In discussion with GBI Magazine, Praetura Ventures’ Director Jon Prescott, highlights the untapped potential that the North of England holds as an investment opportunity.
As a retail focused asset manager operating in the alternative investment space, Praetura Ventures is a venture capital firm based in Manchester which invest in early-stage businesses with a particular focus on the North of England. The VC firm believe that an underappreciated opportunity presents itself in the North with numerous successful start-ups appearing over the last decade.
Countless investment successes have already been overseen by Praetura as part of their northern-centric investment approach. Whilst talking to GBI Magazine, in this interview Jon highlights how he believes that the absence of competition in the North and the ability to diversify portfolios across different geographies could lead to many more fruitful ventures for advisors, investors and founders in the years to come.
However, from Jon’s perspective, good communication is key in ensuring that success. He stresses why good relationships with advisers, investors and founders are paramount in ensuring all the group’s aims and objectives are met.
Jon believes that this can only be achieved on a larger scale if education around alternative assets classes is improved across the EIS and SEIS sector. Jon also highlights how better communication around such investments is all part of Praetura’s long-term objective to achieve a frictionless process for investors and advisers to be able to access their services and thus be exposed to the full potential of EIS and SEIS investment.
IFA: Do you think the Government’s levelling up agenda will place more focus on start-ups and entrepreneurship through EIS and SEIS in the North of England?
Jon Prescott: “We identified back in 2011 that there was a definite need for support for early-stage businesses in the North. It has been very well documented and clear that the South has had, to some extent, a monopoly over venture capital. A significant amount of capital, around 81% of capital raised, is deployed into businesses in London and Southeast. We identified that back in 2011 and what we’re hearing now about levelling up is nothing new. It’s been there for several years, but it’s just hit the radar again. I think what needs to be expressed is that the South doesn’t have a monopoly on high level founders or businesses and the North is full of good, high-quality businesses where capital is required to help them grow just like businesses in the South.
“EIS and VCT solutions are becoming more and more mainstream in the whole financial planning world. Having an opportunity to invest in a pool of exciting businesses is a big advantage. We see ourselves as an extension of what’s gone before but also as giving investors an opportunity not only to diversify across managers but also to diversify across businesses, many of which will go on to be great businesses and across a different geography too.
“20% of the UK GDP output comes from the Northwest, but we only see 7% of the overall VC investment there from a UK perspective.
We’ve calculated something like a £9.7 billion funding shortfall for early-stage VC equity funds. From our point of view that presents a real opportunity for investors because that’s a gap that typically most investment managers don’t focus on.
“By definition, the valuation of those deals increases too. That’s because there’s more demand for the deal in the South whereas we don’t have that level of competition in the North. We believe from an investor’s point of view, not only does the North present a good opportunity to invest into some exciting businesses, but there’s also a pricing arbitrage where if we can buy locally and sell globally, there is an arbitrage to be had relative to a lot of the South.
“In terms of the successes of our portfolio, I’d highlight Peak AI who just raised £75 million from Soft Bank. We invested into them when they were just four people and now, they’re 350 strong and use their AI platform to help brands like Pepsico, ASOS and Boohoo solve their biggest challenges. One of our more recent success stories is BankiFi – an innovative, fintech company which got great traction initially. Despite only being a few years old, they have processed over £1,000,000,000 worth of payments and have contracts with banks in Australia and New Zealand, the UK and Singapore.”
IFA: Why and how do advisors need to demand better communication from fund managers?
Jon Prescott: “In lots of areas of asset management and financial planning, the level of communication is pretty good. We’ve seen the development of the platform space as a way of creating an environment where all assets are managed from one single space, but also that increased visibility on what investors have.
“In the world of alternatives, the level of communication hasn’t accelerated as quickly as it should have done. There’s still an air of opaqueness around what investors have got and what they don’t have. From our point of view, we are firmly of the belief that the clearer we can communicate with investors and financial advisors, the better the relationship and the more the investor and the advisor will understand what it is we’re trying to do. One of the big barriers around this is there’s still a little bit of mystique around how EIS, SEIS and VCT investors really operate.
One of our objectives back in 2019 was to ensure that every single investor and every single advisor who invests with us has very clear and transparent communication on what we’re doing, when we’re doing it, how we’re doing it and how much we’re charging for doing it. We pride ourselves on our investor communications and our alignment with advisors.
“Our biannual report explains exactly where an investor’s portfolio is. As opposed to just giving numbers, investors get a six monthly update as to what’s been happening in the portfolio, as well as individual updates as major changes happen.
“The response to that thus far, both from advisers and investors, has been wholeheartedly positive. Investors are as interested in what they are invested in as they are about how much they have invested. We have a responsibility, as do all asset managers, to ensure that investors understand what they’re invested in and why.”
IFA: What is the most exciting project you’re working on right now and where do you see it going in the future?
Jon Prescott: “We’re on a very big build process here. Since 2019, we’ve been assessing the entire business to remove as much friction as we possibly can to enable advisors and investors to access this exciting asset class and power planning solutions.
“Advisers are now faced with a tightening fiscal environment and tax planning will become more valuable than ever as more individuals are faced with greater challenges. Ultimately, we want to continue on our journey to help educate advisers on the benefits of EIS, and VCT so they in turn can use these powerful planning tools to help their clients meet their wider financial objectives.”
