Although Nova have been around for 10 years investing in start-up tech businesses, this is the first fund they have launched and are aiming to promote to IFAs for the first time.
Tell us about the fund
The Nova cofoundery SEIS & EIS fund invests alongside Nova in early stage technology start-ups.
Andy Davidson, CEO, is a serial entrepreneur with over 20 years experience in co-founding technology companies and still holds directorships in many successful tech businesses including Sentric Music and Lucid Games. In 2017, Andy was recognised by the Sunday Times as one of the UK’s top 100 disruptive entrepreneurs.
With the launch of the fund Nova private investors have the opportunity to co-invest alongside Nova into their portfolio of potentially fast growth, SEIS and EIS eligible, technology startups. Investors are benefiting from Nova’s experience and track record, as well as an attractive category of tax relief available to UK investors.
The fund is intended for individuals
• Seeking a diversified exposure to knowledge intensive companies in the UK
• With income tax liability in the preceding or current tax years
• With large capital gains to defer or mitigate
• Who will benefit from IHT relief
The coinvestment model means that Nova provide team members and business services to each start-up within the portfolio on a flexible basis. In the opinion of
Nova, this prevents the start-up from locking in fixed monthly costs, provides a flexible cashflow runway and ensures the start-up has the optimum mix of skills and experience to achieve their objectives. Nova receives part of its payment for these services in cash and invests part of its payment on the same terms as the fund. This aligns both Nova and the fund investors in seeking successful exits for the portfolio companies.
Between 2008 and 2018, Nova invested in over 70 companies, with portfolio growth in excess of 80% year on year. Nova had created £72 million in shareholder value by 2018, and as Nova only invests at the point of a company’s inception, none of that value existed before Nova became involved.
How much is being raised?
£6,000,000 during tax year 2019/2020
What types of investments are being sought?
Nova are passionate about investing in growth-focused technology start-ups, companies which have passionate founders and have the potential to disrupt existing markets. To date Nova have invested in over 70 technology start-ups, with a further 30 planned for this year, covering multiple different verticals including MedTech, FinTech, EdTech and PropTech.
Investments made into the fund are deployed in the knowledge intensive sector and split between SEIS and EIS qualifying companies. The fund invests in a minimum of 10 investee companies per quarter, each of which is engaged in solving industry problems with the use of a digital solution. Investors’ funds will typically be deployed across at least 10 companies in the quarter they are received.
The selection of investee companies and the subsequent allocation of investor’s subscriptions to the investee companies are made at the discretion of the Investment Manager with appropriate guidance from the Investment Advisor.
The investment strategy for the fund is to deploy into early stage companies, and founders, that exhibit some or all of the following qualities:
• Significant market potential with clear and demonstrable consumer or commercial need or demand
• A problem originated solution that has the potential to create new market segments or displace current market offerings
• Companies that utilise a technology-derived platform and/or an innovative approach to meet a newly-identified or existing market or consumer demand
• Knowledge intensive opportunities that possess a clear and realistic path to the delivery of a maximum viable product or prototype
• A clearly defined strategy aimed at creating and protecting intellectual property
• Passionate, energetic and experienced founders
• A clear exit strategy to be implemented within 4-5 years with alignment of founder interests with shareholders
What is the minimum investment?
The minimum individual investment in the fund is £10,000, or £1000 per month. At Nova’s discretion, smaller individual investments may be accepted. The maximum investment per year is £2,100,000. Nova encourages investors to invest via a monthly premium setup on their platform. Over several years a regular investor will benefit from a diversified portfolio of over 100 underlying companies.
What is the targeted return?
In the opinion of Nova, against industry research conducted by Beahurst 2011-2016 showing tech company CAGR of 34%, the fund is prudently targeting growth of 20% year on year. At this growth rate investor returns including tax incentives of £2.18 for every £1 invested are being targeted. If, however, Nova portfolio growth continues in line with historical performance of 83%, investors could see returns of £5.70 for every £1 invested.
Which are your top fund holdings?
Nova’s portfolio is made up of a diverse range of technology businesses including;
Aquarate – A suite of sensor based medical devices for automated fluid balance monitoring in hospital patients and care home residents. Preventing illness and reducing lives lost due to hydration related illnesses.For further information please visit https://aquarate.com/
Hygenie – An active monitoring system that allows hospitals to detect usage of hand hygiene stations, helping reduce healthcare associated infections (HCAIs) and improve patient safety. For further information please visit https://hygenie.io/
Woowi – A wearable device that supports SEN children to discover mindfulness when emotional stress levels are elevated. For further information please visit https://woowi.co.uk/
MenuGuru – Making eating out easy, accessible and painless for both the growing population of food allergy and intolerance sufferers, and the restaurants that serve them. For further information please visit https://menuguru.co.uk/