A Look Beyond the Numbers
For sophisticated investors, the Seed Enterprise Investment Scheme (SEIS) offers an unparalleled combination of generous tax reliefs and the potential for explosive growth. But in a landscape of private, early-stage companies, how do you separate the high-flyers from the hopefuls?
Unlike VCTs or public equities, you can’t simply look up a 3-year performance table for SEIS funds. The true value of these investments is typically realised over five to ten years, upon a successful sale or IPO. So, how can an investor gauge success in the shorter term? By looking for the clues: industry recognition and, most importantly, a track record of real-world exits.
The Challenge of Measuring Early-Stage Success
Before we dive in, it’s crucial to understand why SEIS performance is so opaque. These funds invest in fledgling businesses whose valuations are not updated daily. A company’s worth is often only formally reassessed during new funding rounds or upon an exit. This means a simple three-year performance metric doesn’t capture the full picture and can even be misleading.
Instead, savvy investors must act like detectives, piecing together evidence to identify managers who consistently make smart bets.
A Mark of Quality: Following the Awards 🏆
Industry awards are a strong indicator of a fund manager’s quality, expertise, and reputation among their peers. Events like the EISA (EIS Association) Awards and the Growth Investor Awards rigorously assess managers, and consistent winners are often at the top of their game.
Based on recent accolades, a few names repeatedly appear in the winner’s circle:
- Jenson Funding Partners: A veteran in the SEIS space, Jenson is highly respected for its long track record and deep experience. Their recent win as “Best SEIS Investment Manager” at the 2024 EISA Awards highlights their continued excellence.
- SFC Capital: As one of the UK’s most active seed-stage investors, SFC Capital has built a vast and diverse portfolio. Their frequent award wins are a testament to their ability to source and secure high-quality deals at scale.
- Fuel Ventures: With a sharp focus on tech and software startups, Fuel Ventures has carved out a niche as a top-tier manager for investors seeking exposure to this high-growth sector. Their recognition as a “Best SEIS Investment Manager” underscores their success in this competitive space.
The Ultimate Proof: Successful Exits 🚀
While awards are a great signpost, the ultimate validation of any venture capital strategy is a successful exit. This is where potential on paper turns into tangible returns in an investor’s pocket.
Some managers are more transparent than others about their wins, and these figures provide invaluable insight:
- Jenson Funding Partners has successfully exited 12 companies from its SEIS funds, delivering an impressive average exit multiple of 4.69x for their investors.
- SFC Capital recently celebrated a partial exit from payment platform Ryft, which generated a 6.2x return for the SEIS investors who backed the company.
These examples are powerful proof points, demonstrating a manager’s ability to not only pick winners but also guide them toward a profitable exit.
Your Due Diligence Checklist ✅
When evaluating an SEIS opportunity, past performance is just one piece of the puzzle. Use this checklist to ensure you’re looking at the complete picture:
- Manager’s Track Record: Do they have a long and proven history of investing, nurturing, and exiting early-stage companies?
- Investment Strategy: What is their sector focus? Does their approach to building a diversified portfolio align with your risk appetite?
- Quality of Deal Flow: How do they source their investment opportunities? A manager’s network and reputation are critical for accessing the most promising startups.
- Portfolio Support: Do they take an active role in helping their companies succeed? Look for managers who provide mentorship and strategic support, not just capital.
Ultimately, identifying the best SEIS funds requires looking beyond simple league tables. By focusing on industry accolades, a proven history of successful exits, and a robust due diligence process, you can position yourself to tap into the remarkable growth potential of the UK’s most innovative startups.