In an economic downturn, VCTs offer investors a range of advantages
10 March 20
10 March 20
Triple Point Venture Investor Seb Wallace explores the challenges and opportunities for early stage growth financing across the UK.
The past decade has seen significant growth in UK venture capital. Just last year investment in UK technology businesses grew to £6.3bn, a 61% year-on-year increase. The amount of wider European venture capital available for investment has also grown, from €4bn in 2009 to €8.4bn in 2018.
The increased deployment of venture capital is good for the economy in helping to drive efficiency and growth. However, once we look behind these headline numbers, we see that the rate of venture funds that back the country’s earliest stage start-ups has been decreasing annually. Fewer new funds are being launched each year, down from 155 in 2008 to 62 in 2018. If this trend persists, future SMEs may miss out on vital early stage funding, which will hurt not only their growth prospects but the positive impact they have on employment and GDP growth across the country.
Alongside this, capital is becoming increasingly concentrated in a smaller number of funds. This is good for later stage funding – larger funds mean larger investment amounts. But for early stage venture capital, where investment rounds are smaller, the range of options available to businesses have shrunk. This presents a problem for the pipeline of future growth businesses in the UK, which will need fast access to early stage venture capital to grow their businesses from the ideas of today into the leaders of tomorrow.
This is precisely why Venture Capital Trusts (VCTs) are so significant. VCTs invest in small companies with high potential for growth that need some financial support. Depending on your individual circumstances you may benefit from the tax reliefs associated with VCTs.
Triple Point understands that access to fast, reliable capital at the earliest stages of a company’s lifecycle is vital for that company’s ability to develop its product, grow its market share, and increase its impact on the wider economy.
By funding seed and series A stage businesses through investing in the Venture share class of Triple Point 2011 VCT plc, investors are able to be part of a robust effort to provide early stage businesses with funding, right when they need it to grow.
Recent investments include:
Quit Genius, an innovative digital smoking cessation tool which helps users quit smoking and vaping with a success rate double that of alternatives. The business markets its solution to major corporates and health systems across the United States and UK, including the NHS and MyCare Alabama.
Adfenix, a data-driven marketing automation software provider. Adfenix counts some of the largest estate agency brands in UK, USA, Sweden and Australia amongst its client base.
Aventus, an open API (application programming interface) platform that enables insurance companies to digitally join up their ecosystem of service providers, partners and distributors.
The Venture Fund has a strong pipeline of further opportunities that it is expecting to close in the coming months. This is against the backdrop of VCT fundraising having accelerated in recent weeks, with over 50% of VCT market capacity already taken. Since 6 February, we have seen a 126% increase in the funds raised into the Triple Point Venture Fund VCT. The good news - there is still time to invest, with just under £7m of capacity remaining.
Triple Point’s Venture Fund VCT targets significant capital growth by investing in early stage innovative companies typically at the point at which they obtain market validation. This strategy aims to mitigate some of the risks of early stage investing whilst helping early stage businesses increase their chances of success.
With close ties to over 100 large corporates through their wider venture network, the Fund starts with the issue facing established businesses, and then invests in the innovative young company with the scalable solution.
By focusing on early-stage businesses which have established a market fit for their products and services with established corporates, Triple Point aims to address some of the risks of early stage venture capital and can enhance investors chances of securing a robust return on their investments.
Triple Point has a 15-year track record as an established VCT manager, with £260m of VCT and EIS exits to date. As Triple Point’s 20th VCT fundraise to date, this share class looks to targets income and capital growth by drawing on a distinctive ‘Challenge Led’ investment approach. If you want to find out more about Triple Point Venture Fund VCT click here
Risk Warning: The Triple Point Venture Fund carries all the risks of investment in smaller companies and places investor’s capital at risk. There is no guarantee that target returns will be achieved and investors may get back less than they invested. Past performance is not an indication of future performance. Tax rules and reliefs are subject to change.
Triple Point does not provide investment or tax advice, and information in this promotion should not be construed as such. Triple Point Investment Management LLP is authorised and regulated by the Financial Conduct Authority, firm reference number 456597. This promotion has been issued by Triple Point Administration LLP is authorised and regulated by the Financial Conduct Authority, firm reference number 618187.