Nova Cofoundery SEIS & EIS Fund is a fund that aims to invest in 10 companies that are eligible for SEIS or EIS relief. The target return for each investee company is a three-year return of £2.18 after tax relief for each £1 invested (although investments are expected to be held for 5-7 years). Returns will be focussed on capital gains and investors are unlikely to receive any dividends. The aim is for the assets to be invested as soon as possible after receipt.
The target is for investors to receive shares in 10 companies, with 80% of companies and two thirds of the value being brand-new companies (SEIS) and the balance EIS. Businesses will be technology-enabled, with some sector diversification, although this depends on the opportunities that arise. Given the very early stage of the investments, we would expect idiosyncratic risk to dominate market or economic risk.
The return target seems reasonable for what is a higher risk strategy, although this is in line with other SEIS investments.
Nova has a well-established sourcing process, with an emphasis on digital media. Its focus on entrepreneurs who are just starting up a company is unique in SEIS funds with little competition from other investors. Nova has tested its ability to boost potential deal-flow by increasing its advertising and appears to have plenty of capacity to source sufficient investments for the fund.
Sapia Partners LLP (Sapia) validates all investment decisions made by Nova. Within Nova, candidates are pre-qualified by a mentoring team before being assessed by the separate Investment Committee.
The Nova proposition is unique in the (S)EIS market. The support has some features of an incubator, such as mentoring, support for finance or business space assistance, but also has a staff of technology specialists that can be deployed into a company, reducing recruitment risks at the earliest stages. Nova ‘s parent takes a board seat in investee companies, with Nova having the right to do so too.