Par Equity is to launch The Par Syndicate EIS Fund I (the fund), which will invest in innovative small and medium-sized companies with high growth potential.
The fund will seek to generate attractive investment returns as well as offering investors the opportunity to mitigate investment risk by investing only in companies qualifying under the rules of the Enterprise Investment Scheme (EIS). The Fund will invest alongside business angels, in particular members of the Par Syndicate, an active group of business angels focusing on investment opportunities in information & communications technology, medical technology and clean technology. In this way, the Fund is intended to offer investors the combined benefits of a professionally-managed fund, the business insights and sector knowledge of business angels and the potential to realise significant tax planning advantages.
The fund will be managed by the investment management arm of Par Equity, Par Fund Management Limited. Par Fund Management Limited is a member of the British Venture Capital Association and the EIS Association, and is authorised and regulated by the Financial Services Authority.
The fund will not be open to retail investors – information regarding the Fund will only be provided to and subscriptions will only be accepted from investors eligible to be treated as professional investors.
Technological innovation lies at the heart of the Technology Media and Telecommunications sector, as well as playing a major part in clean-tech, alternative energy, medical technologies and advanced industrial processes.
Within these areas, macro trends such as globalisation, demographic change, climate change and the increasing complexity of the corporate environment drive the pace of development. Although large corporations can and do innovate, small companies have an extremely important part to play in the process of innovation and larger corporations provide a natural market for investment exits.
Innovative companies have the potential to achieve high growth rates and so generate attractive returns for investors. The potential for high returns is, however, accompanied by high levels of investment risk and investors can lose some or even all of their capital. Venture capital investments can nevertheless form a key part of a diversified portfolio and offer returns that are not closely correlated to other forms of equity return.
The availability of EIS Relief allows higher-rate tax payers the opportunity to reduce their overall risk significantly. Par Equity has not applied for HMRC approval for the Fund, so EIS relief will be available as investments are made rather than at the Fund’s final closing date.
Par Equity’s investment model is to combine intellectual and financial capital, investing in businesses it understands well and funding them to succeed. This investment capital is derived from various sources, including the Par Syndicate, which comprises successful entrepreneurs, senior managers and executives with a strong interest in investing in young companies. The Fund allows investors to invest alongside business angels, aligning themselves with the angels’ commercial experience and sector insights, whilst benefitting from the Fund’s formal investment process and the opportunity to take advantage of EIS relief.
Technology can flourish in the hot-house environment of universities, laboratories and test-sites, but technology of itself doesn’t make a business. Some investors are willing to put significant sums into an unproven technology, hoping that a business will emerge from it. Par Equity’s model is to apply commercial judgment to investment opportunities, looking through the technology to the business underneath. We do this in the equity gap, a grey area beyond the reach of many business angels but not big enough in scale to attract competition from private equity funds, which often deal in tens or hundreds of millions each time they invest.
We believe that our model suits this early-stage part of the investment spectrum. The kind of company that responds best to this approach is one that is big enough to harbour realistic ambitions for growth, small enough to need help with the day-today challenges of achieving those ambitions and whose managers are smart enough to realise that they need this help. They value both the money that we can bring and the brains, experience and contacts of the Par Syndicate. This means that we have a competitive advantage when it comes to the decision management teams make when they consider bringing an external investor into their companies.
