GBI City Editor Neil Martin talks to Andrew Aldridge, Partner and Head of Marketing at Deepbridge Capital
It’s been a year since we have talked in depth to Deepbridge Capital, so I’m keen to find out how the firm has found the last 12 months.
As regards 2018 and the approach for 2019, Aldridge says: ‘The Deepbridge EIS and SEIS approach remains unchanged; we invest in growth-focused technology and life sciences companies. The Deepbridge propositions continue to grow in popularity with increasing funds raised and deployed each year, with Deepbridge selecting and supporting highly innovative companies with global ambitions.’
It’s an approach which has served the firm well and it has built a credible following within the sector. It has also worked hard in the last 12 months to expand its size and activities.
It has added to its investment, investor relations and regulatory compliance teams. In 2017 it launched the Deepbridge Life Sciences EIS and technology-focused Deepbridge Innovation SEIS, to complement the existing Deepbridge Technology Growth EIS and Deepbridge Life Sciences SEIS. Both new products have been well received by financial advisers and investors.
Deepbridge believes its success is mostly due to its vastly experienced individuals who have developed and exited successful business within key sectors.
If not it provides a hands-on management approach to supporting and managing investee companies. By working closely with investee companies and supporting its commercialisation, it provide entrepreneurs with the best possible opportunity to thrive and ultimately produce a return on investment for investors. The firm has also noticed a greater interest from advisers. Aldridge says: ‘Anecdotally, advisers are increasingly looking at EIS and SEIS as they require alternative tax efficient homes for investors’ investment. As the market becomes increasingly transparent and greater education is provided, advisers (and compliance and PI providers) appear to be increasingly confident at utilising tax efficient investments when appropriate for a client.’
Does that mean clients are savvier about EIS and SEIS nowadays?
‘EIS and SEIS have never been more high profile and as long as investors understand the ethos, and experience, of the manager and understand the types of companies in to which they could be invested, then I believe there is a genuine appetite to support UK businesses and particularly those business which are either creating jobs or are creating cutting-edge technology or medical discoveries.
Aldridge believes that advisers need to understand that not all of their clients should be investing via EIS.
‘However, if they suitably segment their client base and identify appropriate clients then the managers and the EIS industry as a whole now has some great tools and information available regarding EIS, the potentially significant risks, the potential opportunities and scenarios where EIS may be a crucial part of well diversified portfolio.’
And Aldridge believes that the industry still needs to do more to promote the schemes to wider investor base, but the situation is getting better.
I move on to ask ask Alridge about the UK’s strong start-up and entrepreneurial culture. What does he put that down to?
‘The UK has always been entrepreneurial and innovative. It is common for an increase in start-ups following an economic downturn and the past ten years has seen the UK economy continue this trend in the wake of the credit crunch. With great academia, and a focus on technology and medical innovation the UK continues to be a leader in both the tech and life sciences sectors with fantastic skills coupled with an increasingly supportive Venture Capital sector. Tax incentives such as EIS and SEIS are also ensuring that that there is an incentive for UK investors to support such innovations financially.’
So what did the firm make of the government’s recent changes to EIS?
‘Fully supportive. The government has effectively endorsed the Deepbridge approach to investing – EIS monies should be going to those companies that offer the potential to create jobs, create exports and provide economic, and in the case of life sciences, health economic, efficiencies.’
Deepbridge, based in Chester and founded by Managing Partner Ian Warwick, works closely with financial advisers and investors to design innovative products, ranging from investment in technology growth companies to asset-backed renewable energy projects.
Does the firm have any fears that future government changes could undermine the schemes effectiveness?
‘My primary concern is that managers who haven’t invested in innovative or knowledge-intensive companies previously suddenly attempt to portray themselves as experts then this could lead to muddying of the water and potentially adverse headlines for the EIS sector as a whole [we saw with film schemes that it only takes one or two to get it badly wrong and the whole sector becomes tarnished].’
When asked if they could influence changes to the schemes, what would they suggest, Aldridge replies: ‘We have previously called for a greater focus on growth capital so are pleased that the government’s new common-sense-approach to EIS means that there is more money targeting growth-focused innovations. However, one area we would like further review is around SEIS limits – with R&D heavy start-ups, £150,000 will often not go very far or last very long so perhaps this limit should be reviewed in due course.’