Exciting – and exiting
As part of that transaction, those shareholders who elected to dispose of part (but not all) of those shares, were able to realise a return on original investment in the region of 4.7x. With the benefit of the original EIS or in some cases SEIS treatment of their investment bracket, they were able to achieve a post-tax return of as much as 9.4x. Over 6 years this equated to an IRR of c 30% or more. They have all however retained an ongoing interest in a business which continues to grow and win contracts throughout the world. Whilst EIS is often as much about protecting the downside from the likelihood of losers, as it is of riding the winners “tax-free”, the message is that the latter possibility should not be disregarded entirely when contemplating a client’s portfolio. And this is more likely achieved with entrusting client’s money to specialist and expert industry fund managers, who really know their space.
Diversification, not isolation
The above is not an isolated experience: in 2018 and 2019, we also facilitated positive returns on exits or partial exits from two cutting edge Healthcare holdings, one called Pharmacy2U, another called Medopad (now Huma). Both achieved 5x for some of our investors irrespective of tax, both continue to go from strength to strength for those who held.
Matching clients’ interests to clients’ needs
We select real, serious, businesses, scaling-up not just starting-up. They often continue to go on to attract “proper” institutional later-stage capital, as well as strategic investment and trade interest. But it is earlier investors who have most potential for meaningful later gains, and with attendant EIS protections invariably attached.
As examples of what is happening today in our Scale-Up Fund, we are excited that many of our EIS Fund investors (including a number of doctors, and private equity managers) are beneficial shareholders in FundamentalVR and Cyance, to pick just two of the Fund’s current twelve portfolio companies: in their case transforming the fields of surgery training, and usage of “buyer-intent data”, respectively, around the world.
I hope that the above has been useful in showing what a laser-focussed, value-added EIS adviser and fund manager can achieve for investors “on the way out”.
Next month I will look at highlighting “the way in”.
For more information on Nexus Investments Scale-Up Fund and our monthly subscription schedules, click here. Our next completion will be 31 January 2021 to join our current pipeline of deals. For more information on Nexus’s 26-year group history, and to see more of the Ed Tech, Data & Healthcare companies we have backed to date to globally scale-up, click here.
About Matthew O’Kane, Managing director, Nexus Investments
Matt is a tax specialist, Chartered Accountant FCA BPA (ICAEW). and a Chartered Member of the Securities and Investments Institute (MCSI), but also brings commercial awareness and flair to the businesses he invests in and advises.
Since joining Nexus Group from Deloitte in late 2013 to spearhead a new venture focussed division, Matt has sourced a large majority of Nexus Investments’ portfolio, and has invested personally into 18 of them as part of almost £12m deployed in that time. As part of his role, Matt reviews and appraises many of the fastest growing Ed Tech, Health Tech, Data and Digital firms in the UK, and currently sits on the investment committee which selects those to back.
Building on a compelling track record of selection and growth of its EIS portfolio in the first 5 years, the Nexus Investments’ Scale-Up Fund is a an award-nominated Alternative Investment Fund (AIF) which Matthew now heads up. The Fund (at www.scaleupfund.co.uk) already has over £3.7m AUM since late 2018 launch – over doubling since one year ago – and is open for monthly investment from EIS investors (advised or direct) during 2020 and 2021. It focusses on the most promising fastgrowth Data, Digital, Education & Health businesses, and gives a wider-pool of investors a curated and diversified EIS portfolio managed by Nexus. Nexus in particular has access to unique and hard-to-find deal-flow in its chosen sectors, and its track record already suggests that longer-term superior returns for EIS investors may be achievable with appropriate focus on founders and active involvement from experienced industry investors.