In this exclusive interview with GBI Magazine, Jenson Funding Partners’ Sarah discusses the company’s approach to early-stage investing.
Barber outlines the impact of the recent extension to the EIS sunset clause, explains how EIS provides a boost to start-ups, and discusses how the new consumer duty rules have impacted early-stage investments.
Q: Could you tell us a bit about yourself and your role?
I am the CEO of Jenson Funding Partners, having been part of the fund since its inception over a decade ago. Our focus on early-stage investments is driven by our belief in fostering change and opportunities within the investment ecosystem.
Q: The Chancellor’s move to extend the EIS sunset clause is undoubtedly a positive step, how do you see this impacting entrepreneurs and the UK start-up ecosystem?
The extension of the EIS sunset clause is a great move for entrepreneurs, providing much-needed certainty for their future steps. Coupled with the earlier increase in SEIS limits in 2023, this initiative allows portfolio companies to anticipate their future funding sources.
While there remains a gap between SEIS and many existing ElS funds, Jenson Funding Partners strategically positions itself in that crucial space, facilitating the transition from SEIS to later-stage ‘series A’ ElS investment.
The government’s commitment to early-stage businesses makes this an exciting time for entrepreneurs navigating the funding landscape.
Q: When we talk about start-up ecosystem, how early stage are these start-ups and does the Enterprise Investment Scheme provide a boost this early on?
When we talk about early-stage businesses, there’s an assumption that they’ve already hit this £1million revenue mark, but these businesses do not just appear. They have to go through the process of having an idea, a concept and an MVP.
We must find out if there’s a market for that product and then get that product market fit, so there’s a lot of stages before that million-pound revenue mark. So when we’re talking about the early stage Start-Up ecosystem, we need to remember that crucial stage before that.
That’s where SEIS and EIS can provide a great source of funding for early-stage businesses, alongside all the other funding that exists for businesses through those periods, including grants and R&D tax credits, which supplement those SEIS and ElS investments.
For us, it’s about finding those amazing early-stage businesses and working with them through that period. Sometimes there are issues with the funding at this stage, which is why I’m trying to promote it, some of the later-stage funders will miss out on the types of investments that we’re investing in because of that funding gap that still very much exists.
We’re still plugging away at that, to get them over that hump. We need to make sure that we’re pushing this very early stage so that investors invest in the best businesses at that stage, crucially providing a pipeline for that later stage as well.
Q: New Consumer Duty rules have brought about change to the investment landscape. What factors enable investors to navigate these early-stage investments with confidence?
I think the Consumer Duty rules are a good addition. We’ve always been proactive with our investors to ensure they understand that this is the correct investment vehicle for them. We’ve been proactive with our investors because it’s an area that isn’t well-known, so we want to ensure people understand what the investment entails.
The Consumer Duty rules supplement a lot of the processes that we have in place already. It’s important for investors to be looking for experienced managers with that proven track record, longevity, robust deal flow, and the ability to deploy cash.
We know that investing at an early stage carries a higher risk, with the tax efficiencies of SEIS aiming to offset some of that for the investors. It’s a great vehicle, but we need to make sure people understand the high-risk element. I think one of the other challenges here is making sure that IFAs are comfortable with it and have the confidence to recommend any fund to their investors.
I think there will be a bedding-in period, but I think as soon as people start seeing it as the norm when making these investments, that will be overcome. Overall, it’s a good thing, we need to protect investors and they need to understand the risk profile they are investing in.
Q: As we move into 2024, what about the industry is exciting you the most?
I’m very excited about the increased awareness and understanding of early stage investing, because it’s something we’ve been plugging away at for a long time. We believe this is the right thing to be doing.
The increasing awareness and understanding of early-stage investing are particularly exciting for us. It reflects the industry’s evolution and the recognition of its importance by government and opposition parties. This inclusivity agenda aligns with Jenson Funding Partners’ values, with 40% of our portfolio comprising female and ethnic minority entrepreneurs. Without setting specific targets, our approach remains proportionate to the pipeline, driving both change and returns for investors. We are enthusiastic about the opportunities and positive impact that early-stage investing can continue to bring.
To find out more about Jenson’s tax-efficient funds, access your complimentary of the EIS Annual Report 2024 here or the SEIS Annual Report 2024 here.
