LOCATED IN BIRMINGHAM, NOVO WORKS WITH
DYNAMIC & DISRUPTIVE VENTURES THROUGH
THE PROVISION OF FINANCE & EXPERTISE

WE BRING TOGETHER PRIVATE & INSTITUTIONAL
INVESTORS ENABLING US TO SUPPORT FROM
SEED, THROUGH TO SERIES A AND BEYOND

Are you an investor seeking EIS or SEIS investment opportunities?

Are you a company that is seeking to
raise growth capital?

ABOUT US
NOVO CAPITAL IS A VENTURE FINANCE CONSULTANCY THAT SPECIALISES IN SUPPORTING EARLY STAGE COMPANIES THROUGH THEIR DEVELOPMENT AND GROWTH, WITH PARTICULAR EMPHASIS ON RAISING NEW CAPITAL. WE POSITION OURSELVES BETWEEN EACH VENTURE AND OUR INVESTOR COMMUNITY TO MAINTAIN A COLLABORATIVE AND TRANSPARENT WORKING RELATIONSHIP THAT ENSURES WE HELP DELIVER OPTIMAL RESULTS FOR BOTH SIDES
Overview
We work across the UK, looking to discover and develop exciting businesses and investment opportunities which meet both our criteria and the requirements of our investor community, whereby we help to fuel the venture with both capital and expertise to drive development and growth.

Our collaborative and open framework is designed to keep things simple and flexible. Businesses and investment opportunities work with us to help them get off the ground, grow and expand – capital may be the primary requirement but we look to add value where needed. Investors look to us to provide a transparent approach to tax efficient investing which offers access to a diverse range of off-market EIS and SEIS opportunities, whilst managing the tax process, ensuring legals are completed professionally and consistent investment communication is provided.

Due to the diversity of businesses we work with, our investment criteria is not a rigid formula to be adhered to but an investment blueprint which guides the investment sourcing strategy – as it is investors who make the investment decisions, we try to not limit the breadth of opportunities whilst still ensuring quality and key principles are not compromised.

Key elements within our investment blueprint include:

  • Straightforward, proven business model within an established sector
  • Strong management team with successful track record
  • Demonstrable competitive advantage/USP
  • Clear path to exit within 3-5 years
  • Profitable or profitable within 12 months
  • Growth business with either a strong asset base (eg: property) or an attractive sales/order pipeline (relaxed for SEIS investments)

 

Our mission
We want to make EIS and SEIS investing simple and effective. The industry has been around for a long time but that doesn’t mean it has been perfected. Our focus is on helping solid business opportunities get the capital and support they need to reach their potential (both as a business and in terms of maximising investor return), whilst giving experienced investors access to these opportunities, the tools to make informed investment decisions and the confidence that they are looked after once they decide to go ahead.

Although the below list is not nearly exhaustive, these points offer a quick overview into the key areas Novo Capital supports when working with our investor community.

 

  • Access to off-market investment opportunities
  • Legal, tax and administrative support
  • Transparency at all times (eg: even though we never charge fees to the investor, we tell you exactly what we charge to the company)
  • Clear company information – each company completes a standard due diligence pack and has to provide all supplementary material/evidence
  • Independent company and director checks (reports made available)
  • Comprehensive Advance Assurance completed for each company by us
  • Specialist lawyers preparing the legal documents to ensure key investor interests are delivered in an EIS compliant manner
  • Quarterly reporting and monthly CEO update against fixed template (agreed with company in legals)
  • Clear, jargon free insights

 

 
INVESTORS
WE GIVE EXPERIENCED INVESTORS ACCESS TO A DIVERSE RANGE OF TAX EFFICIENT OPPORTUNITIES; PROVIDING THE REQUISITE INSIGHTS TO MAKE INFORMED DECISIONS AGAINST PERSONAL OBJECTIVES, WHILST OFFERING AN EFFECTIVE FRAMEWORK TO ENSURE EACH INVESTORS’ TAX, LEGAL AND ADMINISTRATIVE INTERESTS ARE PROTECTED
Our approach
We’re not an investment manager, an angel network or a crowdfunding platform; we’re different. Novo works with existing companies and new opportunities which meet key criteria and that we feel our investor community will find attractive; adding value to their proposition where we can, then overseeing the completion of our preliminary due diligence framework before opening up to investors.

We are sector agnostic however each opportunity must fit within our investment blueprint and each deal needs to be independently evaluated by every investor based on its merits and their personal objectives. Our role is not to make or advise on investment decisions but to provide access to off-market EIS/SEIS opportunities, help navigate the due diligence process to enable informed decision making, and critically, manage the EIS compliant completion process and post investment relations (including working with each company to provide fast turnaround of EIS/SEIS certificates and delivering fluid communications and reporting).

 

Investment areas
Our primary model is to work with uncomplicated businesses and investment opportunities within well established but growing sectors that can demonstrate a clear path to increasing revenues or building market share. Good businesses do not need to necessarily reinvent the wheel and we believe that by looking at straightforward business models (assuming clear market demand and/or competitive advantage) both us and our investor community can add greater value, be it from key areas such as sales and marketing or through using our network to open new doors for the company. Additionally, understanding the exit paths for investors is a fundamental element of the due diligence process and can be clearly analysed when reviewing the track record within an established sector.

In order to remain flexible and to deliver the types of opportunities our investment community require, we break our sourcing strategy into 3 components: existing, new and bespoke.

Existing
As the name suggests, this is where we support existing companies that meet our criteria who are looking to raise growth capital to expand or scale their business, leading to an eventual trade sale or MBO. Management and/or prior investors will usually own the majority of the business.

New
Investment opportunities which launch on completion of the deal and/or raising of required capital. Here, investments often will be centred around acquiring key assets and placing an experienced management team which allows the trade to commence quickly with the aid of targeted marketing and PR. An example might be a celebrated chef looking to launch a new restaurant which requires substantial capital investment to acquire and fit out the premises before the trade can begin. Investors will traditionally own the majority of shares in issue depending on management contribution.

Bespoke
Investors (individuals or like-minded collectives) may have a clear idea of the type of opportunity they want or simply not like the range of EIS/SEIS investments currently available. If so, contact us directly to discuss your requirements and we may be able to source the market for what you’re looking for. If we get it wrong, you don’t invest!

 

Process
We’re here to support investors when reviewing each opportunity and to work as a conduit between our investor community and each business to facilitate the due diligence process and, should an investor opt to go ahead, ensure that the appropriate steps are taken from a tax, legal and administrative perspective.

 

At a very basic level, here are some of the fundamental steps for an investor:

  • Review the investment pack for each investment
  • Tell us what else you need and/or the questions you have for management – we also facilitate live management video conferences and seminars
  • If happy, provide an indication of how much you would like to invest – subject to a review of the final completion documents (investors are never bound to this indication, we just ask that you’re committed before coming back to us)
  • Once we’ve got commitments for the target raise (or within the investment range) we will provide notification of the completion timeline
  • If you’re still happy to move forward, we connect you with the solicitors to go through the paperwork
  • Once agreed by each party the deal can complete with monies transferred and shares issued in accordance with EIS rules
  • Novo subsequently submits the EIS1 or SEIS1 form once qualifying criteria has been met and completes all EIS3/SEIS3 forms on behalf of investors as they are received from HMRC
  • We are then your conduit for all investment communication and reporting alongside any questions you have for the invested company

 

Why use Novo?
Investment choice
Every investor evaluates each deal on its own merits, based on both the investment pack and their own due diligence, and against their own personal objectives. Thus enabling investors to build a bespoke portfolio.

Transparency at all times
You see what we see. Investors are also made aware of all fees even though none are charged to them – if we are charging a company fees that you are investing into we feel you should know what they are!

Confidence in execution
Every deal receives full Advance Assurance from HMRC to ensure nothing is left to chance. Specialist solicitors work with each company and each investor to ensure key interests are protected and EIS compliance is adhered to. Novo fully manages the tax certificate process from the initial EIS1/SEIS1 form submission to the final completion of EIS3/SEIS3s on behalf of investors.

Standardised initial due diligence
We expect all investors to do their own DD however, as part of the investment pack, we provide a detailed core template which every business must complete and give access to a range of supplementary material including company and director reports. Novo subsequently facilitates further due diligence to ensure investors have all the requisite information they require in order to make an informed investment decision.

Value
Investors never pay us any fees as these are charged to the company. This means that tax relief is available on the total investment as all capital is fully invested. Additionally, our model allows for a highly competitive cost structure typically consisting of an upfront fee (circa 3-5%) and a small annual administration fee (circa 0.2-0.5%) which means capital is being put to work in the company rather than being eaten away by costs.

Your investment, your voice
Our experienced and sophisticated investor community naturally has significant commercial expertise, insights and connections which can prove invaluable to the businesses and ventures we work with. As such, we encourage investors to actively engage with management to help drive development and growth – to ensure investors can (should they wish) have real input we typically keep investments to no more than 20 new investors and implement a range of tools such as interactive CEO video conferences alongside company and investor days to enhance collaboration.

 

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venture clients & opportunities in the region


 
COMPANIES
NOVO IS TAKEN FROM THE LATIN EXPRESSION ‘FROM THE BEGINNING’ AND SYMBOLISES OUR COMMITMENT TO SUPPORTING EARLY STAGE ENTERPRISE IN THE UK, WORKING TO HELP PROVIDE THE CAPITAL, EXPERTISE AND CONNECTIONS THAT CAN ENABLE BUSINESSES WITH GREAT POTENTIAL TO ACHIEVE THEIR OBJECTIVES WHILST DELIVERING INVESTOR RETURN
Supporting your business
Our function as a venture finance consultant is to work alongside early stage businesses and investment opportunities as they look to either grow or expand their operations, or in order to launch the venture itself. We are sector agnostic to enable us to support a wide breadth of venture opportunities in the UK, however each must fit within our investment blueprint to ensure there is continuity for our investor community and investment quality is not compromised.

There are many avenues in the UK today for young businesses to receive some or all of the finance they need to help develop or grow their business and as such, equity funding from private investors (under EIS or SEIS) may not be the optimal path. Where it is, businesses then need to ensure they choose the correct channel upon which to raise equity funding – crowdfunding for instance can seem appealing but this can come with implications for the business when raising follow-on funding alongside the administrative burden of dealing with hundreds if not thousands of small investors.

At Novo, we work to support and position the business ahead of funding, then introduce the right investors who can not only bring in the capital required but can also add value to the business through their experience and connections. Finally, we provide an effective investor relations function for your business to enable you to focus on growing the company whilst letting us look after investors on your behalf.

 

Who we work with
As previously mentioned, we try not to apply rigid and constrictive criteria against the ventures we work with as we want to see great businesses across the spectrum, and importantly, not miss out on exciting opportunities simply because of our own restrictions.

The bullet points below will help provide a guide as to what we’re looking for, however please don’t hesitate to contact us directly to discuss your venture if you don’t think it quite fits within these – even if we can’t help, we my be able to point you in the right direction!

 

  • Straightforward, proven business model within an established sector – if your business is highly technical or IP heavy then we may not be the right partner for you as such businesses often benefit from deep sector specific expertise
  • Strong management team with successful track record – people run businesses and we need to know that every business we work with is led by individuals who are not just good at running the business it is today, but can use the capital injection to build it into something stronger tomorrow.
  • Clear path to exit within 3-5 years – an investor is looking for a financial return which is created from an exit not growth and therefore understanding the paths available is a primary factor when evaluating a proposition

 

  • Demonstrable competitive advantage/USP – to attract investment there must of course be sufficient market opportunity to justify whilst management must also be able to show how the capital will be used to take advantage of this
  • Profitable or profitable within 12 months – we look at businesses that generate cash and can do so quickly; we’re likely not the right partner if value is attributed to user growth
  • Growth business with either a strong asset base (eg: property) or attractive sales/order pipeline (relaxed for SEIS investments) – we favour businesses that can grow quickly, using the capital injection to best effect

 

How we work
Initial consultation
The first step is to understand the business and establish whether Novo Capital is the appropriate partner/consultant. Once on-board, we then establish the key areas of the business or investment proposition where work needs to be done to attract investment – this can involve bringing in strategic partners such as accountants or digital marketers or providing guidance on building and perfecting your investment pitch.

Company and director due diligence
Novo Capital will provide a preliminary information template which outlines the core detail required to create the investment pack for your business which can be made available to investors.

Advance Assurance application
The process for submitting an Advance Assurance application is technical and needs to be properly completed to avoid problems post investment. We work with each company to submit this and manage the full process with HMRC.

Investor community research
Investors will conduct independent research so management will have to be aware that they need to allocate sufficient time to handle investor questions diligently, and will be required to meet investors face to face and pitch during investment seminars and other Novo engagements.

Investment completion process
Once sufficient investor commitments have been received, Novo will work on your behalf with the specialist solicitors who can draw up the paperwork and transact the investment.

Ongoing oversight and investor communication
Once an investment is made, the job is not done – this is simply the start of the journey. Novo will work with you to build an investor communication strategy which we will help to deliver, whilst also enabling, where available, the experience and expertise of your investors to be accessible to the business.

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& application pack on working with Novo Ventures


 
TAX RELIEF
EIS RELIEF AND SEIS RELIEF ARE TWO OF THE PRIMARY TAX INCENTIVES AFFORDED BY GOVERNMENT TO STIMULATE PRIVATE SECTOR INVESTMENT INTO EARLY STAGE COMPANIES. THESE GENEROUS TAX ADVANTAGES, IF USED CORRECTLY, HAVE THE POTENTIAL TO BOTH ENHANCE INVESTMENT RETURNS AND REDUCE CAPITAL RISK
Background
The Enterprise Investment Scheme was introduced by government in 1993-94, making it one of the longest standing schemes in existence and illustrating the overwhelmingly positive impact the scheme has on our economy. To date, over £14bn of EIS capital has been injected into qualifying companies in the UK and this number has been rapidly growing over the past few years whereby we are now raising in the region of £1.5-2bn per annum, stimulated by key drivers including the mounting restrictions to pension contributions and the subsequent need to find alternative means for funding retirement, and simply the wealth of strong early stage commercial opportunities in the UK right now.

Aside from a list of excluded activities/trades, the Enterprise Investment Scheme is sector agnostic and investors are able to access EIS and SEIS investments through a variety of different channels each with their own pros and cons, these include: single company investment, EIS/SEIS funds and qualifying structured/asset backed investments.

The relief itself becomes available once an investor has acquired the shares and qualifying criteria has been met (namely that the business has been trading for at least 4 months) however there are strict HMRC (SCEC team) processes which must be adhered to involving the submission of key forms and supplementary material – this should only be done by an experienced professional to ensure errors are not made and relief is not unnecessarily withdrawn.

 

Enterprise Investment Scheme (EIS)
Income tax relief
There is no minimum investment through EIS in any one company in any one tax year. Tax relief of 30% can be claimed on investments (up to £1,000,000 in one tax year) giving a maximum tax reduction in any one year of £300,000, provided you have sufficient Income Tax liability to cover it.

EIS allowances are allocated individually; therefore a married couple could invest up to £2 million each tax year and be eligible for Income tax relief. The shares must be held for at least three years from the date of issue or the tax relief will be withdrawn. People connected with the company are not eligible for Income Tax Relief on their shares.

Capital gains tax (CGT) exemption 
Any gain is CGT free if the shares are held for at least three years and the income tax relief was claimed on them. Shares can be held for much longer and therefore potentially enable the investor to be accrue their CGT exemption over a long period of time which can be a great attraction.

Loss relief
If shares are disposed of at a loss, the investor can elect that the amount of the loss, less Income Tax relief given, can be set against income of the year in which they were disposed or, on income of the previous year instead of being set of against any capital gains.

Capital gains tax (CGT) deferral
Payment of CGT can be deferred when the gain is invested in shares of an EIS qualifying company. The gain can be made from the disposal of any kind of asset but the Investment must be made one year before or three years after the gain arose – connection to company does not matter. Unconnected investors are eligible for relief from both Income tax and CGT referral relief.

Inheritance tax relief
After two years from the investment date, EIS qualifying companies generally fall outside the estate for IHT purposes under Business Property Relief (BPR) thus providing an effective estate planning tool on top of the core tax advantages for EIS.

 

Seed EIS (SEIS)
Income tax relief
Tax relief of 50% can be claimed on investments (up to £100,000 in one tax year) giving a maximum tax reduction in any one year of £50,000 under SEIS alone, provided you have sufficient Income Tax liability to cover it.

SEIS allowances are allocated individually. The shares must be held for at least three years from the date of issue or the tax relief will be withdrawn. People connected with the company are not eligible for Income Tax Relief on their shares.

Capital gains tax exemption (SEIS gains)
Any gain is CGT free if the shares are held for at least three years and the income tax relief was claimed on them. Shares can be held for much longer and therefore potentially enable the investor to be accrue their CGT exemption over a long period of time which can be a great attraction.

Loss relief
If shares are disposed of at a loss, the investor can elect that the amount of the loss, less Income Tax relief given, can be set against income of the year in which they were disposed or, on income of the previous year instead of being set of against any capital gains.

Capital gains tax (CGT) exemption (existing gains)
Payment of CGT can be cut in half if the full gain is invested in shares of an SEIS qualifying company. The gain can be made from the disposal of any kind of asset but the investment must be made one year before or three years after the gain arose.

Inheritance tax relief
After two years from the investment date, EIS qualifying companies generally fall outside the estate for IHT purposes under Business Property Relief (BPR) thus providing an effective estate planning tool on top of the core tax advantages for SEIS.

 

Excluded trades
  • Dealing in land, in commodities or futures in shares, securities or other financial instruments
  • Dealing in goods, other than in an ordinary trade of retail or wholesale distribution
  • Financial activities such as banking, insurance, money-lending, debt-factoring, hire-purchase financing or any other financial activities
  • Leasing or letting assets on hire, except in the case of certain ship-chartering activities
  • Receiving royalties or licence fees (though if these arise from the exploitation of an intangible asset which the company itself has created, that is not an excluded activity)
  • Providing legal or accountancy services
  • Property development
  • Farming or market gardening
  • Holding, managing or occupying woodlands, any other forestry activities or timber production
  • Shipbuilding
  • Coal production
  • Steel production
  • Operating or managing hotels or comparable establishments or managing property used as an hotel or comparable establishment
  • Operating or managing nursing homes or residential care homes, or managing property used as a nursing Home or residential care home
  • All energy generation activities (from 6 April 2016)
  • Providing services to another person where that person’s trade consists, to a substantial extent, of excluded activities, and the person controlling that trade also controls the company providing the services

A company can carry on some excluded activities, but these must not be ‘substantial’ part of the company’s trade.

 

Key points to consider
  • Liquidity – aside from the three year holding rule, there is no secondary market for EIS/SEIS shares and therefore it is likely investors will have to wait for a sale or listing of the company to realise a liquid return from their shares. Alternative exit routes such as an MBO may also be available depending on the individual company.
  • Are you connected with the company? Individuals looking to subscribe for EIS or SEIS qualifying shares cannot be connected with the company anytime 2 years before and 3 years after the issue of EIS shares else relief will be withdrawn. Please click here for additional information on what HMRC classifies as being connected.
  • Claiming your relief – sadly the work is not done once shares are issued as a strict administrative process must be adhered to when dealing with the Small Companies Enterprise Centre at HMRC who run the EIS scheme. All steps, including the Advance Assurance application, should be administered by an experienced professional.
  • Steer clear of preferences – all shares must be full risk, ordinary shares and they must also be fully paid up in cash before issued (one of the most common reasons for individuals losing tax relief is by receiving shares before they have actually transferred funds).
  • Capital still risk – perhaps stating the obvious but however generous the EIS and SEIS tax reliefs are, should your investment fail you will still lose capital. Sadly there will always be investments or schemes in the market which wrongly put the tax benefits ahead of the investment merits, so it is always good to remember that you can’t make money from just the tax and a bad investment is still a bad investment regardless of the tax benefits!

 

 
ARTICLES
WE LOOK TO PROVIDE A RANGE OF INSIGHTS AND USEFUL INFORMATION TO BOTH OUR INVESTMENT COMMUNITY ALONGISDE ENTREPRENEURS AND COMPANIES SEEKING VENTURE FINANCE OR DETAILS ON EIS AND SEIS MORE GENERALLY. THE OPINIONS WITHIN THE ARTICLES POSTED REFLECT THOSE OF NOVO CAPITAL AND SHOULD NOT BE USED AS INVESTMENT GUIDANCE

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CONTACT
Birmingham office (HQ)

3 Brindleyplace
Birmingham
B1 2JB

Email: info@novocap.co.uk

London office

100 St Paul’s Churchyard
London
EC4M 8BU
Tel: +44(0) 20 3371 1250

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