £6.7 million. The funds will help the business grow its sales and marketing team as it looks to build on its strong customer base with food manufacturers, retailers, FMCG brands as well as expand internationally. 

Performance and dividends

Over the five years to 30 June 2021, the VCTs have generated a NAV total return of 52.73% (BSC) and 51.28% (BSC2) – past performance is not a guide to the future.

The difference is largely due to the historical difference in investment strategy and portfolio. For instance, some of the companies, such as GO Outdoors, that achieved significant profitable realisations were held in BSC and not BSC2. In future, performance is expected to converge.

Over the last five years to June 2021, the VCTs have paid total dividends per share of 45.25p (BSC) and 21.0p (BSC2), equivalent to a cumulative dividend yield of 58.54% (BSC) and 37.37% (BSC2) based on the average monthly NAV of each VCT over the period – dividends are variable and not guaranteed. 

The VCTs have not set a specific target dividend. In future, as newer growth capital investments take over from old-style ones, dividends could be lumpier.

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 Dec 2015 to 30 June 2021.

Dividend payments in the calendar year

Source: YFM. Past performance is not a guide to the future. Dividends are variable and not guaranteed. Dividends paid per calendar year to 30 June 2021.

Average dividend yield (% of NAV) history

2016 23.34% 7.35%
2017 7.28% 5.11%
2018 5.13% 5.11%
2019 15.01% 14.51%
2020 8.64% 6.92%
YTD 2.62% 2.67%
Source: Morningstar. Average dividend yields are based on the dividends paid over the period divided by the monthly average NAV of the VCT over the same period. Past performance is no guide to the future.

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.

Both VCTs have significant exposure to one company, Matillion. This means the BSC VCTs are more concentrated and less diversified than their peers.

VCTs can now only invest new money in growth capital deals. Management buyouts, replacement capital deals and investments in mature companies are no longer permitted. This results in considerably higher risks.

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%
Early bird discount
Wealth Club initial saving 2%
Existing shareholder discount
Net initial charge through Wealth Club (new investors) 3.0%
Net initial charge through Wealth Club (existing shareholders) 3.0%
Annual management charge 2%
Annual administration charge £69k (BSC), £70k(BSC2)
Performance fee 20%
Annual rebate from Wealth Club (for three years) 0.10%

More detail on the charges


This offer is now closed.

Dividend Re-investment Scheme (DRIS)

A dividend re-investment scheme is available if shareholders wish to reinvest dividend payments by way of subscription for new shares. 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 buybacks

Each of the VCTs has a current policy of buying back shares at a discount of 5% to the latest published NAV, subject to available liquidity in the VCTs, applicable rules and regulations and market conditions.

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.

The charts show the five-year discount to net asset value history of British Smaller Companies VCTs based on the closing share price at the end of each month, divided by the latest net asset value at the time. Past performance is not a guide to the future. Investors looking to sell their VCT shares may get a better price using the VCT’s share buyback facility, although this is not guaranteed.

BSC – Five Year Discount to NAV history

BSC2 – Five Year Discount to NAV history

Source: Morningstar. Past performance is not a guide to the future. Dividends are variable and not guaranteed. Dividends paid per calendar year to 30 June 2021.

Annual rebate when you invest through Wealth Club

The VCT 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 0.10% of the Net Asset Value of the Offer Shares issued to you when you invest. Terms and conditions apply.

Our view

Having developed a loyal following over the last two decades, seasoned VCT investors will be familiar with the two British Smaller Companies VCTs. 

Once renowned for management buyout deals, since 2015, the VCTs have focused exclusively on growth capital investments. Today the two VCTs give investors exposure to a concentrated portfolio of predominantly technology-based early-stage investments, one of which, Matillion, has had a material positive impact on the value of both VCTs. Investors should note Matillion is now a substantial proportion of the net assets of both VCTs and this adds concentration risk.

The VCTs are managed by an experienced and well resourced investment team. YFM continues to invest in growing the team as assets under management increase.  

Realisations from the legacy portfolio have aided the payment of dividends, whilst the newer investments have supported the net asset value of the trusts. In particular, the VCTs’ investments in data & analytics, and software appear to have served the VCTs well during the pandemic as they drove the recovery in their net asset value: remember though that past performance is not a guide to the future and experienced investors should form their own view. 

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

Target dividend
Initial charge
Initial saving via Wealth Club
Net initial charge
Annual rebate
Funds raised / sought
£60.0 million / £60.0 million
Last updated: 11 November 2021

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