British Smaller Companies VCTs

Offer closed – Register your interest

The last British Smaller Companies VCTs offer closed on 16 February 2024.

Please register your interest below in the next British Smaller Companies VCTs offer.

Alternatively, see VCT offers open now »

Register your interest – British Smaller Companies VCTs

Review: British Smaller Companies VCTs

Below is our review of the British Smaller Companies VCTs 2023/24 share offer, which closed in February 2024 having raised £90 million including overallotment.

British Smaller Companies VCT (BSC) and British Smaller Companies VCT 2 (BSC2) are longstanding generalist VCTs managed by YFM Equity Partners. The VCTs have combined net assets of £332.1 million (September 2023) and a portfolio of around 40 companies. 

The VCTs share the same investment strategy and focus on technology companies, with a bias towards data, tech-enabled services, and new media. An example is Matillion, which became the sixth VCT-backed unicorn in September 2021 and is currently the largest holding within both VCTs.

In the five years to 31 December 2023, the two VCTs generated a NAV total return of 61.5% (BSC) and 54.2% (BSC2). Over the period, the VCTs paid total dividends per share of 38.5p (BSC) and 27.75p (BSC2), equivalent to a cumulative dividend yield of 47.5% (BSC) and 46.3% (BSC2) based on the starting NAV of each VCT – dividends are variable and not guaranteed.

  • Seeking to raise £65 million with a £25 million overallotment facility
  • The VCTs do not specify a dividend target
  • Minimum investment £6,000 (you can split your investment 60/40 between the two VCTs or invest in just one) 

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

The British Smaller Companies VCTs are among the longest-standing VCTs – BSC launched in 1996 and BSC2 in 2001. 

The manager, YFM Equity Partners (“YFM”), has been investing in young, fast-growing companies for 40 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. 

Established in Yorkshire in 1982, YFM is a specialist private equity business independently owned by the senior management and investment team. Its 49 employees are located across five offices (Leeds, London, Manchester, Birmingham, and Reading) and the team has over £556 million in assets under management across its VCTs and private equity funds (August 2023).

The investment team is led by Executive 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 is split in four subteams, covering two areas (North and South) and responsible for either new investments or for providing support to portfolio companies. 

YFM’s investment team now comprises 33 professionals, following several senior hires in 2023. These include Head of Talent Network Jade McGrath, who supports existing portfolio companies with hiring, and Raj Pharhani (previously BGF and Barclays Ventures) as Head of Portfolio Reporting. Raj will build out YFM’s portfolio data capture, reporting and monitoring systems. Two Investment Associates and an Investment Director were also added to the team. 

Meet the manager: David Hall of YFM Equity Partners


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 and now follow the same growth capital investment strategy.

The VCTs seek to invest in innovative businesses in both established and emerging industries. Companies will typically be headquartered in the UK and have ambitions to expand internationally. At the point of investment, they will usually generate at least £1 million in turnover, though there is no requirement for them to be profitable. Founders must have a clear strategy to scale the business.

The VCTs typically invest £2 to £6 million into each company. 

Whilst the VCTs will consider investments in any sector, there is a strong bias towards technology and, as a result, the combined portfolio is heavily weighted towards companies operating within the data, application software, tech-enabled services, and new media sectors. 

Portfolio overview

The BSC and BSC2 VCTs have combined net assets of £332.1 million (September 2023). 

Due to its performance, Matillion, has become the largest holding in both VCTs’ portfolios, accounting for 12.7% (BSC) and 16.0% (BSC2) of net assets. As a result, the portfolios are highly concentrated, with the top 10 holdings accounting for 42.4% (BSC) and 44.5% (BSC2) of their respective net assets. 

The VCTs chiefly invest across four sectors: data, application software, tech-enabled services, and new media. These account for 75% of the combined investment portfolio (September 2023). 

The current sector breakdown is shown below.

Combined portfolio sector breakdown (%)

Source: YFM. As at September 2023.

Example of portfolio companies

Matillion – British Smaller Companies VCTsMatillion – largest holding 

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

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

In 2022 Matillion was featured in the FT 1000 as one of Europe’s fastest-growing private technology companies, with revenue growth of 624% between 2017-2020. 

The British Smaller Companies VCTs first invested £3.5 million in November 2016, and a further £0.88 million two years 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 VCTs realised 15% (BSC) and 20% (BSC2) of their stake in Matillion during the Series E funding round. YFM has also reduced Matillion valuation in line with recent falls in the value of comparable listed businesses – the holding is currently held at 10.5x cost (based on combined figures). Nonetheless, the business continues to grow strongly, with revenues up 46.2% to $83.75 million in FY 2023. It remains the largest holding within both VCTs, accounting for 12.7% (BSC) and 16.0% (BSC2) of net assets (September 2023). Past performance is not a guide to the future. 

WorkBuzz-British-Smaller-Companies-VCT.jpgWorkBuzz – recent investment 

Only 23% of the world’s employees are “engaged”: they find their work meaningful and feel connected to the team and their organisation. The remaining 77% are either not engaged or actively disengaged. It’s estimated that low engagement costs the global economy $8.8 trillion.

To address this, HR expert Steven Frost launched employee engagement platform WorkBuzz in 2018. 

WorkBuzz helps organisations gather real-time feedback from their people, analyses this in real-time using AI, and guides managers on where to focus to build great cultures and improve employee retention. 

WorkBuzz now serves more than 400 organisations, including Five Guys, Shell Energy and HS2, and has doubled in size in each of the previous two years. The VCTs invested £4.3 million in June 2023 as part of a £6.2 million funding round supported by the Midlands Engine Investment Fund.

Exit track record

Both VCTs have a history of exits. Over the five financial years to 31 March 2023 (BSC) and to 31 December 2022 (BSC2), they have generated combined exit proceeds of £124.8 million on an investment cost of £64.2 million. Past performance is not a guide to the future.

In the 12 months to March 2023, the VCTs realised two top 10 positions, Springboard (detailed below) and Intelligent Office, a support services provider to the legal and professional services sectors. The VCTs also fully exited Wakefield Acoustics, one of the UK's leading noise reduction specialists, for £1.6 million and partially exited software company Vuealta, generating proceeds of £7.7 million. 

Springboard – British Smaller Companies VCTsSpringboard – example of previous exit

Founded in 2002, Springboard is a provider of AI-powered retail footfall data. 

Springboard claims to have real-time footfall counters installed in every major UK retail location, and consequently the broadest data available. The company tracks consumers’ physical behaviours inside and outside retail locations and develops actionable insights and analytics to help maximise use of retail space. The business serves more than 450 clients across over 3,000 locations. 

YFM Equity Partners first backed Springboard in 2014, and provided follow-on funding in 2015 and 2022, investing a total of £4 million. The business was the second-largest holding in both VCTs as at 30 June 2022. In October 2022, the company was sold to MRI Software, a specialist real estate software business, generating realised proceeds of £14.5 million and a total return of 4.1x. Proceeds funded a special dividend in January 2023. Past performance is not a guide to the future. 

ARRACO Global Markets – example of previous failure 

As is to be expected, not all investments work out. One example is ARRACO Global Markets. Established in 2015, the business was an award-winning interdealer broker for global commodity markets. 

YFM invested £3.75 million in 2020. At the time, the company had doubled revenues to £4 million and was Europe’s fastest growing energy brokerage. It also won commodities broker of the year at the Energy Risk Awards. 

Despite the positive start, the business was severely impacted by declining trading volumes in EU Power and Gas markets as well as increased regulatory pressures. The business entered administration in 2022. The VCTs’ investments were written down to nil. 

Performance and dividends

In the five years to 31 December 2023, the two VCTs generated a NAV total return of 61.5% (BSC) and 54.2% (BSC2) and paid total dividends per share of 38.5p (BSC) and 27.75p (BSC2), equivalent to a cumulative dividend yield of 47.5% (BSC) and 46.3% (BSC2) based on the starting NAV of each VCT over the period – dividends are variable and not guaranteed. 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.

The VCTs have not set a specific target dividend.

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 31/12/2018 – 31/12/2023.

Dividend payments in the calendar year

Source: Morningstar. Past performance is no guide to the future. Dividends are variable and not guaranteed. The bar chart shows dividend per share paid in each calendar year to 31 December 2023.

Dividend yield history (% of starting NAV)

2019 13.6% 13.4%
2020 7.9% 6.3%
2021 12.2% 14.5%
2022 9.7% 8.5%
2023 4.6% 4.9%
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 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

The boards intend to buy back shares at up to a 5% discount to the prevailing 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.

Based on data from Morningstar, the discount to NAV as at 31 December 2023 was -4.23% (BSC) and -5.47% (BSC2). Over the previous five years the average discount to NAV was -7.48% (BSC) and -7.35% (BSC2).

The discount history is based on the closing share price of the VCT 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 VCTs’ share buyback facilities, 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.

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

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.

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%
Net initial charge through Wealth Club (existing shareholders) 3%
Annual management charge 2%
Annual administration charge See offer documents
Performance fee 20%
Annual rebate from Wealth Club (for three years) 0.10%

More detail on the charges

Annual rebate when you invest through Wealth Club

The British Smaller Companies VCTs include 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 your subscription. Terms and conditions apply. 


The offer is now closed.

The manager has stated that applicants will receive additional new shares equivalent to receiving a 3.70% per annum return on funds awaiting allotment, calculated by reference to the number of days between the acceptance of an application (including full receipt of cleared funds) and the date of allotment. This rate is subject to change.

Our view

The VCTs are well established and managed by an experienced and well resourced investment team. YFM continues to invest in its team, most recently with the appointment of a Head of Talent Network and Head of Portfolio Reporting, expected to expand the capabilities to the investment team. 

The VCTs give investors exposure to a concentrated portfolio of companies with a focus on data, application software, tech-enabled services, and new media sectors. YFM is building an enviable track record investing in these sectors. 

The VCTs’ portfolio includes several promising companies, such as Matillion, the data analytics business and the largest position in both VCTs, Outpost, the visual FX business, Unbiased, the financial adviser review site and Displayplan, the in store “point of purchase” displays provider.

In our view, YFM continues to build on its established reputation as an experienced investor in B2B software and data & analytics businesses. The team’s area of expertise and investment strategy is well reflected in both the existing portfolio and recent investments. We believe this offer could be worth considering – experienced investors should form their own view.

How to invest

The 2023/24 British Smaller Companies VCTs share offer closed on 16 February, having raised £90 million (including overallotment) in 21 weeks.

Please register your interest to receive free VCT alerts.

Alternatively, view other VCTs you can invest in now »

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
£90.0 million / £90.0 million
Last updated: 20 September 2023

News about Venture Capital Trusts. Read all