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VGC Partners

VGC Partners Development Fund VII

23 Feb 2023 / Tax enhanced research

The VGC Partners Development Fund VII is an Alternative Investment Fund, which will provide a portfolio of early-stage technology investments. The target return is 3x invested capital in 4-7 years. Returns will be focused on capital gains, and investors are unlikely to receive any dividends. This is the second of an annual series of EIS funds.

Why invest

Positives

  • Strategy: Investing in a range of consumer-focused technology companies supported by corporate partners.

Issues

  • Newer fund: While VGC has managed institutional and SEIS funds in this area, EIS is still relatively small.

 

The investment manager

Positives

  • Team: An experienced and growing team that has been managing venture capital investments for a decade.

Issues

  • Track record: Both the (S)EIS and institutional fund track records are promising, but there are few exits to date.

 

Nuts & bolts

  • Duration: The fund has a limited lifespan, with a single closing date of 30 April 2023, with deployment in the 2023/24 tax year.
  • Diversification: The manager aims to provide 5-8 investments for each investor.
  • Valuation: A mixture of last transaction and writedown, if appropriate.

 

Fees

  • Fees: Some direct fees, with most charged to investee companies.
  • Performance fee: Charged at 20% on aggregate returns over £1.20 for each £1 invested.

 

Risks

  • Target returns: The target return of 3x capital, after fees, suggests a high-risk investment strategy.
  • Companies: Supplying risk capital to early-stage technology companies. 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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