Opportunity knocks
With sectors in flux and companies beginning to identify and capitalise on fast moving trends, it feels like now is another great investment opportunity. Clearly, the Uber example above is an exception rather than norm. For very Uber, there are 100 Betamaxes but it goes to show what is possible when investing at the earliest stages of a company’s growth journey. And it’s the job of a good VC fund not just to second guess these trends but to work with companies when things go against them and to turn them around.
The Government plays its part by facilitating the landscape and has indeed committed to making the UK the technology and entrepreneurial centre of the world. Actions speak louder than words and we wait to see whether the Government delivers but it has made a good start with initiatives such as the £20M Tech fund and the £134M Sustainable Innovation Fund. But it’s private investors and fund managers who can play a significant part and drive sectors and companies forward even quicker. This is where EIS and SEIS come into play.
In the past few years, the schemes have been focused on delivering funding to companies prioritising growth, innovation and tech and during the pandemic, EIS and SEIS funded companies and the funds which invest in them have proved the value of this strategy. They have proved not only nimble and adaptive but also genuinely inventive, profitable and increasingly important job creators.
A few examples help make the point.
SonicJobs
SonicJobs, invested in by Velocity Capital, started life as a recruitment app for hospitality and retail. The key technology in the app is its chatbot, “Julie”, which generates comprehensive CVs on the back of a series of simple machine learning questions. It became clear that candidates did not realise that they possessed a number of transferable skills relevant to opportunities in other sectors and that the CVs in their own right had a value. In December 2019, they pivoted to extend their sector coverage to include healthcare and logistics and CVs created using Julie started to be sold to a number of job boards. Revenue has doubled in the past year as a result and people are getting access to directly relevant job opportunities.
Buymie
Buymie is a Haatch Ventures investment and is a mobile app for On-Demand Groceries. You can order goods from a selection of local stores and have them delivered by a personal shopper in as little as 1 Hour. Buymie were quick to see the opportunity presented by Covid-19, namely the huge increase in demand for delivered groceries and the company believes that this is a trend that will continue after the end of Covid-19.
Buymie facilitates a delivery service for any supermarket which means that any supermarket can compete with the likes of Ocado and Sainsburys, offering a rapid service, and without the fixed overheads of storage, refrigerated vans and inflexible staffing. As a result, Buymie now have relationships with Lidl in Ireland and the Co-op on the UK. Tests are also now being run with Tesco and Asda in the UK. New facilities in Cork and Bristol have created over 150 new jobs.
Hy-genie
Finally, we are all acutely aware of the importance of hand washing in society as a result of Covid19. Hand hygiene is a key component to preventing the spread of germs and bacteria in hospitals. It is estimated that over 300,000 patients suffer from health care associated infections each year in the UK. Hy-genie, invested in by Nova Growth Capital has the potential to save thousands of lives each year and the NHS an estimated £1.2bn in treatment costs annually. Hy-genie provides the measurement and monitoring system that is needed at an individual level.
The company is now ready to go live at Alder Hey Hospital and another 6 hospital trusts are talking about introducing the service. Hy-genie believes their product is absolutely right for our world today. The public awareness of the importance of hand washing is going to be with us for very many years, and Hy-genie is set to capitalise on this.
These are just 3 examples of many I could have given you of companies which have been EIS or SEIS funded and been first responders to the pandemic, each in a different – but a rapid and effective -way. It’s now the job of those companies and the VCs that support them to ensure they continue to grow and are ready to take advantage of further opportunities when they present themselves either at a macro or micro level.
There will always be winners and losers in early stage businesses. Both receive funding but only VC backed businesses get the mentorship, support and advice required to navigate through all types of economic conditions to create consistent winners. Within a VC portfolio right now is the opportunity to invest in the next Uber or Airbnb. Go find it!
About Mark Brownridge
Mark has over twenty years’ experience in financial services and prior to becoming Director General of the EIS Association, he was Head of Research and Development at Mazars, a leading UK financial planning firm. Mark is highly qualified being a Certified Financial Planner, Chartered Financial Planner, Chartered Wealth Manager and Fellow of the PFS and also sits on the CISI’s Accredited firms committee and TISA’s Distribution Policy Council. Mark’s involvement with EIS began 8 years ago and he has since championed EIS investing within a financial planning context and is extremely passionate about promoting the industry, increasing its effectiveness and ensuring the private sector continues to drive much needed funding to small companies.
