Octopus Investments is launching a new Enterprise Investment Scheme (EIS) investing in UK smaller companies and early-stage tech enabled companies with high growth potential. The product offers investors an opportunity to back the next generation of British businesses, which have a critical role to play in driving economic recovery following the current Covid-19 downturn, while providing attractive growth potential for investors.
Octopus is the largest EIS and Venture Capital Trust manager in the UK. The Octopus Ventures EIS Service (Ventures EIS) is the latest addition to Octopus’ range of tax efficient investments, which includes Octopus Titan VCT, the UK’s largest VCT. It builds on the company’s track record spanning two decades as a leading investor in UK smaller companies. Octopus has invested more than £3 billion in early stage companies on behalf of retail and institutional investors.
The Ventures EIS will have access to Octopus Ventures, one of Europe’s largest and most active venture capital investors. It has a long track record for backing well-known names such as Zoopla Property Group, Secret Escapes, Tails.com, Graze, Elvie and Cazoo from the beginning of their journey, and is the same team that manages Octopus Titan VCT.
The Ventures EIS is a high-risk, long term investment, offering a portfolio of around 10-15 predominantly early stage businesses. The companies will either be new investments, where Octopus is investing in them for the first time, or ‘follow-on’ investments, where Octopus is providing further investment to promising companies that it has supported before.
The product is aimed at high net worth investors who are comfortable taking on higher levels of risk, in return for potentially higher returns. It has a minimum investment of £50,000 and an expected holding period of five to ten years.
As with all EIS, the Octopus Ventures EIS provides a package of advantageous tax reliefs, in recognition of the high-risk nature of early stage investing. These include 30% income tax relief and tax-free growth, provided the companies are held for at least three years. Octopus will only receive an annual management fee if the sale price, when it ultimately sells each portfolio company, is higher than the amount invested, meaning its interests are strongly aligned with investors.
Paul Latham, Managing Director at Octopus Investments, commented:
“UK early stage companies will play a critical role in driving the post-Covid economic recovery and Ventures EIS provides equity financing to them when it’s most needed, while also offering investors attractive growth potential and tax benefits.
“We know from speaking to financial advisers and wealth managers that there is demand for this type of investment from an established manager with high quality deal flow. Increasingly, high net worth investors are excited by the prospect of backing the ‘next big thing’ and are looking for ways to access the most exciting companies in a tax efficient way that recognises the risk they are taking.”
Alliott Cole, CEO at Octopus Ventures, commented:
“Our position as one of Europe’s largest and most active venture capital firms means we are fortunate to have access to many of the most exciting early stage companies across the continent. The talent, ambition and drive of the entrepreneurs we meet is phenomenal, and there is now a genuine belief that we can produce multi-billion-pound businesses in a way we just didn’t see ten years ago.
“The UK in particular is now regarded as one of the best places in the world to grow and scale a business. That’s partly because of a compounding effect, where successful entrepreneurs and experienced start-up operators have gone on to build more and more businesses, leveraging all that know-how and sharing it with others.
“Clearly, this year has been challenging for some start-ups, but we’ve also seen an acceleration of fundamental changes in how we live and work, which means the long-term outlook for tech enabled businesses is arguably better than it’s ever been.”