ProVen VCTs

The two ProVen VCTs – ProVen VCT (PVN) and ProVen Growth & Income VCT (PGI) – are the longest-standing VCTs with a focus on growth investing. 

The manager invests in a broad range of opportunities, ranging from B2B software and data providers to consumer brands. While it has a particularly strong reputation for backing e-commerce companies, it has enjoyed success across the spectrum. Many fast-growing companies from Watchfinder to Chargemaster have come out of the ProVen stable. 

The two VCTs now have combined net assets of £322.8 million across over 50 companies (February 2023). The portfolio has a bias towards consumer (predominantly e-commerce) and Software as a Service (SaaS), accounting for 38% and 29% of invested assets respectively. The manager operates in both the UK and US, giving it a transatlantic outlook unusual in the sector.

In the 10 years to June 2023, PVN and PGI have produced a NAV total return (including dividends) of 54.1% and 35.9% respectively. Over the five years to June 2023, returns were -1.1% and 4.1% respectively. Past performance is not a guide to the future.

• Seeking to raise up to £40 million, with a £40 million overallotment facility
  
• Target dividends of 5% of NAV – variable and not guaranteed
• Available for the 2023/24 tax year

The manager

Since inception, the two ProVen VCTs have been managed by Beringea LLP, the UK arm of transatlantic venture specialist Beringea LLC. Beringea as a whole has successfully backed entrepreneurial businesses for over 30 years and currently manages UK and US venture capital funds of more than $800 million, including £322.8 million of VCT assets in the UK and $465 million across four institutional funds in the US (February 2023). The manager’s international footprint means it can provide on-the-ground support to help companies expand across the Atlantic.

The VCTs are directly managed by an investment team of 11. This includes Founding Partner Malcolm Moss, Managing Partner Stuart Veale, and Chief Investment Officer Karen McCormick. 

The investment team is assisted by the wider UK Beringea team of 26, which provides assistance to portfolio companies, including in-house legal and marketing expertise.

Investment strategy

The ProVen VCTs are over twenty years old. PVN, the elder of the two, launched in 2000, while PGI launched in 2001. Unlike many VCTs of the same age, ProVen has always focused on growth capital investments. 

Over the years, the funds have progressively converged towards identical investment mandates. Today, it’s expected they will mirror each other and co-invest on each new deal, albeit in different amounts. This does mean there are some differences; for instance, marketing software provider CreativeX is the largest position within PGI but a smaller position within PVN. 

An ideal portfolio company should have a proven commercial business with an exceptional team capable of taking the company to exit. Both VCTs have a strong bias towards consumer and Software as a Service sectors. 

The majority of portfolio companies are tech-enabled and relatively capital light, with the potential, in Beringea’s view, to deliver a profitable exit within three to four years – not guaranteed. Beringea will only invest in companies that are either already profitable, or where the manager sees a clear path to profitability, and aims to be a key part of the team with significant influence in the business. That may include using its transatlantic experience to support expansion into the US where appropriate.

In recent years ProVen’s growing list of successful founders has helped create proprietary deal flow and value for the VCTs. As an example, the VCTs’ second largest holding, Luxury Promise, the pre-owned luxury handbag marketplace, was introduced to Beringea by one of the co-founders of previous portfolio company and successful exit Watchfinder. 

Current portfolio overview

The combined portfolio contains over 50 companies (February 2023), offering a blend of new and maturing growth assets which have the potential to seek an exit in the coming years, although this is not guaranteed.

In the year to February 2023 Beringea made six new investments, worth a total of £31.6 million. In addition, £12.7 million was invested into nine follow-on companies.

Combined portfolio sector breakdown (%) – invested assets

Example portfolio companies

Picasso Labs (t/a CreativeX) – largest combined holding

CreativeX, in its founder’s words, was a “happy accident”. It was developed for a previous venture to measure the impact of an image content on marketing performance. However, what was originally a side project quickly became the company’s focus.

Through a combination of vision, audio, and text detection, CreativeX can provide real-time analytics, helping brands measure the impact of each creative element. This not only allows firms to track important metrics such as quality and representation but also establishes “best practices”, meaning content is kept consistent across the brand.

This software has already been adopted by more than 5,000 brands and over 1,000 advertising agencies, including blue-chip clients such as Pepsi, Nestle, and Heineken.

The VCTs originally invested £2.1 million in 2019. More recently, they participated in a $25 million funding round, taking the total combined investment to £7.3 million. The holding is currently valued at £16.3 million, representing 5% of combined net assets. Past performance is not a guide to the future.

Not Another Beer Co (t/a Lucky Saint) – recent investment 

With 1 in 3 UK’s pub visits now alcohol free, Lucky Saint is part of the growing movement towards lower alcohol consumption. 

Founded in 2018, Lucky Saint makes alcohol-free beer from only four natural ingredients in a 400-year-old Bavarian brewery in accordance with Reinheitsgebot (the German purity law).

Since launch, the company has seen revenue sales growth of 180% year-on-year with its beer now available in 5,000 pubs, bars, and restaurants (including 60 Michelin star restaurants), as well as major retailers such as Waitrose, Sainsbury’s, and Tesco – it claims to be the UK’s number one independent alcohol-free beer. 

The Proven VCTs led the company’s £10 million Series A investment round in 2023, alongside JamJar Investments (the fund setup by the founders of Innocent Smoothies) and Warburtons chairman, Jonathan Warburton. At the time, the raise represented the largest alcohol-free beer investment in Europe. 

In total, the VCTs invested a combined £5 million into the business.

Exit track record

In the year to February 2023, the ProVen VCTs recorded 11 full and partial exits. Of these, five were positive, two were below cost, and four were written down to nil. Two other exits completed after the VCTs’ financial year-end, including Monica Vinader (detailed below). Past performance is not a guide to the future.

Monica Vinader – recent exit

Monica Vinader is an award-winning jewellery brand, founded by sisters Monica and Gabriela Vinader. Described as affordable luxury, the company offers high-quality and responsibly sourced designs without an eye-watering price tag. 

Since launching in 2008, the business has garnered a loyal following, with notable customers including Jennifer Lopez, Kendall Jenner, and the Princess of Wales. Revenues quadrupled to c.£100 million over the last six years.

The ProVen VCTs originally backed the business in 2010 and later sold 60% of the combined stake in 2016 for a 5.2x return on cost. In March 2023, Monica Vinader agreed a strategic sale to Bridgepoint Development Capital IV, a private equity fund. The VCTs realised their remaining holding for initial proceeds of £8.7 million, equivalent to a 11.8x return on cost, with the potential for future proceeds. Past performance is not a guide to the future.

MYCS – example of previous failure

As is to be expected, not all investments work out. Online furniture retailer MYCS is an example.

The company had to hold large quantities of expensive stock for extended periods. This caused problems when loan providers introduced lending caps in March 2022 at the same time as consumer confidence fell sharply. 

In response to these challenges, MYCS entered into a merger with another private equity-backed business. The ProVen VCTs invested a total of £10.9 million in the business. The VCTs will not receive any proceeds from the merger, although there is the possibility of some contingent returns should the buyer secure a future sale of the enlarged group. 

Performance and dividends

Whilst the ProVen VCTs have a good longer-term performance track record, driven primarily by profitable exits, recent performance has proved more challenging with write-downs to key portfolio holdings (Plum Guide, Papier, Fnatic, Thread, Zoovu).

In the 10 years to June 2023, PVN and PGI have produced a NAV total return (including dividends) of 54.1% and 35.9% respectively. Over the five years to June 2023, returns were -1.1% and 4.1% respectively. 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.

The VCTs target an annual dividend yield of approximately 5% of Net Asset Value, variable and not guaranteed. Over the five years to June 2023, the VCTs have delivered a cumulative dividend yield of 55.2% (PVN) and 30.4% (PGI), based on the average monthly NAV of each VCT over the period – dividends are variable and not guaranteed.

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

 Dividend payments in the calendar year

Dividend Reinvestment Scheme

The VCTs 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 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 average discount to NAV as at 30 June 2023 was -6.68%. Over the previous five years the average discount to NAV was -6.36%.

The discount history is based on the closing share price of the VCTs 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.

Charges and savings

A summary of the main charges and savings is shown below. The net initial charge shown includes the Wealth Club saving. 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 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.

Our view

The ProVen VCTs have a long and successful track record of growth capital investing, having achieved several profitable exits. More recent performance has been mixed, with failures such as MYCS offset against the portfolios’ successful e-commerce and software investments, such as CreativeX and Monica Vinader (both detailed above). 

Beringea has been backing entrepreneurial businesses for the last 30 years and has a highly experienced management team. The VCTs have continued to deploy capital into an encouraging pipeline of predominantly consumer and SaaS investments, Lucky Saint (detailed above) is an example. 

The manager is highly credible in our opinion and Beringea’s transatlantic connections set it apart from some other VCTs, but 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.