What type of vehicle are you setting up and who are the investors that you hope will be interested in using it?
Fuel.Ventures Fund 1 has a structure which is 100% EIS, this makes it an effective way for UK onshore investors to gain access to early stage start-ups in a tax efficient manner. The EIS structure allows UK onshore investors to take advantage of 30% income tax relief and 100% capital gains tax relief, although some restrictions do apply.
We expect this to appeal to a wide array of investors looking to diversify their portfolio via exposure to early stage e-commerce start-ups. Our initial investors will predominantly be high net worth individuals, ultra-net worth individuals and family offices.
What size of fund are you targeting (AUM)?
We are initially targeting up to £30m for Fuel Ventures. However, given the open ended nature of the fund the sky is very much the limit. Our initial focus will be on delivering results for our investors to establish a formal track record, beyond Mark Pearson’s personal track record.
Mark began his career in e-commerce in 2006 starting a business, Markco Media, which he sold in 2014 for £55m. To date Mark has invested in 10 e-commerce businesses, achieving an average 70X return on initial investment significantly outperforming venture capital in Europe. In October 2010 Mark became an early investor in Ve interactive, an e-commerce SAAS provider now valued at £1.2bn, generating a 75X return on investment.
His business acumen has won him plaudits, awards and attention from around the globe. From Growing Business Awards; Young Entrepreneur of the Year, through to Ernst and Young; Entrepreneur of the Year, Mark’s ability and success has been well documented and substantially recognised by reputable individuals and organisations.
What are the timings around the launch of the fund, ie, when will it officially launch, when will it close, etc?
Fuel Ventures Fund 1 launched in April 2015. Early stage investors are able to take advantage of the current pipeline which has been built up over the past 12 months and is ready to be invested in immediately. The fund is open-ended so investors will always be able to allocate additional capital to the fund.
Now is the ideal time to be investing in the e-commerce sphere, B2C and B2B e-commerce sales have seen rapid growth since 2009. The amount of products and services sold via websites is growing substantially as a percentage of business turnover. This trend is particularly pronounced in the UK, the UK share of the entire European e-commerce market is almost one third.
How can investors access the fund?
Appropriately qualified investors can access the fund directly through Fuel Ventures. There is a minimum investment of £50k. We are also in discussions with a number of platforms who will potentially make the fund available to their investment audience.
How broad is the universe of companies you are targeting? Eg, are you using any particular definition of ‘tech’, ‘ecommerce’ or ‘Europe’?
Our sector focus is the e-commerce ecosystem. We define that broadly to include any consumer facing business where there is a clear transaction/purchase and B2B companies that sell to ecommerce companies. We particularly like innovative shopping models, innovative product companies and software and services for e-commerce businesses.
The European mobile and ecommerce sectors are forecast to more than double in growth over the next three years, Fuel Ventures Fund 1 will capitalize on this growth by investing in the next generation of entrepreneurs who are driving this growth through innovation and execution.
What are examples of types of investments that will be made by the fund?
Fuel.Ventures will target super-early seed, seed and A-stage investments in the rapidly growing European e-commerce sector. European mobile commerce sales are expected to grow from €17.3bn to €113.3bn between 2013 and 2018.
Fuel.Ventures will invest in a variety of UK based high-growth, sector-agnostic technology based transactional businesses from incubation and inception (super-early seed), to seed and post launch (late seed), as well as series A businesses showing exceptional signs of growth. These will typically be firms looking for investment ranging from £50,000 to £1,000,000.
We will be specifically investing in disruptive technology companies who have huge growth potential. We like companies and teams with big vision and ambition. Average or good is not acceptable for us.
Firms that are currently in our investment pipeline include Garden Tags, a mobile-first gardening ecommerce platform, Paddle, creator of software development tools and checkout services and Mcado, an on-demand tradesmen service.
What is your exit strategy for investments made?
We are excited in opportunities where we can see a clear path from early development, through to commercialisation, rapid growth and then an attractive exit. In terms of the exits themselves, we will take an investment by investment approach, as there are clearly a number of ways to realise value such as Series A and B rounds as well as trade sales or listings.
What is the time horizon that you are recommending for investors?
Due to EIS regulations, investors should expect to stay invested in the fund for at least three years to receive the full tax benefits, with exits planned between two and five years. Although, we expect investors who join us on the journey of EIS Fund 1, will also join us in follow up funds as we provide future successful exits and returns.
What is your own stake in the new fund?
We will be investing 10% of the total AUM, under the same terms, alongside other investors in the fund. This is in line with Mark’s investment principles and beliefs in the fund. Mark is already a prolific seed and early-stage investor whose personal portfolio has outperformed many established funds over the past decade.