The investment firm behind leading consumer brands like Lucky Saint has partnered with a crowdfunding platform to bring venture capital to a wider pool of investors.
ProVen VCTs, which are managed by Beringea, will be offered through the crowdfunding platform Seedrs from today, This is Money can reveal.
VCTs raise money from investors to invest in early-stage, usually privately-owned companies, or those listed on the junior Aim market.
In return for taking on a higher level of risk, they offer a 30 per cent income tax break and tax-free dividends, along with an annual investment limit of £200,000.
Proven VCT has invested in a number of leading consumer brands, including alcohol-free beer brand Lucky Saint
Over the last few years, there have been a number of successful exits for UK VCTs that have paid out handsomely to trusts. These include car retailer Cazoo, which listed in New York in 2021, and clothing resale app Depop, which sold to Etsy for $1.6billion (£1.26billion).
However, VCTs have largely been a vehicle for wealthy, experienced investors because the minimum investment tended to be between £3,000 and £5,000.
It has meant that with companies staying private for longer, the vast majority of retail investors have been shut out of accessing privately-held startups.
> Are VCTs right for you? Our guide to investing in the high risk trusts
ProVen’s chief investment officer Karen McCormick said: ‘When I started out, entrepreneurship was not a career…. but over the last 25 years [it] has become a goal.
‘Everyone knows the names Elon Musk, Jeff Bezos and Mark Zuckerberg [and] that stimulates conversation about start-up investing.
Proven VCT manager Karen McCormick thinks there’s too many barriers to venture capital investment
‘Now I think there’s more going on about investing in your mate’s company or becoming an angel investor, and still less access or discussion about investing in venture capital funds.
‘Traditionally the asset class has been reserved for either large institutions or people who can afford large cheques.’
The partnership will see Proven VCTs available for investment via the Seedrs platform, with a minimum investment of £500.
It will be a combined offer of both ProVen VCT and ProVen Growth & Income VCT, but investors will only be able to make an investment across both, rather than select one or the other.
Seedrs will act as an execution-only broker, meaning that the initial fee for investors will be 5.5 per cent. This comprises a 3 per cent promoter’s fee and a 2.5 per cent initial commission fee for Seedrs, which will initially be waived.
Crucially, the minimum investment has been lowered to £500, opening Proven VCTs up to a wider pool of investors.
‘We want to welcome younger investors’
McCormick said: ‘Seedrs is a company we’ve known for a long time… They’ve raised successfully for our portfolio and for a lot of the industry. What we’re hoping for is access to a new type of consumer.
‘VCT investors are on average over the age of 50. They’re a fantastic group for us to be able to tap in to – they tend to know the industry, we can get deal flow from them and some of them tend to be quite active in terms of providing access to potential non-execs or deal flows.
‘What we’re looking forward to is welcoming a potentially younger consumer who can start to learn more about what we do and what venture capital is.
‘I think some of the types of consumers we’re looking to attract probably already dabble in some angel investing… maybe they have a career in entrerpenurship or their friends are entrepreneurs, and so by nature they’re going to be looking at platforms like Seedrs.
‘It may appeal to people who have traditionally invested in individual assets… whereas this allows them to take more of a portfolio approach rather than a share in a single company.’
Unlike other venture capital funds, which tend to invest in a lot of businesses with the assumption many will fail but the ones that do succeed generate huge returns, ProVen says it invests in companies a bit further down the line.
McCormick adds: ‘We aren’t taking a big risk on whether the company is going to fail or not, because they already have enough economic and commercial traction that we feel confident. There’s usually a couple of million in revenue and they’ve got a product they can prove.
‘The question is whether our investment is going to generate a great return or if the business keeps ticking along.
‘We don’t fund to bridge losses to an extra round of investment, we fund to try and see a return on our initial investment.’
ProVen VCTs have a strong track record. In the 10 years to June 2023, ProVen VCT and ProVen Growth & Income have produced a NAV total return of 54.1 per cent and 35.9 respectively, including dividends.
While a lot of its investments are in software, ProVen has around a third of its portfolio held in consumer brands, including Lucky Saint and notebook company Papier.
Last year, it exited its position in jewellery brand Monica Vinader, which sold to private equity firm Bridgepoint.
Proven and Seedrs’ partnership follows a similar move made by Octopus Investments, which partnered with Crowdcube to bring its flagship funds Titan VCT and Apollo VCT to retail investors last year.
While VCTs might have become more popular, investors should be aware that they come with greater risk than other types of investments.
They allow investors to spread their risk over a number of start-ups, but they’re still a niche and highly risky investment because the companies they invest in are at an early stage and the vast majority will fail.
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