On October 15th 2020 Mercia won the EISA EST Exit Award for their development of The Native Antigen Company. The Native Antigen Company has swiftly become one of the world’s leading suppliers of infectious disease reagents, widely adopted by vaccine manufacturers. The entirely digital sales process, completed in July, returned 8.6x cost to EIS investors, and returned 13x cost to the proof of concept fund.
Mercia is an institutional scale, early stage technology investor, with almost £1billion under management that has an EIS fund as part of its overall investment strategy. With an emphasis on deep experience, and the capability to see an investment through from seed to follow on capital, Mercia is uniquely placed to maximise returns in the changing investment landscape following the Covid pandemic.
It’s good to talk
Following their success at the EISA Awards, IFA Magazine’s Peter Wilson was in conversation with Mercia’s Dr Paul Mattick to talk about the business and how it operates. Mattick heads the Sales and Investor Relations team for the Mercia EIS Funds and is clearly very proud of the team’s success in this and in many other aspects of the business.
Asked to respond to this success, Mattick said ‘It reflects our model where we use multiple issue funds to support companies over long periods, and enable them to grow and realise value where we can.’ Mattick was quick to highlight another successful exit just the day before. Clear Review was two and half years to exit and generated an 8x return on Mercia’s EIS managed fund investment cost and a 122% fund IRR. Mattick said this returned 80% of the cost of the fund, continuing, ‘this is what we can we do and what we’ve started to do more regularly.’
When asked about the EIS landscape following the coronavirus pandemic Mattick expressed confidence.
‘One of the benefits to EIS is that every time you make an investment, it’s into a new portfolio of companies.’ There may be follow on investment, but investors aren’t buying into a portfolio from a pre-pandemic world. Mattick put it simply, ’It’s going to look different. Digitisation and remote working is not temporary.’
Ability to pivot and adapt
‘The thing about EIS is that it can be bespoke to where we are currently, rather than where we were a couple of years ago.’ Following a volatile year, and a transformed economy, newer companies with the ability to pivot and adapt rapidly have become an appealing investment. Mattick continued, ‘These little companies are really nimble with the ability to change their business models, which larger companies aren’t able to do.’
These are tricky times for most businesses so we proceeded to talk about the impact the pandemic has had on Mercia and its investments. In this respect Mattick said, ‘We kind of expected a lot of failures in our portfolio, but we’ve had hardly any – its exposed gaps in the market that these companies are eager to fill’.
Mattick continued, ’In some ways I think small companies will have a distinct advantage in the next few years – companies are realising they have to develop new ways of working and the quickest way to do that is through acquiring.’ Mattick related this back to Clear Review, a human resources tool providing organisations with data and systems to improve performance management. Clear Review is ideal for supporting the development of employees whilst they work remotely and was snapped up by the third largest British software and services company in the UK.
The portfolio approach
Mercia EIS fund is in a great spot for the acquisitions market, particularly with a large position in biotech; multiple coronavirus testing companies and spinal implants that are complemented with deep institutional experience. Mattick highlighted this saying, ‘I think when discussing EIS the success stories are important, but within the context of an overall portfolio approach.’ Mattick wants EIS to be thought about similar to other investments, ‘you want diversity, you want to look at the track record of the fund and the fees, and look for value in the investment.’ He rounded off the conversation with an important point stating that ‘the messaging from the managers is still focused on minimal risk, rather than creating venture capital EIS’.
About Dr Paul Mattick
Dr Paul Mattick heads the Sales and Investor Relations team for the Mercia EIS Funds. He works directly with private clients and advisers to build the EIS fundraising capacity of Mercia. Paul oversees the administration and development of the EIS funds, and ensures that investors receive a high level of service, much of which is delivered through Mercia’s award-winning Investor Centre. Paul has a variety of experience in early-stage businesses (including being a founder), and formerly worked at another leading EIS fund manager, where he built close relationships with top tier clients, and significantly grew both fund and single company assets under management. Paul has a PhD and Post-Doctorate from the University of Oxford and a 1st Class Bachelor of Science from the University of Leeds.