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Newable

Newable EIS Scale-Up Fund 3

07 Dec 2020 / Tax enhanced research

The Newable EIS Scale-Up Fund 3 is an investment management service conducted on a discretionary basis by the Fund Manager, which will provide a portfolio of investments in unquoted deep technology companies. The target return is an average annualised IRR of 20% or 3x capital. Returns will be focused on capital gains, and investors are unlikely to receive any dividends. The Fund is evergreen.

Why Invest

Positives

  • Strategy: Exposure to a portfolio of deep technology companies in sectors in which the team has expertise.

Issues

  • Track record: With the current structure and process in place for only five years, the track record lacks depth.

The Investment Manager

Positives

  • Team: Diverse range of experience in team, with clear strategy and good support from its Investment Committee (IC) and ¬†angel network.

Issues

  • Company size: Although¬† the investment team is small, the IC and angel network bring more than adequate scale to operations.

Nuts & Bolts

  • Duration: The Fund is evergreen, with quarterly (soon to be monthly) closings.
  • Diversification: The manager expects to provide between seven and ten investments for each closing.
  • Valuation: Usually changes at next financing or on writedown.

Specific Fees

  • Fees: Combination of direct fees and company charges. Unusually, fee rates decline over time.
  • Performance fee: Charged at 20% on aggregate returns over 110% of amount invested in companies on a portfolio basis. Charged on in-specie transfers.

Risks

  • Target returns: The target IRR of 20% or 3x capital suggests a high-risk investment strategy.
  • Companies: Supplying risk capital to early-stage technology companies at the start of commercialisation. There will be a spread of company returns as the successful ones will do very well, but those who fail may do so completely.
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