By David Stevenson on Friday 5 January 2018
Innovative equity crowdfunder opens two new investment channels.
Crowdfunding platform SyndicateRoom has this week announced that its two innovative investment funds have opened for subscriptions. Both funds have already attracted subscriptions from early-bird investors and are capped at a maximum of £9m – the minimum investment is £10,000 for each investor.
The existing crowdfunding model is based on individual investors investing in single campaigns – only a few platforms such as Israeli outfit OurCrowd have focused on providing a fund. Cambridge based SyndicateRoom has not one but two EIS eligible investment funds open for investors. These funds allow private investors to access the campaigns on its platform (110 to date) in a diversified manner.
Fund Twenty8 helps investors “passively” diversify your portfolio across an unprecedented number of EIS opportunities, while the Growth Fund gives investors access to a select number of later-stage EIS investments from SyndicateRoom's portfolio.
Fund Twenty8 initially launched back in 2016 pioneering what the platform calls a ‘passive’ approach to investing in the platforms campaigns – the fund’s strategy is to use its own algorithm to automatically build you a diversified portfolio of at least 28 EIS-eligible early-stage investments, across a broad range of sectors, targeting a return of over 20% IRR including EIS tax relief.
After strong interest at launch , Fund Twenty8 2016 raised over £4.5m from 233 investors. The Fund typically invests in funding rounds of between £250,000 and £3m and typically not invest more than 1/28th of the Fund into a single deal to guarantee a portfolio of at least 28 investments. Fees on this fund are a 1% initial fee and a 1% annual management fee plus a 20% performance fee after a 110% hurdle. Key investments in the earlier version of this fund include digital law platform Pekama – which raised £599,080 on SR – as well as Warwick Audio and Revana, a biodegrageable drug delivery business which raised £1.1m.
SyndicateRoom’s Growth Fund takes a more selective approach by focusing on a smaller portfolio of at least six of the best-performing portfolio businesses on SR’s platform – the fund is looking to invest between £250,000 and £2m alongside the respective Lead Investors.
SyndicateRoom says it will initially only invest in “revenue-generating businesses (or businesses in the advanced stages of developing their Intellectual Property in the case of knowledge-intensive sectors)”. According to SR, target businesses for this more select portfolio need to boast a number of key characteristics including:
In terms of target returns SyndicateRoom hopes to “generate capital growth over three to seven years with a target return in excess of 20% IRR including EIS tax reliefs” for the Growth Fund. Crucially the Growth fund will invest alongside Lead Investors – this echoes Syndicate Rooms co investment philosophy of working with established angels who perform much of the due diligence on a new business.
SyndicateRoom has also crunched the numbers on the businesses already backed by the platform – this gives it the ability it says to “show the value of SyndicateRoom’s investment portfolio as of the start of 2017. SR Portfolio theoretical value as of the start of 2017 was found to be worth 114% of subscriptions. When EIS tax relief is considered this value rises to 163%.” In terms of fees on the Growth Fund, the initial fee is also 1% plus VAT as well as an annual management fee of 1.5% plus a performance fee of 20% on any gains over an initial 110% barrier. As with the FundTwenty8, the minimum investment is £10,000 and applications close on 30th March.
In terms of sector mix for the businesses backed by SR investors to date, 31% are in the life sciences sector, 15% in media and lifestyle and a further 15% in enterprise software.
