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- £25,000MIN. INVESTMENT
- EvergreenCLOSING DATE
- 30th June 2021NEXT TRANCHE CLOSE
Central to Vala's investment thesis is the sheer scale of the growth opportunity that the world’s push for sustainability is creating.
Reducing carbon emissions from developed economies to net zero, whilst also tackling other major sustainable development challenges, will take nothing less than a reinvention of almost everything we do - food production, energy supplies, consumer behaviour, manufacturing techniques, transport, and much more.
Clearly, these challenges are daunting. But they also create fertile growth conditions for innovative companies.
Vala believe that start-ups and early-stage companies with products and services designed to alleviate sustainability issues could grow at least as quickly as companies operating in any other technology niche. In short, the perception that ‘sustainable’ investing means targeting a lower investment return has become outdated. It is now possible to aim for high levels of target returns whilst also aiming to make a positive impact.
- Duration: The Fund is evergreen, with investors participating in deal flow after investment. Vala aims to invest within 12 months.
- Diversification: The manager aims to provide six to ten investments for each investor, with no more than 20% in one company.
- The Investment Committee - Time has been spent to put together an industry leading team with a thorough understanding of sustainability and sustainable investing. It is chaired by Mike Penrose, Founder of The Sustainability Group, and former CEO of UNICEF UK.
- ESG focus: Companies targeted as part of 3 main themes: Planetary Health, Sustainable Consumerism, and Fairer Access to Social Goods.
- Valuation: Mixture of last transaction and internal valuation.
Vala's goal is to invest in companies that are aiming to make a meaningful difference to one of the major sustainability issues facing our economy, society and environment.
These companies will be solving challenges as part of 3 key themes:
- Tech for Planetary Health
- Sustainable Consumerism
- Fairer Access to Social Goods
Success for these companies will be defined by three equally important measures: their sustainability impact, their growth and development, and the value they build for investors.
The companies Vala invest will all be start-ups and earlystage companies, but they may be at different phases of their business plans when the Fund first invests. Some companies may already be ‘post-revenue’ - they have already started to sell their product or service and now require funding to accelerate growth (for example, by investing in their sales and marketing function or expanding their product range). Other companies may be ‘pre-revenue’ - they are still developing a product, and they require funding to cover the costs of finalising and launching it into their chosen markets. The Fund may also invest in some businesses more than once. As such, your portfolio could include companies that have already been invested in by previous Fund Investors and mentored by Vala Capital over a number of years.
Typically, though not always, Vala expect to invest in companies that have received seed investment in the past, but which have not yet reached a scale where they are likely to be able to raise a large venture capital investment round.
As such, each investment round (i.e. the capital committed to each company by the Vala Sustainable Growth EIS on a particular occasion) is likely to be between £200,000 and £2,000,000, but it could vary.
The Fund’s goal is to generate the level of returns typically associated with high-performing venture capital funds. As such, the target for the Fund is to return 2.5x the amount invested into companies, net of our fees. This target does not include the value of any tax reliefs you claim in connection with your investments.
It’s important to note that the returns from this sort of investing are hard to predict. It is expected that some Investee Companies may eventually fail or be sold for less than the 2.5x target. As such, for the Fund to achieve its overall 2.5x target return, the best performing Investee Companies will need to be sold for more than 2.5x their acquisition cost. This is by no means guaranteed. The stated 2.5x target should remind you that this is a risky investment, with returns that are unpredictable.
Mike set up the Sustainability Group with Justin Cooke to make sustainability and social purpose a core part of how businesses and investors plan for the future. He was previously Executive Director of UNICEF UK, CEO of Action Contre Le Faim in Paris, Chair of Soccer Aid, and Global Humanitarian Director at Save the Children. He has worked as a commercial consultant for numerous financial institutions and businesses, helping them achieve their social, sustainability and ESG investment objectives. Mike has also sat on the ESG advisory committee of FTSE Russell, advised numerous family offices, businesses, investment funds and social entrepreneurs on how to implement programmes that achieve both social impact and financial returns, and he is a retained advisor to a number of high profile boards and businesses.
Jake is the founder and former CEO of Goji, a fintech asset management platform. Jake led the company through a number of VC-led investment rounds from some of Europe’s largest fintech VCs including Axa and Anthemis. Goji now provides asset management services to clients across Europe administering over £400m of assets.
Jasper is the founder of Vala. He has overall responsibility for deal flow and mentoring services and sits on the investment committee for the Vala Sustainable Growth EIS. He is an entrepreneur who has founded and invested in many companies in the media, technology and engineering sectors. His ventures include: PlayJam, one of the largest TV and mobile games networks; PlayStack a mobile games publisher; and Arksen, an engineering company focused on developing offshore explorer vessels and marine technology. He has achieved a number of highly successful exits, creating significant shareholder value along the way. Jasper started the World Ocean Trust in 1987 and is now a trustee at the Arksen Foundation.
Max is an investment manager at Vala Capital, with responsibilities that include managing due diligence, investment execution and operations for the Vala Sustainable Growth EIS. He joined Vala from The Ingenious Group, where his focus was investments within the energy, transportation and resource efficiency sectors. He has also worked for EcoMachines Ventures, a venture capital firm investing in resource efficiency and industrial technology.
The ultimate goal for each portfolio company is to achieve an exit event, to allow the Vala Sustainable Growth EIS to produce a profitable return to Investors. The companies may be acquired by other parties (such as a bigger company in the same industry or a private equity firm) or listed on a stock exchange.
At the time of the initial investment, it is impossible to know how long a company might take to reach an exit. However, Vala Capital and the Investment Manager will work closely with the companies during any exit process.
The Annual Management Charge is 1.5% of your Subscription to the Fund per year for the first three years. For the fourth and fifth years, the charge is 1.5% of the lower of the value or the acquisition cost of your remaining shareholdings. No annual charge is applied after the fifth year.
For individuals who invest in the Fund directly (rather than through their financial adviser), a 2.5% initial fee is collected from the gross Subscription amount to cover the costs of setting up the Fund.
Vala also charges an initial fee of up to 5% of the amount invested into companies. This fee is invoiced to the companies Vala invest in (the “Investee Companies”), so it does not reduce the amount invested into shares.
To align Vala's interests with yours, Vala charge a performance fee, calculated as 20% of the cash returns that exceed 110% of the amount invested into companies.
Below we have set out some of the main risks associated with investing in the Vala Sustainable Growth EIS. Please read this information carefully.
The most important thing to understand is that investing in small, early-stage companies is inherently very risky. It is possible for you to lose your entire investment. As such, you should only invest what you can afford to lose.
The Vala Sustainable Growth EIS will not be suitable for all investors. We recommend that you seek financial advice before investing.
Company underperformance or failure
To reiterate, the investments made by the Fund are inherently high risk. Small companies often struggle to grow. They may never become profitable and it is possible they could go out of business.
The companies are also often heavily reliant on a small number of directors and employees. If a key team member resigns or becomes unable to work for the company, it can have a significant detrimental impact on the company’s chances of success.
‘Force majeure’ events, such as floods, fires and terrorist attacks could also result in the underperformance or failure of a company.
Demand for the products and services sold by some Investee Companies may be dependent on laws and regulations related to environmental protection or other sustainability matters. As such, changes in government policy or priorities could have a detrimental effect on performance.
In short, one or more companies in your portfolio may reach a point where their shares are worth less than you paid for them or have no market value at all. You should only invest in the Vala Sustainable Growth EIS if you can afford to lose your entire investment.
The performance of Investee Companies, and therefore the value of an Investor’s shares, may be affected by external factors. Such factors include (but are not limited to) economic and political conditions, interest rate changes, and fluctuations in foreign exchange rates. The UK’s departure from the European and the global Coronavirus pandemic both create economic uncertainty and the potential for successive periods of slow or negative economic growth. Difficult economic conditions in the UK or in countries that trade with the UK could have an adverse impact on the performance of Investee Companies and the value of an Investor’s shares.
The content above has been provided by Vala Capital Limited, an Appointed Representative of Sapphire Capital Partners LLP who are authorised and regulated by the Financial Conduct Authority under firm registration number 565716.