The U.K.’s Enterprise Investment Scheme has been a powerhouse for startups out of the U.K. because it allowed angel investors to invest in a very tax-efficient manner.
Launched in 1994, it was designed to encourage investments in small unquoted companies. As Wikipedia will tell you, by the end of the 2014-15 tax year, a cumulative total of £14.2 billion had been invested under the scheme into approximately 25,000 companies, for example.
The policy has been aped and copied by several European governments since. But with the U.K.’s cultural and historic appetite for risk and investing in assets beyond property, EIS has been a boon to technology companies as the tech industry in the U.K. has greatly expanded.
Although not always perfect — plenty of entrepreneurs sometimes find issues with the whole thing — EIS and SEIS have at least put a great deal of seed money into the tech ecosystem of the years since it was first launched. The result has meant many startups getting their first break and going on to attract institutional investment from venture capital.
A good example of that is Portfolio Ventures (PV), which has now closed its second angel fund (which they claim was oversubscribed), where many of the investing angels do so under EIS.
This means the fund will have over £5 million to invest, between £100,000-£500,000 cheques, into early-stage U.K. tech companies, ranging from pre-seed to Series A. The focus of the fund will be on fintech, insurtech and SaaS.
The second PV angel fund is backed by some of the U.K.’s more active angels, including Chris Adelsbach, Will Neale and Michael Pennington, alongside founders from Credit Kudos, FreeAgent, BrandWatch, Wayve, Passfort, ContentCal, Griffin, Bibliu, Rahko and Fixflo. Furthermore, a number of partners from other VC firms investing personally, and NEDs and former CEOs from the likes of John Lewis, AXA and BBC, according to PV.
The new fund has made its first three investments, co-investing with Hoxton Ventures into RePlan and Juno, while also investing in Passionfruit alongside Firstminute Capital, Playfair Capital, FJ Labs and scouts from Accel, Notion and Atomico.
PV makes much of its community-driven culture, with a network of founders, investors and others alongside the PV founders Will Martin and Will Brooks who put the fund together in 2014. It’s a sort of “institutional angel” that leverages an LP community and a wider investor and founder network. James Pringle, founder of Pringle Capital and co-host of the Riding Unicorns podcast, has recently joined PV.
Martin and Brooks say they have helped raise funding for more than 200 companies from seed to Series A, including Tractable, ManyPets, Marshmallow, OLIO, Pensionbee, Attest, Smart, Ably and Credit Kudos, among others.
“We are delighted to have closed our 2nd Angel Fund as we continue to invest and support some of the U.K.’s leading entrepreneurs as they scale. PV has always been about network and accessibility,” Will Brooks said in a statement.
Over a call, Pringle outlined for me how the fund works.
Starting Funding Club (SFC) is the funding services provider, and all investors are committed to the fund and Portfolio Ventures are discretionary fund managers deploying from a pot of capital put in by these investors.
This means PV is “like a mini VC, but with angels instead of LPs.”
“As an EIS fund the major beneficiaries are individuals. So our fund is fairly unique in that we only have individuals in our fund, and it’s made up of what we consider some of the best angels and operators founders in the U.K.,” Brooks told me.
“So we’ve put a real focus on quality. And that comes from ‘Will and Will’, who founded Portfolio Ventures starting out as an angel network, doing lots of deals over the years since 2014. They’ve been doing lots of deals with these very active angel investors. And now it’s in a fund structure so that we can get access to certain deals because some deals are very competitive and only really available to funds. So [our angel investors] benefit from going through a kind of fund model.”
He also added that this is the first fund over £5 million, which means that PV “can do ticket usually of about £250,000. So in most of the deals that we’re doing, we’re about third on the cap table.”
At a time of macroeconomic downturns, it looks like Portfolio Ventures’ second fund has arrived just in time to take advantage of the continuing innovation across the U.K.