If there is one sector that gets a lot of airtime currently, it’s robotics and automation, so GBI City Editor Neil Martin took the opportunity to get an update from Dominic Keen, CEO of Britbots and Investment Director of the British Robotics Funds
The British Robotics funds include The British Robotics Sidecar SEIS Fund (currently open), The British Robotics EIS Fund (which launches in the autumn), The British Robotics Seed SEIS Fund III (following in the winter) and Britbots CROWD, a direct investment portal which is serving clients now.
Keen, a pioneer in robot investment, believes that as automation and robotisation drive significant productivity improvements across the global business landscape, investors are becoming aware of the important economic role that robots and artificial intelligence have started to play.
Britbots manages the British Robotics funds to give investors access to this important investment theme, whilst offering a balanced portfolio within a highly taxefficient wrapper.
Sapphire Capital Partners
Keen is in charge of investments and Boyd Carson, of Sapphire Capital Partners, provides regulatory compliance and fund management.
The investment strategy is based on the idea of establishing holdings in a mixed basket of the most innovative and disruptive robotics and artificialintelligence businesses within a highly tax-efficient wrapper. As well as providing exposure across a range of business sectors, the funds also invest in various types of companies including deep-IP, platforms, robotic services and sub-systems.
How have things changed over the year and what about 2019?
‘More than ever before, the automation of industries via robotics, artificial-intelligence and autonomous machines is transforming profitability and, consequently, creating an opportunity for investors to receive significant premiums from investments made in this area.
‘Over the last year, we’ve attracted over £6 million into UK-based robotics and AI firms; and, as we’ve scaled-up, we’ve put in place more support services for our portfolio businesses to further raise their chances of commercial success; such as assistance in finding new customers and raising publicity.
‘Now that we have a current stable of 12 plus investee companies, spanning a wide range of sectors of the economy, in addition to the early-stage SEIS funds that we have previously offered, we are also introducing a new EIS fund that will provide a broader spread of lower-risk, scale-up investments in businesses that have clearly-defined commercial opportunities.’
He says that this year they will be providing investors in the fund with more choice.
They will have the opportunity to either:
- take advantage of the maximum level of tax benefit by investing in a portfolio consisting predominantly of SEIS-qualifying businesses (50%income tax credit) which are, by nature, fairly earlystage and therefore carry a higher risk; or
- elect to invest in a broader portfolio of more mature EIS-qualifying robotics and AI companies (30% income tax credit) that have already spent time within the Britbots stable and therefore are somewhat less risky.
They have also expanded the mentoring service, offering portfolio companies specific support in areas which can be particularly time-consuming, or complex for robotics entrepreneurs, increasing the chances of longer-term success.
So what would Keen say is his firm’s USP?
‘The British Robotics funds are the only tax-efficient investment vehicles that focus purely on the investment theme of robotics and AI.
‘Our specialism allows us to provide targeted support, mentoring, networking and access to customers, so to best help portfolio business get to market and create exit opportunities for investors.’
Why does Keen think that the UK is particularly suited to investment in this sector:
‘The UK is home to some of the best AI and robotics talent in the world. Historically much of the development activity has been happening within universities or large corporations. However, as the cost of the technology has fallen and the pool of national expertise has grown, in recent years we have seen the emergence of a vibrant national robotic and AI start-up scene.’
How can EIS investments continue to help diversify client portfolios?
‘Long-term investors will want to have some exposure to the important growth theme of robotics, AI and automation within their portfolio, given the significant impact these trends are already having on the global economy.
‘It is hard to get a good coverage of these equities on the stock market as there are not many listed players, consequently a well-balanced SEIS/EIS fund can provide access to this area; with the tax advantages used to offset the risk of holding more illiquid securities.’
Are advisers more receptive to the schemes and are clients more savvy about them nowadays?
‘We are seeing increased awareness by advisers of the British Robotics funds as the growth potential of the robotics and AI sector becomes more apparent. In our most recent fund, over 70% of the monies raised came via advisers.
‘Particularly in an environment where interest rates are still low by historical standards; long-terms returns on listed equities remain anaemic; and tax rates are getting higher, SEIS and EIS schemes represent an ever-more important element in building a portfolio that can achieve adequate levels of growth over the long-term.’
How can advisers continue to educate their clients about the investment opportunities in EIS?
‘Given the increasing restrictions on pension pots, advisers can start to introduce SEIS and EIS allowances alongside their clients’ ISA allowance, as one of the higher risk components of a long-term savings programme.’
Does the industry need to do more to promote the schemes to a wider investor base?
‘Britbots has always tried to create product that can be accessed by smaller investors so as to be applicable to a wide investor base.’
Are any clouds on the horizon, that might spoil the party?
‘For the 2018/19 tax season, the uncertainty around Brexit may lead to a reduction in funds invested in SEIS and EIS businesses.
‘Nevertheless, we believe that an investment in UKbased robotics and AI businesses will provide a good shelter for investors against the negative impacts to the economy caused by Brexit; and are likely to continue to build new markets in the forthcoming period.’