Liverpool startup specialist Nova has launched its own SEIS/EIS fund to invest in early stage startups, enabling investors to back promising startups in edtech, fintech, proptech, digital health and other knowledge-intensive industries in a diversified portfolio designed to reduce risk of failure.
It launches the fund off the back of Nova’s 83% portfolio growth rate, which it has achieved year on year for the past nine years, more than doubling the industry standard of 34%.* This would see returns of £5.70 in every £1 based on the current trajectory.
The Enterprise Investment Scheme (EIS) and Seed Investment Scheme (SEIS) are Government incentives designed to encourage investment into small companies by offering tax breaks to investors.
Deployments are co-invested quarterly alongside Nova into a diversified cohort of at least 10 early-stage companies within Nova’s portfolio. This results in a diversified portfolio of up to 40 companies over the year, helping to reduce the risk of failure.
Nova teams up with aspiring entrepreneurs who have an initial idea, providing financial support, mentorship and a team of experts to help build and launch the startup. This model reduces the risk of startup failure, meaning Nova’s startups are five times more likely to succeed: 46% are still in existence after three years, compared to the 8% industry standard success rate.
Nova’s CEO Andy Davidson explained why Nova decided to launch its own EIS/SEIS fund:
“We have developed a product that allows investors to take advantage of the high growth rate within Nova’s portfolio, but also mitigates the risks that are typically associated with these high growth markets.
Across the industry, only 8% of startups are in existence after three years, and this means that the 34% average industry growth rate is actually only coming from one in twelve firms. Over the last 10 years, we have worked hard to remove the reasons for startup failure, meaning our success rate after three years is at 46%. This is why our portfolio growth rate is so much higher than the average, at 83%.
This fund gives Nova full ownership and control over our investment. It means we can deploy the funds quicker, and have a flexible and bespoke approach to each startup. Spreading the investment across a minimum portfolio of ten companies per quarter significantly reduces risk. Our investors also take advantage of considerable income tax, capital gains tax and inheritance tax benefits available under the SEIS/EIS scheme, making it a really attractive offer for investors.”
To date, Nova has invested in more than 80 businesses, generating over £100 million in shareholder value from its startups, and creating over 200 new jobs.
Through the EIS/SEIS investment scheme, Nova is targeting minimum returns of £2.18 in the £1 based on 20% year on year portfolio growth. The returns would reach £5.70 in the £1 if portfolio growth continues at 83%. The minimum investment is £10,000 over a target timescale of five to six years.
*Research by Beauhurst revealed that companies within the UK knowledge intensive market segment are growing an average of 34% year on year.
"We have developed a product that allows investors to take advantage of the high growth rate within Novas portfolio, but also mitigates the risks that are typically associated with these high growth."
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