Vala Capital, a UK venture capital firm, is looking to shake-up fees in the EIS industry with the launch of its new EIS fund.
Vala Capital says the fund’s fee structure means investors will not pay any initial fees, annual management charges (AMC) or administrative, audit or custodian costs. The only expense charged directly to them will be a 20 per cent performance fee on profitable exits.
The investee companies themselves will cover ongoing administration costs through a one-off 6 per cent fee on cash invested.
Jasper Smith, Chairman of Vala Capital, says: “All three of the investment team, Arthur Hughes, Paddy Willis and me, have been involved on both sides of venture capital – as entrepreneurs and as investors, with a combined track-record of 34 exits with an aggregate 3x return.”
“We loved venture capital but were also frustrated by it. Frankly, we thought there was a way of doing things that was fairer to investors. We wanted more transparent fees and we wanted managers to be rewarded for success, not regardless of it.”
Independent investment research body MICAP has described the costs as “the cheapest we have seen by some margin.” It estimates that over a five-year period, the market typically collects 14.6 per cent in charges from investors, not including performance fees.
The Vala EIS Portfolio is MICAP-reviewed and targets a diversified range of sectors including technology, engineering, media and entertainment, fintech, lifestyle and food and beverages.
The fund managers are hoping to raise GBP10m for a portfolio of 6-10 companies and intend to have all capital raised by March deployed before the end of this tax year – in just a few weeks.
Examples of companies the venture capital firm has highlighted already for potential investment include Arksen, a company that designs semi-autonomous explorer yachts, Great British Biscotti co., a bakery business successfully challenging their Italian competition, and Play.Works, a company that makes videogames playable through instant messaging platforms.
Smith says: “We’ve spent the past 12 months preparing, carrying out extensive background research and due diligence and we’re in a position to finalise deals already, so that money can be put to work immediately and investors can claim their tax advantages in this financial year and carry back the income tax relief to 2017-18 if they need to.”
The venture capital firm say they will take a hands-on approach and work as mentors, intending on taking board seats in investee companies whenever possible.
For investors, the fund will require a minimum subscription of GBP25,000 with a 5-plus years expected holding period and is targeting 2x return on investment.
Vala Capital is an appointed representative of Sapphire Capital Partners LLP which is authorised and regulated by the FCA.
CEO of Sapphire Capital Partners, Boyd Carson, says: “I am really pleased to work with Jasper and the team at Vala. Their entrepreneurial experience and hands-on approach will provide invaluable assistance to the investee companies in the portfolio.”
