SFC Capital’s CEO Stephen Page reveals investment strategy and highlights
In this exclusive interview with GBI Magazine, SFC Capital’s Founder and CEO Stephen Page joins us to share more about his company’s approach to investing.
Stephen takes us through his journey to becoming a CEO, the workings of SFC Capital’s investment strategy and how the company has become one of the most active investors in the sector.
He also shares his thoughts on the future of SEIS and provides advice for investors and financial professionals.
Q: If you could start by giving us a little bit of background on yourself, your role within the company, and an outline of what SFC Capital does?
I’m the founder and CEO of SFC Capital. I spent 30 years as a software entrepreneur at a couple of successful companies. After all that, I decided to go to the other side of the table and become an investor, although it wasn’t an immediate decision – it took some time.
I started SFC as an angel network 11 years ago. We immediately struck gold with one of our first investments, Onfido, which recently exited at 100x valuation. We then launched our SEIS fund in 2014, which has gone on to become the market leader, and our follow-on EIS fund a couple of years after that. We are very well-established in the UK early-stage investment world, partnered with the British business bank, London Co-Investment fund, and Innovate UK, among others.
Q: What does SFC Capital focus its investment in and what should someone expect from an SFC Capital portfolio?
We invest in very early-stage companies, backing as many as 80 new companies every year across all sectors. Investing in the early stages is partly a numbers game. The first 5-10 years of a company’s life are very much like that, so we try to get in early with as many companies as possible.
Over the years, we have found that it’s best to have as much diversity as possible. We’ve invested in almost 500 companies, ranging across all sectors. Technology is the main area, which can be broken down into medtech, biotech, life sciences, climate tech, and B2B Software, fintech, and so on. We’re also involved in specialised sectors like space technology; we’ve invested in 4-5 companies in that sector so far.
For us, it’s very much about diversity in the portfolio itself. Each portfolio is made up of 15-20 companies. We also focus on diversity in terms of gender, race, and region to help establish that diversity across the UK landscape.
Q: It sounds like diversity is a key ethos in the company, but in what other ways would you say SFC Capital has become a leader within SEIS and one of the most active investors in Europe?
We have been a leader in SEIS for several years, winning numerous awards. You get good at what you specialise in, and I think that’s what has happened with us. We started 11 years ago when no one knew what SEIS was. Since then,
it’s become a vital part of the UK’s innovation landscape. Over that time, we’ve also built a lot of different parts of our system, including a comprehensive scoring system we put in place to help us assess companies we invest in. This looks at the team and their backgrounds, including through psychometric testing, plus traction to date, their revenues, and whether they’ve received other funding, such as from Innovate UK. We invest in a lot of university spinouts, which come with grants, so we’re looking across the whole spectrum as to what makes up a really good early-stage company.
In the early days, I wouldn’t say we were any different, but we’ve become good at it. Most recently, we were ranked 9th in the world, 2nd in Europe and 1st in the UK for early-stage investments. It has been a successful ride so far; we’ve had over 20 exits, including some very exciting startups where we got in right at the very beginning. I mentioned Onfido before, but also companies like Cognism, which we first invested in about six years ago. Across the board, we’ve got quite a few companies that are valued at over £100 million. We partner with the right people. We’ve got 15 people in the team with a range of different talents to help us operate effectively.
Q: What is SFC Capital’s perspective on SEIS moving forward and, its application for IFAs?
SEIS has become a mainstream product for IFAs over the last 18 months. Since the rules were updated, including increasing investor limits to £200k per year, startup limits to £250k, and startup ages to within 3 years of trading, the profile of SEIS investing has taken a major step forward. I think that was when SEIS entered the serious world. We’ve seen a lot of EIS investors come down and do £200,000 a year into SEIS, whereas before they might have done £100,000. They’re pulling some of their EIS down into SEIS.
SEIS is now a significant product. Most UK startups go through the SEIS route. A decade ago, there were probably only 100 or 200 early-stage companies with funding each year. After SEIS was introduced, that number rose to over 2,000 annually. Even today, well over 2,000 companies a year receive SEIS funding and get off the ground.
SEIS is one of the UK’s key assets. No other country has this fantastic tax break with no capital gains tax. It’s a wonderful scheme that is now a serious product for IFAs. In the past, they may have seen it as high-risk and too small to be worth the effort, but that has changed.
I don’t see any risk from the Labour government. They’ve said very good things about keeping innovation at the forefront. I think SEIS and EIS are only going to get better and potentially even increase again. It’s a very good way of creating a circular economy because the well-paid and wealthy are putting money into the innovation ecosystem through these schemes. Those funds are circulating, and the wealthy and well- paid are happy to do that because of the tax breaks. If you get a winner and you don’t pay capital gains tax, it’s a very pleasant feeling.
Q: Lastly, is there anything else you think our readers would like to know about?
The broader the portfolio, the greater the chances of success. That’s what I would preach. You have to invest in a portfolio of companies, not rely on the success of just a few. The best early-stage investors play the numbers game. That’s why each of our portfolios contains as many as 15-20 companies – to spread risk and give each the best chance of discovering multiple potential stars.
