ProVen VCTs

“Meet the manager” video – watch below

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

Many successful companies, from Watchfinder to Chargemaster, have come out of the ProVen stable. A string of profitable exits in the run-up to 2019 resulted in large dividend payouts and healthy returns for investors. More recently, the VCTs’ exposure to e-commerce and software has proved resilient during the pandemic – although as ever past performance is not a guide to the future. 

The two VCTs now have combined net assets of £307.2 million, across a portfolio of around 50 companies (as at August 2021). The portfolio has a bias towards retail and consumer businesses (predominantly e-commerce), which account for 49% of invested assets. B2B software is another area of focus, accounting for 36% of invested assets. The manager operates in both the UK and US, giving it a transatlantic outlook unusual in the sector.

Over the past 10 years, ProVen VCT and ProVen Growth and Income VCT have produced returns of 58.5% and 71.6% respectively. Past performance is not a guide to the future.

The current offer is seeking to raise up to £40 million, with a £40 million overallotment facility. Update (31 Mar 2022): both VCTs are now using the full £20 million of their respective overallotments.

VCT Offer capacity Funds raised
ProVen VCT £40m* £33.2m
ProVen Growth & Income VCT £40m* £26.1m
*Includes £20m overallotment. Figures as at 23 May 2022. Data is provided by Beringea and is the latest available.

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.

Read important documents and then apply

Highlights

  • Large and long-established VCTs with total assets of £307 million (August 2021) 
  • Focus on growth capital since inception
  • Diverse portfolio with 85% invested in retail, consumer and B2B SaaS sectors 
  • Target dividends of 5% of NAV – exceeded by both VCTs in the last five full financial years. Dividends are not guaranteed and past performance is not a guide to the future
  • Experienced management team with transatlantic experience
  • Available for the 2022/23 tax year
  • Minimum aggregate investment £5,000 (min £2,500 per VCT) – you can apply online

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 $750 million, including £307 million of VCT assets in the UK and $430 million across four institutional funds in the US (August 2021). 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, alongside two investment directors and six investment professionals. 

Beringea supports portfolio companies with its in-house resource legal and marketing expertise and – following the appointment of Head of Talent James Adams in November 2021 – it will also help companies recruit and retain key talent. The investment team is assisted by a further 13 support staff.

Meet the manager: Watch our video interview with Karen McCormick

 

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 rather than management buyouts. 

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, Blis Media, a developer of digital marketing targeting software, is the second-largest position within PGI but a smaller position within PVN. 

An ideal investee 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 B2B Software as a Service (B2B SaaS) and retail and consumer sectors. 

The majority of portfolio companies are tech-enabled and relatively capital light, with the potential, in Beringea’s view, to return 2-5x, although this is 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.

Exit track record

In the first half of 2021, the ProVen VCTs recorded four complete or partial exits, two profitable. This includes the sale of a £3.1 million stake in online camera retailer MPB, which generated a 2.75x realised return on the shares sold. The VCTs retained 70% of its stake in the business. Past performance is not a guide to the future.

ContactEngine – ProVen VCTsContactEngine – recent exit

ContactEngine has developed an AI system that allows companies to automate outbound customer contact. The conversational AI helps companies deliver an enhanced customer experience without significant additional cost. 

The product has attracted big-name customers like British Gas, Verizon and Asda. That pushed the company into the 2020 Tech Track 100, a list of the UK’s fastest-growing private tech companies.

The ProVen VCTs initially invested in the company in 2016, and subsequently participated in two further funding rounds for a total investment across both VCTs of £3.8 million. 

ContactEngine was sold to Nasdaq-listed software group NICE in June 2021, generating exit proceeds of £10.9 million for the VCTs, an average 2.9x realised return. This is expected to increase once anticipated future returns are included. Past performance is not a guide to the future.

Utility Exchange – example of previous failure

As is to be expected, not all investments work out. Utility Exchange is one such example. The business, which traded as Switch my Business, ran an online utility switching service aimed at small and medium-sized business (SME) customers. Unlike the household market, the SME utility sector is complicated and manually intensive, which the company believed created an opportunity. 

The business had been struggling for some years, with new entrants driving down margins and a disruptive move from Derby to Manchester leading to a writedown in valuation in 2016. The business suffered over the pandemic, which saw a significant decline in energy usage by its customers, and finally entered administration in mid-2021. 

Over the course of several funding rounds, the ProVen VCTs invested a total of £3.7 million in the business, through a combination of equity and debt. Following the administration, the VCTs sold their remaining interest for £240,000.

Covid-19 impact

At the onset of the Covid-19 crisis, the ProVen VCTs had just come to the end of a successful fundraising period, so had a strong cash position which enabled them to support their portfolio companies where required. In addition to financial support, Beringea arranged a series of weekly virtual “huddles” with portfolio companies on topics ranging from accessing government support to managing finances and motivating workforces.

The portfolio has limited exposure to hospitality but counts several online retailers within its portfolio, as well as businesses with recurring revenue business models. The sectors favoured by the ProVen portfolio appear to have offered some protection against the economic impact of the crisis.

Nonetheless, the VCTs did report a decline in NAV when the pandemic hit, with NAV total returns of -11.6% (PVN) and -10.9% (PGI) for the three months to March 2020. The VCTs have since recovered strongly, in the 18 months to September 2021, the VCTs have generated NAV total returns of 26.4% (PVN) and 26.2% (PGI). Past performance is not a guide to the future.

Portfolio overview

The combined portfolio contains around 50 companies (August 2021), 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.

The combination of several significant disposals in the run-up to 2019 and new fundraising and investment activity to replenish the portfolio has seen the average age of portfolio companies reduce. As at February 2021, over a third of the portfolio was less than three years old. As you would expect, this younger and less mature profile of the portfolio has led to a short-term reduction in exit activity, historically a key driver of returns. Past performance is no guide to the future.

In the six months to August 2021, Beringea made four investments in new companies, worth a total of £13.9 million. In addition, there have been two follow-on investments in e-commerce AI group Zoovu and medical supplies specialist Hygienica.

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 £2.7 million investment into 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. The investment is now held at over 2x cost. 

Combined portfolio sector breakdown (%) – invested assets

Source: Beringea. As at 31 August 2021.

Example portfolio companies

Zoovu – ProVen VCTsZoovu – largest holding (PVN and PGI) 

Zoovu is a SaaS business that delivers conversational AI systems to online retailers. Its products ease and improve the e-commerce experience through better recognition of search terms as well as running chatbots and introducing a more visual sales experience.

The group’s products have been shown to increase conversion by as much as 211%, while also driving increased order value – the holy grail as far as digital retailers are concerned. Customers include digital giants like Microsoft and Amazon, a vote of confidence in the company’s technology in our view, as well as manufacturers like Bosch and Dyson. Zoovu reported revenues in 2020 of £12.0 million, a 94.2% increase year-on-year. 

The conversational AI space is clearly an area of strength for the manager, given the similarities between Zoovu and ContactEngine. Beringea first invested in Zoovu in February 2019 and has now invested a total of £8.4 million across both ProVen VCTs. The holding is currently valued at £18.5 million (August 2021). Past performance is not a guide to the future. 

Plum Guide – ProVen VCTsPlum Guide – recent investment 

Just as restaurants have the Michelin Star and books the Booker Prize, Plum Guide aims to set the standard in holiday rentals. Its “curated” Airbnb-style website lists top rental properties, while its Plum Awards go to the top 3% of listings in a given destination.

The success of Airbnb, which reported 79.7 million bookings in the third quarter of 2021, indicates appetite in the wider sector. Plum Guide has also recovered quickly from the pandemic, with August 2021 sales reaching 90% of pre-pandemic levels. That could bode well, since revenues are driven by a 3% fee charged to property owners when a property is rented out as well as additional fees charged to guests. 

Beringea invested £5.5m across both ProVen VCTs in July 2021 alongside a host of US venture capital investors. The investment was part of a $9 million funding round that valued the business at £85.7 million.

Performance and dividends

The ProVen VCTs have a good long-term performance track record driven primarily by profitable exits. 

Six profitable exits in FY 2019, for example, supported large capital distributions, with £59.6 million of dividends paid to investors in the period 28 February 2018 to 30 August 2020. As noted above, exit activity has been more muted recently, reflecting the younger profile of the portfolio.

Over the past 10 years, ProVen VCT and ProVen Growth & Income VCT have produced returns of 58.5% and 71.6% respectively. Past performance is not a guide to the future.

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 March 2017 to 31 March 2022.

The VCTs have a target annual dividend yield of approximately 5% of Net Asset Value, not guaranteed. The dividend track records for both VCTs are shown below to 31 December 2021. 

Over the five years to 31 December 2021, both VCTs have exceeded their targets, having paid total dividends per share of 48.75p (PVN) and 29.00p (PGI), equivalent to between 49.0% and 37.2% of the starting net asset value on 31 December 2015. 

Dividend payments in the calendar year

Source: Beringea. Past performance is not a guide to the future. Dividends are variable and not guaranteed. Dividends paid per calendar year to 31 Mar 2022.

Average dividend yield (% of NAV) history

  ProVen VCT ProVen Growth & Income
2017 9.35% 16.28%
2018 27.44% 9.05%
2019 5.66% 5.30%
2020 5.08% 5.71%
2021 4.67% 4.87%
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 not a 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.

VCTs can now only invest new money in growth capital deals. Asset-based investments 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. 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. Both existing shareholders and their spouses can benefit from the existing shareholder additional early bird saving. 

Full initial charge 5.5%
Early bird discount
Wealth Club initial saving 3%
Existing shareholder discount
Net initial charge through Wealth Club (new investors) 2.5%
Net initial charge through Wealth Club (existing shareholders) 2.5%
Annual management charge 2%
Annual administration charge See details below
Performance fee 20%
Annual rebate from Wealth Club (for three years) 0.10%

More detail on the charges

Deadlines

  • Final deadline for allotment in the 2022/23 tax year: 12 December 2022

Dividend Reinvestment Scheme

The companies operate a dividend reinvestment scheme, which enables shareholders to reinvest any future cash dividends. These new shares should qualify for VCT tax reliefs that are applicable to subscription for new VCT shares; however, please remember tax rules can change.

Share buybacks

The VCTs operate a policy of purchasing their own shares as they become available in the market at a discount of approximately 5% to the latest published NAV. However, there is no guarantee that either company will buy back shares. The discount to NAV could also be greater or less than 5%. 

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 the ProVen 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 VCTs’ share buyback facilities, although this is not guaranteed.

PVN – Five year discount to NAV history

PGI – Five year discount to NAV history

Source: Morningstar, 31 March 2022. The discount chart shows the discount of each ProVen VCT, calculated as the closing share price at the end of each month, divided by the latest net asset value at the time. Rolling 12 month average is this figure averaged over the year.

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.

In the run-up to the pandemic, they achieved several profitable exits and generated substantial capital distributions to investors. More recent performance has been buoyed by the portfolios’ e-commerce and software businesses, notable examples include Monica Vinader, the women’s jewellery designer, MPB, the world’s largest reseller of photo and video kit, and Zoovu, 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 throughout 2020 and 2021, and have an encouraging pipeline of new investments. It is largely the success of these businesses which will play an important part in the future performance of the ProVen VCTs. 

This remains a good offer from a highly credible management team in our view. The manager’s transatlantic connections set it apart from some other VCTs, but investors should form their own view.

Read important documents and then apply

Wealth Club aims to make it easier for experienced investors to find information on – and apply for – tax-efficient investments. You should base your investment decision on the provider's documents and ensure you have read and fully understand them before investing. This review is a marketing communication. It is not advice or a personal or research recommendation to buy the investment mentioned. 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
3%
Net initial charge
2.5%
Annual rebate
0.10%
Funds raised / sought
£59.3 million / £80.0 million
Deadline
Apply now for 2022/23 allotment
Last updated: 11 January 2022

News about Venture Capital Trusts. Read all