Vala Capital, the entrepreneur-led venture capital firm, has launched a new tranche for its EIS portfolio – targeting fast-growth British start-ups with strategies to scale quickly and become the next generation of British unicorns.
The firm writes that innovative small companies are key to the UK’s post-pandemic recovery, yet there is a significant funding gap that threatens to stifle their growth. While there is a large pool of seed capital of up to GBP1 million available for start-ups, traditional venture capital companies are increasingly moving up toward later-stage and larger deals of GBP5 million-plus.
This has left a funding gap between angel investors and later-stage venture capital funds, which Vala believes has created an opportunity to invest in start-ups that can make the biggest impact and help deliver the greatest returns.
The company plans to raise GBP15 million over the next two years for Vala British Ventures EIS, formerly known as the Vala EIS Portfolio. It is aiming to raise up to GBP2 million in its latest round, which closes on 1 November. Investments are expected to completed by December and a further fund-raising round is due in the Spring.
Vala British Ventures EIS portfolio, managed by an investment committee, led by Vala’s founder Jasper Smith, brings together a team of entrepreneurs with proven track records of delivering strong returns for shareholders. The team is targeting a 2.5x return after fees, over a five-to-seven-year time horizon. The EIS will invest in between eight to 12 companies across sectors including technology, engineering, fintech, media and entertainment, lifestyle and wellness, and food and beverage.
Companies in the latest tranche of the portfolio will be early-stage companies at different phases of growth – some will already be revenue generating and some will be at the pre-revenue stage of growth. Likely investments include The Artful Baker, which recently secured funding in a co-venture with baking giant Warburtons, and Pirkx, an online employee benefits platform for the gig economy, whose chair is former Google UK managing director, Dan Cobley.
Jasper Smith, Vala’s founder, says: “The UK offers a world-class environment for start-ups to flourish. Technology has transformed almost every industry, creating possibilities for start-ups to become significant players or major multinationals in record time. The UK has so far created 100 unicorns. Tomorrow’s global giants could be among the 500,000 new companies started in each year in the UK alone – and our EIS provides a fresh alternative to the challenge of venture building.”
Vala’s investment team’s venture capital experience ¬– as both entrepreneurs and investors – has a combined track record of 35 exits with an aggregate three-fold return.
Smith adds: “We are venture builders looking to give young companies the best chance to thrive. And we understand the challenges early-stage businesses face because we’ve lived them. Before we were investors, we were entrepreneurs, successfully building and investing in businesses across multiple sectors for decades. Now it’s our turn to apply this experience and insight to support the companies we invest in.”
The minimum investment is GBP20,000 and eligible investors are expected to be able to carry back tax reliefs to the previous tax year. There are no initial fees – the annual management charge is 1.5 per cent. A performance fee of 20 per cent on profitable exits in excess of 110 per cent of the acquisition costs.