Summary: The Deepbridge Innovation SEIS is a discretionary portfolio service that will invest into a small portfolio of up to 10 underlying companies, focusing on start-up or early-stage life science companies.

Why Invest

Positives

Strategy: Well defined investment process to invest directly in new companies in selected technology areas.

Issues

Concentration: Portfolio may be up to nine investments, although smaller investors may get greater concentration.

 

The Investment Adviser

Positives

Team: The Deepbridge team is very experienced in the relevant areas, and its Committees have very strong outside members.

Issues

Newer product area: Although Deepbridge has been investing in EIS since 2013, SEIS is a relatively new area.

 

Nuts & Bolts

  • Investing: Deployments take place on a six-monthly basis, with the aim of investing a full £1.5m tranche at that time.
  • Diversification: Portfolio of up to 10 companies.
  • Valuation: Unprofitable companies will be held at cost or at the last relevant transaction. Profitable companies use a discounted average multiple from relevant companies.

 

Specific Issues

  • Fees: Only the performance fee is not charged directly to the company.
  • Performance fee: Performance fee of 20% on gross returns over £1.50 on a per company basis.

 

Risks

  • Risk mitigation: Deepbridge aims to mitigate risk by active ongoing support of the company and choosing conservative business plans. Most of the companies will be introduced by partners, who will also be bringing support.
  • Target return: The target return for the fund is £2 for each gross £1 invested over a minimum of five years. Individual companies tend to have much higher targets, reflecting that success in a company will give an excellent return, but there is a real risk of loss in any project.