An FCA regulated, leading venture capital investor in high growth early-stage businesses.
- London, United Kingdom
Categories: Finance & Payments Non-Digital B2B
Venrex is a London-based, FCA regulated, venture capital firm, with a strong 12 year track record of early stage investments in fast-growing businesses including: Just-Eat, Notonthehighstreet.com, Orlebar Brown, Chilango, Charlotte Tilbury, Dressipi, Thread, Loveknitting, Opus Energy, Skimlinks and Lyst.
Venrex takes a targeted, ‘hit driven’ approach to early stage venture investing, focusing only on opportunities which the team believe can deliver a minimum 10X return - we will have negative outcomes so we need to think that the successes can get big.
Traditionally, venture capital funds have required high minimum investments, making them inaccessible to most investors. This means that access to these opportunities is in reality often limited to closed private networks, family offices, and high net worth individuals. We have successfully raised six investment vehicles this way, with average net realised and unrealised returns to date of over 20% IRR calculated over the past 12 years. All estimated IRR returns have been calculated using the most recent valuation of the companies based on the BVCA method of calculating fair value. In addition, we have had a valuation review undertaken by a 3rd party accountancy firm who provided a review of the valuations used as the basis of such estimated IRR, and who concluded that such valuation bases were reasonable and, in their opinion, consistent with the IPEVC valuation guidelines.
We are very pleased to be opening up access to our seventh fund, the Venrex VII EIS Fund ("the Fund"). We are seeking to democratise venture capital, allowing the crowd to invest through the Fund alongside institutional and high net worth investors.This is an opportunity to invest in the next cohort of ambitious startup and early stage businesses selected by Venrex.
By investing in the Fund, you can now get access to a portfolio of early stage investments selected and supported by a highly experienced team, with a track record of identifying, selecting and managing investments in popular high street and online brands.
We are NOT guaranteeing that all investments will be able to benefit from EIS relief but given the stage that we invest and our UK focus we are hopeful that the majority will be. We are primarily a Venture Fund but we are structured to get the benefit of EIS relief where appropriate. For example, in our 2014 EIS Fund, nine out of the twelve investments were eligible for EIS relief at the time of investment.
By investing in the Fund through Seedrs, each investor will be diversified across the cohort of companies, with the chance to benefit from our proven ability to date to discover and negotiate exciting opportunities, and to mentor entrepreneurs post-funding.
What We Look For
Since January 2003 Venrex has invested £26 million into 54 businesses on behalf of its partners and other investors. Collectively, the realised and unrealised net return (i.e. based on current valuations of those we have not yet sold) has been an estimated £59.5 million at an approximate net IRR of over 20% calculated over the past 12 years. Again such valuations have been estimated in accordance with the BVCA method and have been independently investigated as mentioned above. This does not account for the advantageous tax reliefs under the Enterprise Investment Scheme (EIS) for eligible investments.
In a typical year, we estimate we review more than 300 investment opportunities referred to us from our exclusive network of venture capital, firms, investors, entrepreneurs, advisors and friends which we've built up over the last 12 years. Of these, we aim to meet with, and then assess, around 100 where we look for a combination of the following:
• Large, or potentially large, and growing market niches
• A founder who can sell, convince, knows their market inside out, is commercially hungry or is technically strong and compelling
• Working in an industry with high barriers to entry to other new entrants
• Intellectual property value, strong technical skills, strong brand
• Low capital intensity with minimal physical stock and few physical outlets
• A high Net Promoter Score
• Limited exposure to political, legislative or commodity risk
Of the businesses we see and assess, less than 5% make it through to final due diligence and, ultimately, investment.
Use of Capital
Venrex expects to make approximately 6 investments using the funds raised (dependent on the total size of fund and seeing enough businesses that meet our criteria). Where the business is EIS eligible, each investor in the Fund (depending on their circumstances) will be able to receive EIS relief on these investment made by the Fund.By investing in the Venrex Fund, each investor will be automatically diversified within the portfolio of investments made, benefiting from Venrex’s ability to discover and negotiate exciting opportunities.
It is anticipated that all funds will be invested in the current tax year 2015-16.
Seedrs’ Investors' funds will be held in escrow by Seedrs until the businesses are selected by Venrex. Seedrs acting as nominee will then invest directly in each company in exchange for the equity, subject to their strict legal due diligence. Seedrs will then hold your shares as nominee (in the same way that it does for all startups that raise money through its platform).
PLEASE NOTE THAT THE FEES CHARGED ON THIS FUND ARE DIFFERENT FROM THE NORMAL FEES CHARGED ON OTHER SEEDRS CAMPAIGNS.
There will be a fee of 7.5% charged on the total funds raised, which will be shared between Venrex and Seedrs (this fee is referred to as the "Upfront Fee"). This Upfront Fee will be paid out of the total funds raised first and will be instead of our normal fee that we charge to a company that receives investment on Seedrs. Then, the remaining balance of 92.5% of the funds raised will be invested in the relevant companies chosen for investment.
Venrex will also earn a performance incentive fee of 12.5% on any profit made on a fund wide basis. Seedrs will charge their standard 7.5% fee on any profits made by investors on each individual investment in the fund.
Generating high returns in Venture Capital is “hit driven” and long term in nature and we believe that the likelihood of achieving this is increased by:
• getting to invest in the best deals and management teams;
• investing early when the funding market is imperfect/competition is less, enabling better pricing and terms;
• having business experienced investors;
• increasing the size and profitability of the investee company;
• raising investee companies’ profiles among their industries and the Venture Capital community, leading to more likelihood of experienced and talented management wanting to join, and increasing awareness among potential acquirers and follow-on investors;
• patience and timing when looking to exit – we expect the average holding period for investments to be approximately 8 years.
Many early stage companies in the UK struggle to raise start-up and early stage growth capital in the £150,000 to £1 million range. Venrex typically invests straight into this so-called “equity gap” where we believe that attractive terms can be negotiated.
Our strategy is to create a virtuous circle, increasing awareness of Venrex investments’ successes to the point that potential investees are keen to have Venrex as an investor.
Mark chairs the investment committee and manages all aspects of Venrex’s investment process. Mark is a mentor for Seedcamp and Walpole’s Brands of Tomorrow, and sits on the Investment Advisory Board of the British Fashion Council. Mark's directorships include Notonthehighstreet Enterprises Limited, Orlebar Brown Limited, Charlotte Tilbury Limited, and Astley Clarke Limited.
Prior to setting up Venrex with Tom Fleming in 2003, Mark was a partner at private equity firm Wand Partners Inc. in New York from 1993 to 2001. At Wand, Mark focused on early stage investments in the internet, ecommerce, marketing services and technology sectors. From 1997 to 2001, Mark was acting CEO of Wand investee company, Fulcrum Analytics Inc., a three time winner of an Inc 500 award for being one of America’s 500 fastest growing private companies. Mark has an MBA from the University of Greenwich. Mark’s MBA dissertation, “Informal Investment in SMEs” was published in 1993.
Tom co-founded Venrex in 2003. Tom oversees investments including Poq Studio, Snap Fashion, Sheerluxe and Noble Macmillan Limited. Tom sources, evaluates and manages new investments with a focus on internet and e-commerce. Prior to Venrex, Tom worked for Fleming Family & Partners private equity group, having previously worked at IG Markets and Robert Fleming & Co from 1995 until its sale to Chase in 2000. Tom is a Seedcamp mentor and works with University of the Arts, London’s Centre for Fashion Enterprise helping advise and support fashion start-ups.
Sasha joined Venrex as Investment Manager in spring 2015 and helps evaluate new investment opportunities and support portfolio companies. Prior to Venrex, Sasha worked at JamJar Investments, the consumer VC run by the founders of Innocent Drinks. Sasha began her career as a strategy consultant specialising in providing investment support and insight to businesses in the technology, media and telecoms sectors. She also worked at Apple, supporting the Head of Corporate Communications for Apple France. Sasha graduated from Oxford University in 2011 with a BA in Modern Languages.
Pooja joined Venrex in July 2015 as Head of Finance and manages all aspects of Venrex’s finance and compliance functions, including bi-annual reporting and administration for Venrex’s seven funds and partnerships. Pooja also holds Interim FD roles at a number of portfolio companies and works with the founders on business planning, financial management and finance-related hiring.
Prior to Venrex, Pooja worked at Deloitte and PwC in their Investment Management and Private Equity departments. She audited a number of small and medium sized private equity companies, as well as a leading FTSE 250 entity. Her interests lie within startups, crowdfunding and lean startup methodologies.
She graduated from the University of Southampton in 2009 with a BSc (Hons) in Economics and Finance.
The Venture Capital Market
Venrex believes that the seed and early stage investment sector is compelling for the following reasons:
• Returns can be very attractive: May 2009 research from NESTA showed early stage UK angel investment returns averaging 2.2 times capital invested and a gross IRR of 22% on realised investments; company valuations tend to be low in absolute terms, thus small progress with the business can create relatively high percentage increases in equity value (albeit small companies are illiquid investments and tend to require growth if they are to become realisable investments).
• Values can also be attractive on a relative basis, with fewer investors looking at early stage deals, thus improving an early stage specialist’s negotiating position. We believe that, because this market is far less perfect, higher returns are achievable.
• Active involvement by investors to control the finances, focus the marketing thrust and leverage the investor’s industry contacts can help mitigate risks and accelerate development and, as a result, can rapidly increase the value of their investee companies.
• Management is generally more open to advice and assistance as experienced resources tend to be scarce.
• A company is able to focus purely on its plan, rather than being influenced by historical lines of business, politics and entrenched policies and practices.
Early stage investing is becoming a more competitive and popular space but there are very few formal early stage VC Funds that have a 12 year track record. We see our competition coming from VCs moving earlier stage, Angels and Angel Syndicates, Incubators, Banks and Crowdfunding Platforms. We have a good track record and continue to be active in the space which we believe puts us in a strong position to compete.