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- £25,000Min. Investment
- FinTech/ PropTech/ ConsumerTechSector
- EISFund Type
- 31st OctoberClosing date
Love Ventures Fund II is a venture capital fund investing in early-stage companies which are leveraging technology in a post-Covid world to accelerate their growth. We’re looking to partner with exceptional founders in the FinTech, PropTech and ConsumerTech sectors.
The UK has one of the best environments for start-ups and early-stage companies. Many were already flourishing before the Covid pandemic but those which have been able to adapt quickly to the disruption and embrace technological change are thriving. Love Ventures are interested in the technologies driving these changes.
The move from a cash to a cashless society, the advance of Open Banking and the favourable environment created by the UK's forward-thinking implementation of the Payments Service Directive 2 (PSD2), has created a unique space to lead in the field of innovation at the intersection of banking, retail and utility, thus attracting talent and start-up entrepreneurs. These are some of the ‘mega-trends’ that Love Ventures believes are worth investing in.
Love Ventures Fund II offers a unique opportunity to gain access to these fast growing companies. The team is laser-focussed on finding these opportunities, often off-market, and uncovering the next gems of tomorrow. This added to a strong background of identifying visionary founders and helping bring them from Seed stage up to Series A.
The Fund is as a discretionary managed portfolio service structured as an Alternative Investment Fund (‘AIF’). Love Ventures has a team of three Directors and six advisers in the Investment Committee. The combined experience of the Directors is of over 20 investments, two angel networks and the advisers have exited multiple businesses.
The Fund is the second Love Ventures fund, Fund I was raised and deployed a year ago over a period of less than 12 months.
Love Ventures Fund II Investment opportunity
- A diverse portfolio of EIS Qualifying Investee Companies: target of at least six new investments and follow-on provision to participate in Series A rounds (towards Fund I and Fund II Investee Companies).
- Early-stage investing offers the potential for higher returns, with Investee Companies on the cusp of accelerated growth and a path to a larger stage Series A.
- The Fund will focus on the equity gap between Seed and Series A investment. We provide the appropriate support and infrastructure to Investee Companies to help them grow and flourish.
- The opportunity for retail investors to invest alongside institutional VCs and high-profile angel investors and with the benefits of EIS tax reliefs.
- Invest in the Fund alongside an experienced and diverse team of successful entrepreneurs and investment professionals who have been operating extensively in the UK’s seed/early-stage ecosystem.
- There is a strong case for ‘why now’ with accelerated shift towards digital transformation.
- Successful team with track record and founder exit
- Consistent dealflow with off-market opportunities
- Follow on funding relationships with Series A+ VCs
- Advisers with a wealth of experience in developing early stage companies
The UK is Europe’s leading tech nation and in 2020 alone, technology investment reached $14.9Bn - more than France and Germany combined. There is an ongoing accelerated shift towards digital transformation producing waves of innovation.
In addition, the UK is having a ‘Silicon Valley’ moment with 80 unicorns, behind only the US and China. Talent, knowledge and capital are being redeployed into early-stage companies as each success story flourishes.
Why Love Ventures
Love Ventures has a wealth of experience in investing in early stage companies and the team predominantly consists of founders and exited entrepreneurs a unique position compared to the UK venture capital ecosystem.
The experience of the wider advisory panel means they are uniquely equipped to help founders grow their businesses and exit successfully. This is a particular focus for them as many venture capital firms have difficulty in achieving exits. The Fund’s advisers have successfully exited multiple businesses between them including CyberSource, The Instant Group, Passmark Security and Skyscanner.
The Fund is focussed on three sectors with very large total addressable markets: finance, property and consumer.
The UK is a world leader in FinTech, behind just the US in terms of investment. $4.57Bn was invested into UK FinTech in 20204. The success of the UK’s FinTech community is in large part driven by a supportive regulatory environment, and by the power of global financial markets with a deep technology talent pool.
The UK’s 29 FinTech companies make up close to 40% of all UK unicorns, showing the sector’s strength and importance to the ecosystem.
Digital/mobile wallet payment is now the top online checkout method (32%).
Open Banking, a series of reforms instructing UK banks to enable the secure flow of financial information between accredited and regulated third parties. This has opened the way to new products and services and has seen a huge surge of innovation in FinTech, with new businesses successfully entering the market.
PropTech describes the digital transformation that is currently taking place within the real estate industry, leading to technology-driven innovation within data assembly, transactions and the design of buildings and cities.
There are three PropTech sub-sectors (information, transactions/marketplace and management/control) and horizontal movements (smart buildings, real estate FinTech and the shared economy), with funding rising year on year.
ConsumerTech companies operate in areas where the Total Addressable Market (TAM) is large. They include companies which have B2C or B2B2C strategies and include platforms and marketplaces.
The UK had 95.6% internet penetration and 90.3% mobile internet penetration in 20207, providing a strong environment in which these companies can grow.
The Fund will focus on the equity gap between Seed and Series A for investments into new Investee Companies. It is critical that early-stage businesses have the appropriate support and infrastructure to grow and flourish early on.
The team is particularly active in sourcing off-market intermediate funding rounds as we find businesses that wish to accelerate their growth metrics in the months prior to their Series A. The team are particularly focussed on investing within a round as the last cheque before Series A.
Coconut is a category innovator in the mobile accounting space. The company offers expenses, tax and invoicing products and has over 8,000 users. The investment was made at the same valuation as Coconut’s previous round. Coconut moved to paid only plans in January 2021 and expects to raise a Series A round in Q4 2021.
Tymit are creators of the first instalment-only credit card. The company is reinventing credit by making it more flexible and transparent, ultimately putting the customer in control. Launched in 2019, the team have built a scalable platform with excellent take up from customers.
Banked is an Open Banking payments solution which powers real-time payments for consumers, businesses and banks, improving the customer experience, payment security, business efficiency and cost effectiveness.
Aprao is a leading software provider for property developers, lenders and professionals. Appraisals are like business plans in the property development world. They are used to evaluate opportunities, plan for profit and secure finance. However, as with business plans, they vary greatly. Aprao's mission is to make appraisals more accurate, more consistent and more efficient by introducing a standardised SaaS solution. They participated in Pi Labs' PropTech accelerator 2018 and launched their cloud based financial modelling tool in 2019.
Just Move In
Just Move In is a Home Move platform and is also a Certified B Corporation. Their Utility Management Platform, SaaS Platform and Tenant Referencing powered by Open Banking has a TrustPilot score of 4.9 and saves agents and home movers time, hassle and money. The company has a significant number of partnerships already in place including API integrations with the likes of Knight Frank, Open Rent and Pickfords. With circa 31,000 moves processed in 2020, the platform is growing fast.
Movewise are disrupting the property sales market, offering a streamlined and hassle-free way to sell property. Movewise's mission is to be the dominant property sales platform, enabling the best sales result and experience for any property seller in the UK and beyond. The company has recently onboarded its first corporate customers, including Brick Lane, Knights PLC, Property Partner and Wildheart.
Marcus has over 14 years of experience as an FCA approved financial professional in London. He worked most recently at William O’Neil+Co, the US headquartered equity research firm between 2011-2019.
Marcus has a strong track record of delivering global equity idea generation to investment managers, which enabled his clients to increase their portfolio performance.
Over the last six years he has invested in 20 early-stage businesses and successfully built an angel syndicate. He progressed this syndicate into Love Ventures Fund I and is now further advancing the Love Ventures venture capital franchise. Marcus is co-investing in the Fund alongside investors and seeks to replicate this successful performance.
Adrian has over a decade of experience as an investment professional and chartered surveyor. From 2016, he worked at Dorrington PLC, a £1.4Bn private investment company, where he was an investment manager of a
£200m predominantly residential portfolio of assets, including a joint venture with Grainger PLC and was influential in introducing PropTech companies to partner with the business.
Earlier on in his career, he worked for six years at The Instant Group, a high growth pioneer within the global flexible workspace sector where he focussed on enterprise sales prior to its acquisition by MML Capital. He was instrumental in growing the managed office division’s revenues by over 200% to £25m over a five-year period.
Adrian has built an angel syndicate alongside Marcus that has invested in 20 early stage businesses during the last six years. He led PropTech company Deepfinity's £200k seed funding round in 2020 and joined as a Board Observer to help drive their SaaS sales and marketing strategy. He has recently become a Board Observer at PropTech company Movewise.
Andrew is a chartered surveyor and spent the majority of his career in leadership positions within Capital Markets at the International Real Estate Adviser, JLL prior to being appointed Deputy Chairman of its UK business. He advised investors on both buy and sale-side and acted for many of the major institutional players including Aviva, Legal & General, M&G, LaSalle Investment Management and Wellcome Trust.
In 2016 he joined the Howard de Walden Estate (HdWE) as Chief Executive. HdWE is a privately held company which owns property with a value of more than £4Bn in London's Marylebone. HdWE is Britain's leading healthcare property investor, affording great insight into this fast evolving industry. Andrew retired from HdWE in early 2021.
He chairs the advisory board to Clipstone Investment Management and is a Trustee of various charitable bodies including The University College of Estate Management, The Tim Henman Foundation and The Story of Christmas. As President of OBREMS, the alumni society for former Oxford Brookes students working in property, Andrew enjoys mentoring people in the formative stages of their careers.
Lachie is a digital marketing specialist with over a decade of experience working in financial services. He started his career working agency side at Mindshare as a content marketing and search engine optimisation strategist. Mindshare’s client base includes Facebook, Apple, BlackRock and IBM. He moved in 2018 to work client side with Newton Investment Management.
He has in-depth investment knowledge, having passed Level II of the CFA Programme, which combined with his marketing experience, has created a unique skill set. Most recently, in January 2021 Lachie joined early stage FinTech start-up, ApTap, where he is designing and executing the brand’s multi-channel growth strategy.
Esther is an international strategic growth specialist with an MBA from Oxford University. Over the past 12 years she hasbeen a trusted adviser for some of the world’s biggest brands across consumer, healthcare and tech sectors, from GooglePay to Johnson & Johnson to Suntory. Her experience ranges from providing commercial due diligence and transition plans for private equity backed businesses to identifying new growth opportunities to well established brands. More recently she has started using this experience to advise younger companies on their go-to-market strategies.
She is also an angel investor and mentor to female founded and co-founded technology businesses. She is strongly committed to inspiring investors with the right opportunities that uniquely match their desires and expectations, to drive a sustainable growth in line with their vision for themselves or their family.
Love Ventures will work with each Investee Company to develop a range of appropriate exit strategies on behalf of the Fund. This will include trade sales to other companies in the same sector or industry, listing on an appropriate stock exchange, or selling its share of the Investee Company or a portfolio of its investment to a large private equity firm.
The Fund has a patient approach to investments and any investment by the Fund will have a long-term view. We will endeavour to exit investments after they have been held for at least the Three Year Period, in line with the qualifying conditions for EIS tax relief. However, there may be occasions where an earlier exit is a commercially sensible decision and the exit proceeds are considered sufficiently attractive to outweigh the impact of any loss of EIS tax reliefs. The Fund will never invest in companies where there is a pre-arranged exit at the time of the investment.
Love Ventures anticipate that most exits will take place after the investment has been held for at least five years, with the average being closer to seven. Some investments could take significantly longer depending on market conditions and the growth of the Investee Company.
Products and services
The Fund is focussed on three sectors with very large total addressable markets: Finance, Property and Consumer. The Fund’s areas of focus include but are not limited to:
FinTech - Accounting, Banking, Cybersecurity, Digital Cash, Insurtech, Loans, Payments, Payroll, Pensions, Wealth.
PropTech - Collaborative Software Platforms, Data Management, Geospatial Technologies, Logistics, Smart Buildings & Cities, Sustainability, The Future of Work, The Internet of Things (IoT).
ConsumerTech - Artificial Intelligence, Digital Health & Wellbeing, Ecommerce, Fitness, Personalisation, SaaS (Software-as-a-Service), XaaS (Everything-as-a-Service).
The Fund charges an initial upfront fee of 3% of the amount invested. This initial charge will be paid to Love Ventures VC Limited and covers the establishment and ongoing costs of the Fund. This initial charge will be paid by the Investors prior to Investment in the Investee Companies and therefore this will reduce the EIS reliefs available to Investors.
The Fund charges an annual management fee of 2% of the amount invested. This is payable up to a maximum of five years and covers investment management costs with Sapphire Capital Partners LLP, Mentoring Service fees, custodial fees, reporting to investors, administration and accounting costs, legal costs and portfolio management.
This four year fee (being 8%) is payable directly by the Investors prior to Investment in the Investee Companies and therefore this will reduce the EIS reliefs available to Investors.
A Performance Fee will be payable to Love Ventures and Sapphire Capital Partners LLP equal to 20% of any return to Investors that is in excess of 100% of the total amount invested into the Fund. In other words, an Investor must receive cash payments equal to £1 for every £1 invested, before any Performance Fee becomes due.
Prior to any potential distribution being made to an Investor from the Fund in relation to each Investee Company, a transaction fee of 0.25% of the total proceeds shall be deducted and paid to the Custodian.
Initial charge (to the Investee Company)
The Fund charges a fee of 2% to the Investee Company to cover deal execution fees, custodian and administrative costs including a 0.25% dealing charge on initial investment into each Investee Company, as well as strategic and business support. It also charges an annual mentoring fee of up to 1% for the first three years, payable upfront.
The value of shares can go down as well as up and this could result in an Investor incurring a total loss of their Investment. The Fund will invest in early-stage opportunities in the technology sector. By definition, early-stage investing carries a higher risk. If successful, this offers the potential for higher returns. If unsuccessful it may result in greater or total loss of the Investment. The Fund is taking minority positions in Investee Companies. As a minority investor the Fund may be less able, or unable, to materially influence the policies pursued by an Investee Company.
The products and technologies developed by Investee Companies may not be commercially successful. Investee Companies are very likely to make borrowing arrangements from third parties. Fund shareholders rank behind these creditors should there be an insolvency situation.
Investments will be made into companies which do not trade on any public market or exchange. Accordingly, the Investment Manager will not be able to sell any part of the investment prior to the investment being realised as a whole. There are developments in the secondary share market and should this situation evolve the Investment Manager will update Investors accordingly. The Investment Manager will always act in the best interests of the Investors and could decide to sell all or part of an Investee Company in a secondary market should it become available. The Fund will never invest in companies where there is a pre- arranged exit at the time of the investments.
All investments will usually be made in sterling. Should any income or other transaction arise in a currency other than sterling, the performance of the Investee Company and the return to Investors will be affected in relative terms by the movement of sterling in foreign exchange markets. This Information Memorandum provides details of projected performance that may or may not be achieved by the Fund.
Economic and Political risks
The value of the Investor's Investment may be affected by a range of external factors including but not limited to economic and political conditions, interest rates, fluctuations in foreign exchange rates, etc. As a result of the United Kingdom’s decision to leave the European Union and as a result of the COVID-19 World Health Organisation declared pandemic, there may be a period of uncertainty and a potential economic downturn or recession. Any uncertainty and downturn or recession in the economy of the United Kingdom or in the economy of a country trading with the United Kingdom may have an the adverse impact upon the prospects of the Investee Companies and therefore negatively impact the Investments made by Investors.
Access to suitable Investments and the mentoring of those Investments is dependent on the Directors of Love Ventures VC Limited. Any change in the Directors or employees of Love Ventures VC Limited may have a negative impact on the deal-flow and materially affect the financial performance of each Investee Company. In particular, the Fund is dependent on the services of Love Ventures VC Limited (including Directors Marcus Love, Adrian Love, and James Pringle) to act as the Company Mentor. Any loss of these services may have an adverse impact on the Investee Companies and therefore a negative impact on the returns generated to Investors.
Investors are encouraged to seek advice from their tax, professional or financial advisers regarding their personal tax position. Mention in this Information Memorandum of the tax advantages relate to the generic position of a UK-resident individual higher-rate taxpayer and does not constitute tax advice to any person. Tax legislation administered by HMRC is subject to change at any time and tax advantages may be amended or withdrawn. Any loss of EIS qualifying status by an Investee Company or change in an individual’s circumstances may lead to the loss of the Investor’s tax advantages.
The Fund retains complete discretion to realise an EIS investment at any time (including within the Three Year Period) should it consider it appropriate. In such a case, some of the tax advantages relating to that disposal shall be lost. The Fund is not required to take into account the tax position of Investors (individually or generally).
The Fund or any of the service providers, including the Investment Manager and the Company Mentor may be subject to risks resulting from cybersecurity incidents or technological malfunctions. Such incidents or malfunctions may have a negative impact on the repayment of your investment, interfere with the Investment Manager’s ability to calculate the value of your investment, disrupt the ability of Investors to subscribe to the Fund or make withdrawals and other processes all of which may have a negative impact on the returns generated for Investors. A cybersecurity incident may also have an impact on the security of your personal data held by the Investment Manager, Company Mentor or Custodian and Nominee.
Additionally, such cybersecurity incidents may negatively impact the reputation of the Fund or any of the service providers, including the Investment Manager and the Company Mentor which may affect the capacity of the Fund to achieve any targeted return. The Investment Manager and the Company Mentor rely on third party providers for many day-to-day operations and will be subject to the risk that the protections and policies implemented by such providers will be ineffective to protect the Investment Manager or the Company Mentor from such incidents or malfunctions.
Financial Services Compensation Scheme (‘FSCS’)
Whilst Sapphire Capital Partners LLP is authorised and regulated by the FCA, the Fund is categorised by the FCA as an alternative investment fund and so participation in the Fund is not covered by the Financial Services Compensation Scheme. For further information please contact Sapphire Capital Partners LLP, or the FSCS directly at www.fscs.org.uk. or by writing to the Financial Services Compensation Scheme, 10th Floor, Beaufort House, 15 St Botolph Street, London, EC3A 7QU.
The Fund has discretion to use monies raised from Investors as follow-on investments into Investee Companies and companies in Fund I. This may affect the return to Investors in the Fund, either because the follow-on investment is made at a higher value than the previous investment or because the exit from that investment occurs sooner than is the case for the original Investors in the company.
Valuations may be provided to Investors through fund reporting. No guarantee is given that such valuations are capable of being attained in a disposal, flotation or other realisation. Valuations will be conducted according to industry standards, and the method of calculation of the valuation will be noted for each Investee Company.
The content above has been provided by Love Ventures, an Investment Adviser to Sapphire Capital Partners LLP who are authorised and regulated by the Financial Conduct Authority under firm registration number 565716.