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Investment: British Design Fund
Aim: Investing in and providing support for UK products design and manufacturing companies
Tell us about the fund
The British Design Fund is an early stage investment fund that specifically invests in, and provides support for, early stage UK product design and manufacturing companies. The fund seeks to work with extraordinary entrepreneurs, with scalable products, who are ready to accelerate growth and build long term value and thriving stand-out businesses.
The UK has the second largest design sector in the world and the largest design industry in Europe. However, there is an astonishing lack of equity funding into early stage product design and hardware businesses. Funding for these early stage companies often comes from a combination of innovation grants and awards and product crowdfunding platforms. As a result, the British Design Fund has identified an equity funding gap and aims to provide capital and expertise for companies which seek to deliver outstanding product design and innovation.
The fund is being launched by product entrepreneur-turned-investor Damon Bonser, who has over 10 years’ experience building design and manufacturing businesses, launching over 400 products into the global retail market. Directors include John Mathers, ex-Chief Executive of the Design Council, which runs the successful Spark programme, where a number of the initial investee companies are expected to come from.
Other Directors include David Kremer who has over 25 years’ experience running Seven Towns, a multi-million toy and game business, and co-founder of Rubik’s Brand Limited. Specialist SEIS and EIS investment managers Sapphire Capital, headed by Boyd Carson are responsible for the FCA regulated investment activities. The fund is further supported by Sam Davies, Investment Director, and David Motum, Finance Director, in analysing and monitoring the financials and commercials around each business.
How much is being raised?
The fund is aiming to raise £2 million.
What types of investments are being sought?
The fund seeks to invest between £25,000 and £150,000 in SEIS/EIS qualifying businesses in return for 15% to 30% equity, across at least 10 companies. Investments will be made across a range of product categories and price points, however companies will share the same core routes to market; through institutional buyers such as large retail chains and international distributors. This will spread the risk across different sectors, while playing to the team’s strengths of launching product brands into the global marketplace.
Every business invested in will need to meet key criteria that the investment committee is looking for:
- Firstly, the products must offer clear value to the target market in the form of a differentiated offering. This must be backed up by a rigorous understanding of the marketplace and its competitors
- The business must be able to validate the demand for their products. This could be in the form of a letter of intent to buy from a major retailer, or a purchase order from a well established international distributor
- The business will need to prove that they have protection from competition and new entrants in the form of registered IP such as a patent or registered design
- Finally, all the businesses will agree to take on a mentor with market expertise in their specific product category. These mentors keep the businesses focused on achieving those early sales and rapidly establishing the product in the marketplace
What is the minimum investment?
The minimum subscription is £25,000 per investor.
What is the targeted return?
For financial illustrative purposes only, it has been assumed that a disposal of the shares in the fund occurs five years after the closing date. The targeted average return after five years is £3 for each £1 share held by SEIS and EIS qualifying investors (this is stated net of all costs, any performance returns and fees).
With SEIS benefits
The table below illustrates the potential returns from an investment of £100,000 in the fund, including SEIS relief at the rate of 50%, but excluding any potential benefits from inheritance tax (IHT) relief or capital gains tax (CGT) relief.
| Target | ||
| Assumed performance over five-year period | 0% | £3.00 |
| £ | £ | |
| Initial Investment | 100,000 | 100,000 |
| Less: Income Tax Relief at 50% | (50,000) | (50,000) |
| Net cost investment | 50,000 | 50,000 |
| Exit proceeds (based on targeted performance) | 100,000 | 300,000 |
| Tax free gains | 50,000 | 250,000 |
| Net tax free return | 14.8% p.a. | 43.1% p.a. |
| Gross equivalent return upon net tax free return (to a 40% taxpayer) | 24.7% p.a. | 71.8% p.a. |
| Gross equivalent return upon net tax free return (to a 45% taxpayer) | 27.0% p.a. | 78.3% p.a. |
