Triple Point Venture VCT

The Triple Point Venture VCT looks to invest in early-stage companies that seek to solve problems faced by large corporates. 

Launched in 2018 as a share class in the Triple Point VCT 2011, it has grown net assets to around £43.7 million, including 43 companies and £11.4 million held in cash (February 2023). More than 60% of the portfolio is invested in Fintech, Software, and Health businesses. Since the financial year end the VCT has made five new investments.

The VCT has paid 11p in dividends to date and recorded its first cash exit in 2022, achieving a 5.2x return on cost from Credit Kudos (detailed below) – dividends are variable and not guaranteed. Over the three years to September 2023, the VCT delivered a total return (including dividends) of 20.0% – past performance is not a guide to the future.

• Seeking to raise £10 million with a £20 million overallotment facility
  
• Target dividend of 5p per share (variable and not guaranteed)
• Available for the 2023/24 and 2024/25 tax year
• Minimum investment £3,000 – you can apply online
• Next deadline: The 1% early bird saving is available on the first £5 million raised or until 31 December 2023 if earlier

The manager

Triple Point Investment Management LLP (“Triple Point”) was founded in 2004 and today its team of over 200 manages £2.7 billion of private, institutional, and public capital. To date, it has provided more than £440 million of funding to close to 200 VCT/EIS companies. 

Triple Point concentrates on five key areas for investment: venture capital, private credit, energy, digital infrastructure, and social housing. 

The VCT is managed by the eight-strong venture investment team, led by partner Ian McLennan. The investment team has significant experience in venture capital, start-up incubation, private equity and asset finance and is supported by an advisory committee, whose members are successful entrepreneurs with investment experience in high-growth businesses.

The investment team is also supported by the Triple Point Venture Network, a network of blue-chip corporates, entrepreneur investors, corporate innovation specialists, and venture capitalists, which has been established for over 16 years. The Venture Network works with innovative small businesses addressing identified large corporate problems and contributes to the VCT’s deal sourcing and screening. 

Investment strategy

The VCT focuses on B2B companies that are addressing challenges faced by large corporates. 

The investment team assesses companies by looking at the scale of the challenge they are addressing and their management’s ability to address it.

The fund tends to invest at an early stage, when valuations are typically lower, but after the company has received some form of market validation, e.g. initial revenue. Triple Point believes this overcomes one of the main reasons young companies fail: not enough demand. That said, investing in early-stage companies remains high risk and you should expect some failures. 

While there is no set target, roughly 75% of investments are expected to be pre-seed or seed opportunities (companies generating less than £1 million in annual revenue) with the remainder split between Series A and later-stage investments. 

Successful opportunities are evaluated by Triple Point’s Investment Team, often in conjunction with the advisory committee and subject to due diligence. This forms the backbone of the Investment Committee's investment recommendation. The VCT board has the final say. 

The VCT’s average ticket size is currently c. £700,000 although its initial investment can range between £100,000 and £2 million. As a relatively new VCT, the trust’s focus is still on building its portfolio and so approximately only a third of investments are expected to be in follow-on deals.

Current portfolio overview

The Triple Point Venture VCT has net assets of £43.7 million and a portfolio of 43 companies, with £11.4 million in cash and cash equivalents (February 2023). 

It aims to add 8-12 new investments per year. In the financial year to February 2023, it invested £8.7 million into 13 new investments and £2.7 million into five follow-on investments.

Since February 2023, it has invested £7.2 million into five new investments and eight follow-on investments. It has also had one realisation, with proceeds of £0.45 million.

Sector breakdown

Examples of portfolio companies

Vyne Technologies – largest holding

Open Banking allows banks to securely share their customers’ data with authorised third parties, with customer permission. This change has created a substantial opportunity for third-party providers to create innovative added-value products and services. 

Vyne Technologies (trading as payvyne) is using open banking to build a global instant payments infrastructure for account-to-account payments. Instead of relying on a payment network such as Visa or Mastercard, open banking allows money to be moved directly between users’ and merchants’ bank accounts. There are several benefits: payments are instant, transaction fees lower, and payment security is increased. 

Triple Point initially invested £200,000 in November 2019, as part of a £675,000 round at a £2 million valuation alongside Seedcamp, an early investor in Wise. The business has since raised three further funding rounds with Triple Point participating in each. The latest in February 2023 saw Vyne raise £2.9 million at a £42.9 million pre-money valuation.

The holding is currently valued at £3.2 million, on an investment cost of £1.8 million. It accounts for 7.4% of the fund’s net assets (February 2023).

AeroCloud – recent investment

Founded by ex-professional racing driver George Richardson and aviation industry veteran Ian Forde-Smith, AeroCloud aims to simplify the day-to-day management of operations for airports.

Its platform automatically tracks flights and shows airport staff the real-time effects of delays, diversions, and cancellations on daily operations, so they can adjust plans as required. Airports can also use its machine learning capabilities to predict passenger numbers and peaks and troughs – helping airports manage resources more effectively. Designed to be scalable, the technology can be deployed into a new airport in as little as 48 hours. 

In a little over three years, the business has partnered with 52 customers, including Liverpool, Manchester, Eindhoven, and Tampa International airports. Collectively, its software processes more than 200 million passengers annually. 

Triple Point invested £1.5 million as part of a $12.6 million Series A funding in December 2022.

Exit track record

The VCT had its first cash exit under its current strategy in March 2022 with Credit Kudos, detailed below, with a second small realisation in 2023. It also sold Adepto in December 2019 and received shares in Degreed Inc (the acquirer), as consideration for the sale. Past performance is not a guide to the future.

Credit Kudos – recent exit

Credit Kudos is a Credit Reference Agency that uses financial data obtained via Open Banking. 

The idea for the company came about when software engineer Freddy Kelly (co-founder) returned to the UK after working in Silicon Valley and discovered his time away had severely impacted his credit history. 

Rather than rely on assumptions, Credit Kudos allows lenders to analyse verified, up-to-date transaction data. With direct connections to the UK’s largest banks, users can safely and securely share their financial information with lenders, removing the need to upload bank statements and payslips. This not only provides a fairer credit rating for the user but also allows lenders to make quicker decisions and access a previously overlooked client base.

The business was acquired by Apple in March 2022, just two years after Triple Point invested. The exit generated £2.5 million in proceeds for the fund, equivalent to a 5.2x return on cost. Past performance is not a guide to the future.

Anorak – example of a recent failure

As can be expected, not all investments work out. One example is Anorak. 

Anorak was building a ‘smart’ life insurance advice platform which would automatically offer insurance advice ahead of important life events such as buying a house or starting a family. Using its proprietary recommendation engine, the platform could profile users, analyse their risk, and connect them to a suitable product. 

However, after the company lost a key B2B customer, the business pivoted to a direct-to-consumer model which proved too costly to sustain. The business was sold in a distressed sale process to CLARK Group, a large German insure-tech, in January 2023. There were no proceeds from the sale, resulting in a £700,000 loss for the fund. 

Performance and dividends

To date, the VCT has paid cumulative dividends of 11p per share, including a 2p dividend paid in September 2023. The VCT initially targeted a dividend of 3p per annum, increased to 5p from February 2022. Dividends are variable and not guaranteed.

Like many of its peers, Triple Point Venture VCT has had a mixed year. In the financial year to February 2023, its net asset value per share fell from 113.55p to 102.17p. The fund also paid 3p in dividends in the period, short of its annual 5p target. The decrease in NAV was largely due to falling valuation multiples, particularly for later-stage technology holdings, as well as the realisation of a loss. These factors outweighed more positive news, including the fund’s first exit under its current strategy, which saw Apple acquire Credit Kudos (detailed above). Past performance is not a guide to the future.

Over the three years to September 2023, the VCT delivered a total return (including dividends) of 20.0%. 

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)

Dividends paid per calendar year

Dividend reinvestment scheme

The VCT has introduced a dividend reinvestment 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 buy-back policy

The board intends to buy back shares at 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.

Investors should note the Venture Share class of 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 Triple Point Venture VCT has a five-year track record under its current strategy.

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

This 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 charges above) of the Net Asset Value of the Offer Shares issued to you when you invest. Terms and conditions apply.

Deadlines

• Deadline for early bird saving: 31 December 2023 (The 1% early bird saving is available on the first £5 million raised or until 31 December 2023 if earlier)
  
• Deadline for first allotment in 2023/24 tax year: 5 April 2024 (12 noon)
• Deadline for final allotment in 2024/25 tax year: 31 July 2024 (12 noon)

Our view

Since launch in 2018 the VCT has built a portfolio of early-stage, innovative, B2B companies and paid 11p in dividends (September 2023).

Several portfolio companies, such as Quit Genius (recently rebranded as Pelago), Vyne and Ably Realtime, have shown encouraging progress and raised substantial funding rounds following the VCT’s initial investment. These have been key drivers of performance. In addition, the VCT achieved its first cash exit after Apple acquired Credit Kudos, generating a 5.2x return on cost. Past performance is not a guide to the future. 

In our view, the VCT is emerging as “one to watch”. It has built a portfolio of early-stage companies, often investing alongside some of Europe’s top seed investors, and will soon cross the milestones of £50 million in assets and a five-year track record. The VCT could be worthy of consideration for experienced VCT investors looking to diversify an established VCT portfolio, although investing in early-stage companies is high risk and you should form your 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.