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Downing Ventures EIS
Half-Yearly Report for the six months ended 31 March 2016
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Matt PenneycardHead of Downing Ventures
Investment Manager’s foreword
I will start this editorial the same way I did six months ago by thanking you for being part of this journey with us. Over the last six months at Downing Ventures, we have continued to build on solid foundations, growing the number of investors and the size of our portfolio of innovative and dynamic technology companies. We are continuing to invest our own money in each investee company so we are completely aligned with our investors.
Six months have passed since our last update and the Downing Ventures team have been nothing but busy. We invested in four new businesses – Baby2Body, Hackajob, My Recovery and Smart Matrix – growing our portfolio to 21 companies as of 31 March 2016. We also continued supporting our investee companies to grow. We did this through marketing workshop sessions, hiring support and legal and corporate governance advice.
A few weeks ago, I travelled to the US to network with key stakeholders from the American venture capital market and to visit interesting potential partners or acquirers. These regular trips fit into our exit strategy as we expect to trade our investments to large technology companies, mostly based on the other side of the Atlantic.
As highlighted in the last update, we can’t stress enough the fact that some investee companies from our portfolio are doing and will do better than others. The next few months will be very challenging for some of the companies who haven’t been able to sustain momentum or raise their next round of capital. This is absolutely expected in a very early stage fund like ours, where a relatively high failure rate is more likely to be carried. We also expect to start to see some failures before we potentially achieve any successful exits. At the other end of the spectrum we are also starting to see some early positive performance and we will continue to back these companies with follow on investment.
We are constantly finding and assessing new investment opportunities thanks to our numerous partners like the London Co-Investment Fund (LCIF), the Ministry of Defence and the many other seed stage funds and accelerators that we co-invest with.
We are looking forward to giving you more news on your portfolio in the next update to 30 September 2016.
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The Investments
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AdaptixAdaptix is developing a ‘Flat Panel X-ray Source’ to replace existing bulky and fragile tubes, similar in concept to the change in TV’s from vacuum tubes to LCD displays. The X-ray Detector has already ‘gone digital’ – Adaptix is doing the same for the source. Adaptix will sell these Flat Panels to large Original Equipment Manufacturers (OEMs) who will bundle them into solutions to sell to hospitals and dentists. The reason why several large OEMs are already engaged with Adaptix is that a solution based on this patented technology will allow low-cost, low-dose (safer), truly portable 3D imaging. Adaptix has already received funds from one large OEM and, following major technology advances, expects to be in market in 2017. Development has continued positively in Q1 2016 with St Peter’s Hospital in Chertsey agreeing to conduct a clinical trial with Adaptix in 2017.
Baby2BodyBaby2Body is a personalised guide for new and expecting mothers on fitness, nutrition, wellbeing and beauty. The company send daily emails and has just launched a mobile app with the addition of premium content, which will be sold on a subscription. In June 2016 they reached 297,000 subscribers to their email newsletter and will look to continue to grow these subscribes through 2016.
CasehubCasehub crowdsources claimants for class action lawsuits. In March 2016 they have had initial indications of interest from a litigation funder to finance their first case which is an important step towards proving that the model can be successful in the UK. The team is now focused on marketing for claimants for this and other cases.
DuelDuel is an automated marketing tool which allows brands and publishers to run photo competitions and polls to engage their audience, then moderate and rank the submissions they receive. Since December 2015, they have powered campaigns on social media, email and embedded within websites for brands including Star Wars, Twitter and the Yogscast (one of the largest YouTube channels in the UK). They were also chosen by Unilever to attend the Cannes innovation festival in June, representing Unilever’s Foundry programme and being selected as the startup of the week. Duel is just about to undertake a £10,000 pilot program with Macmillan Cancer support. The next stage for Duel is to convert these early customers to annual contracts for which agencies and brands will pay a monthly license fee to access the Duel software as well as take a percentage cut of interactive ad units automatically created using the platform.
EdPlaceEdPlace provides online tutoring resources for parents. The business is making progress, taking advantage of the growing demand from parents for teaching resources outside the classroom. Revenue in 2014/15 was at £400,000. EdPlace is currently considering joint venture opportunities, working with bigger partners who can provide them the distribution that would help to accelerate growth.
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HabuHabu creates innovative and elegant software for co-working and flexible workspaces around the world. Their platform enables hubs to manage their spaces more efficiently and increase bookings whilst providing a great experience for both the hub and their users. Habu has a global focus and the company has been working closely with 20 hubs, including some in the Americas and South Africa, in beta trial to refine the product. Habu will begin charging these customers full rates in Q3 2016.
hackajobhackajob is an online marketplace that matches technical candidates (software engineers and developers) directly with employers, allowing users to apply by completing job-specific, technical challenges. The candidates are then ranked from best to worst and the top candidates are sent through to the employers for interview. The company has been working with clients including Argos, Capgemini and the BBC, and are generating revenues of on average £7,000-£10,000 per month since we invested in December 2015.
KinderlyNurseryBook rebranded to Kinderly at the end of 2015, in order to have a more extensive appeal to include childminders and international early years settings. Kinderly is an Ed. tech. app for early years practitioners and parents to keep track of learning and development milestones of their children. Kinderly has been focused in Q1-Q3 of 2016 on a partnership with PACEY, the largest association of childminder’s and early years practitioners in the UK, representing over 30,000 of the 65,000 childminders in the UK as a whole. An exclusive 3 year reselling agreement was signed with PACEY in Q2 and they are working together to launch a version of the app to the PACEY members in Q3 2016 with the aim of driving up revenue from this group in 2016 and 2017.
HappiourHappiour is a mobile app which gives users access to real-time offers from food and drink retailers in their local area. The company has spent 2015 growing its user base (over 85,000 downloads as at 23 June 2016) by trialing product giveaways and running offers with over 90 vendors across 500 locations in London. Happiour has been working with brands including Starbucks and Apostrophe, as well as Cadbury and ODEON. In Q4 of 2015 and Q1 of 2016 they added another 10 vendors to the platform, including their first paying clients, Crussh and Hummus Bros. In the next quarter they will look to convert all their vendors to being paying customers and raise a round of investment.
LoyaltyLionLoyaltyLion runs white-labelled loyalty programmes for e-commerce websites. The business has grown steadily by 10-15% monthly during 2015 but the team are now looking to sign-up higher value clients (websites generating revenues of between £5m to £100m annually), for whom LoyaltyLion can generate up to 600 times return on investment. As a result, revenue has remained steady in Q1 2016 rather than continuing to grow at the same rate. In March 2016, LoyaltyLion still generated £132,000 of annual recurring revenue. As they optimize the sales effort towards higher value clients they will continue to increase monthly recurring revenue.
Glisser
Glisser is a web app which makes PowerPoint presentations interactive, allowing users to access slides live, make comments, vote and download content at events.
The platform has been used by clients including Investec, Visa, Amex and Bloomberg, as well as three government departments and many universities. In 2015, Glisser generated around £100,000 in revenue, mainly from running presentations at events for large corporates. Glisser introduced a new pricing structure in February 2016 allowing individual users to experience the Glisser technology for as little as £10 p/m. Glisser was also selected as one of 12 companies to join the latest Microsoft London Accelerator programme. As a solution that’s designed to complement and enhance PowerPoint, the opportunity to work with Microsoft is very positive for the progression of the product and the business. Glisser has also raised another round of investment which Downing Ventures participated in, alongside angels and the London Co-Investment Fund.
Miappi
Miappi lets brands unify the best of their social media and user generated content.
The resulting social hub can be designed, curated and moderated for impactful displays on websites, apps and at live events. In the last 12 months Miappi has worked with a number of large companies and brands, including British Airways, Three Mobile and Sony Music. Revenues started from a low base in 2015 but, in Q4, combined booked and invoiced revenue was £91,000. In Q1 2016 revenue has continued to increase in line with projections and is steadily building as the client base expands.
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myrecoverymyrecovery is a mobile app that informs and empowers patients through every step of their orthopaedic treatment journey, customised to their procedure and hospital. The app improves efficiency across the healthcare value chain and delivers actionable insight through data analytics. myrecovery is currently working with two large private hospital flagships and delivering on key value and quality metrics (reducing length of stay and readmission rates). As at 27 June 2016 around 80 patients have successfully used myrecovery and they will look to replicate these results in larger patient cohorts in Q2 of 2016, before approaching the large healthcare payers. They plan to launch their first US hospital in 2017.
natternatter has unfortunately not been able to generate sufficient users to justify further investment and has therefore started the process of liquidating the company in an orderly fashion. The team at natter worked extremely hard to make a success out of the opportunity, but they faced ever increasing competition for “screen time”. As with many start-ups, natter was a big idea, combined with a talented and motivated team, that did not come to fruition, despite generating good early traction.
Smart MatrixSmart Matrix is a spin out from the renowned charity RAFT (The Restoration of Appearance and Function Trust), and is located at Mount Vernon Hospital in Northwood. The company is developing a new treatment method to improve the repair of skin severely damaged by burns or other wounds. Downing Ventures participated in a £3.8m fundraising round to support human trials. Following the initial patient trials, it was decided to undertake further trials without skin grafts, and the results had shown successful outcomes, suggesting grafting was not necessary. Additional pre-clinical studies have recently completed, and initial reports have been positive. It is, however, still too early to be conclusive on the outcomes. The business raised an additional £350,000 to finance the further trials. Undertaking additional trials will require a more substantial fund raising, which wille be commencing later in 2016.
StarStockStarStock is an online marketplace for wholesale drinks (both alcohol & soft drinks). Revenues have remained stable since our investment in September 2015 as the team rebuilds and rebrands the website, which will relaunch in Q2 2016.
TouchlightTouchlight continues to make good progress in developing technology to amplify DNA. They have now proved that the process is both affordable and scalable, and excellent at amplifying complex gene sequences as in those for gene therapy. The plan is evolving for the commercialisation of the platform. Touchlight was recognised towards the end of 2015 by the industry representative body for Life Sciences (The OBN Awards) as being the Best Emerging UK Biotech Company in the UK, a strong independent validation of the technology. In Q1 2016 they opened a production facility that enables the company to produce its novel dbDNA product at high-quality in order to support feasibility studies with Big Pharma partners in advance of licensing discussions.
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TwizooTwizoo surfaces the millions of opinions shared organically everyday on social media – like Twitter and Instagram. With a patent-pending machine learning methodology, Twizoo is the only technology in the world that can accurately identify and classify customer reviews left on social media – and they use this to automatically display relevant customer opinions pulled from social on any website, across all pages, and in real-time. Twizoo launched successfully in twelve US cities in twelve weeks and was featured on Bloomberg and London Live as a result. Twizoo has built an API to allow other companies to tap into their data which they are looking to license in 2016.
WeTrackWeTrack makes project management software for the event management industry. Their software is currently being used by a small number of clients, with the average client generating between £10,000-£15,000 annually. WeTrack has just integrated with Slack, the fast growing collaborative communication tool and signed two new clients in Q1 of 2016. WeTrack are targeting eight new clients this year to cement their position in the event management industry.
ZenstoresZenstores provides shipping software for ecommerce retailers. Zenstores grew 163% from 2015-2016 and is looking to continue this rapid growth rate into 2016. The company has made several hires in marketing and sales to drive acquisition efforts and have relocated to a bigger office in central Bristol to house their growing team. Zenstores is currently generating over £9,000 of monthly recurring revenue and growing at around 20% month-on-month. They have recently closed a further round of funding which should help them continue this growth.
3 Kinds of Ice3 Kinds of Ice is a discovery app for unique experiences in your city. User growth has been slow and active user numbers are still small. 3 Kinds of Ice are in strategic conversations with a publisher to see whether there is an opportunity to collaborate and kick start growth but if this is not possible then the company is going to be put in a challenging position with regards to continued funding.
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38+15+9+9+9+5+5+5+5Portfolio company Date of first investment Sector Current stage Location Page
Adaptix 01 Dec 2014 Life sciences Proof of concept European Space Agency, Harwell 5
Baby2Body 15 Jan 2016 Health tech. V11 user growth London 5
CaseHub 13 Aug 2015 Legal tech. V1 user growth London 5
Duel 28 Nov 2014 Enterprise SaaS2 V1 launch Bristol 5
EdPlace 02 Mar 2015 Ed. tech. Breaking even London 5
Glisser 19 Dec 2014 Enterprise SaaS Early revenues London 7
Habu 30 Sep 2015 Enterprise SaaS Beta testing MVP3 Bristol 6
Hackajob 16 Dec 2015 HR tech. Early revenues London 6
Happiour 26 Feb 2015 Enterprise SaaS V1 user growth London 6
Kinderly (Nursery Book) 01 Apr 2015 Ed. tech. V1 launch London and Bristol 6
LoyaltyLion 01 Oct 2014 Enterprise SaaS Early revenues London 6
Miappi 25 Sep 2014 Enterprise SaaS Early revenues London 8
My Recovery 16 Dec 2015 Health tech. V1 user growth London 9
Natter 24 Mar 2015 Social media V1 user growth Bath 9
Smart Matrix 08 Dec 2015 Life sciences Proof of concept London 9
StarStock 09 Sep 2015 E-commerce Early revenues London 9
Touchlight 03 Nov 2014 Life sciences Product development London 9
Twizoo 02 Apr 2015 Social data Early revenues London 10
WeTrack 01 Apr 2015 Enterprise SaaS Early revenues London 10
Zenstores 26 Mar 2015 Enterprise SaaS Early revenues Bristol 10
3 Kinds of Ice 11 Dec 2014 Social media V1 user growth London 10
Enterprise SaaS
Social media
E-commerce
Education technology (Ed. tech.)
Social data
Legal technology (Legal tech.)
1 V1: Version 1 2 SaaS: Software-as-a-Service 3 MVP: Minimum Viable Product
The 21 companies listed in the table below formed our portfolio at 31 March 2016.
Health technology (Health tech.)
Human Ressources technology (HR tech.)
Life sciences
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Matt PenneycardMatt is an experienced venture capitalist and heads Downing Ventures. After graduating from Durham University with a degree in Law, Matt started his career in venture capital as one of the early hires at Octopus Investments in 2002. After four years with Octopus and two years at Hermes Private Equity, Matt moved to the US in 2009 and co-founded DTI Capital, a technology focused VC investment firm based out of New York. Matt has been an active angel investor in the UK and US early-stage technology sectors.
The Ventures Investment Team
Our 5-strong Downing Ventures team has over 65 years’ of venture capital experience, both in the UK and the US. They assess on average 40 investment opportunities per month, and after rigorous due diligence and Downing Investment Committee’s approval, they invest in companies and management teams with promising products and strategies.
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Chris AllnerChris is a Partner of Downing LLP and heads up the investment team. He has 30 years’ of venture capital and private equity experience, most recently as head of private equity at Octopus Investments. Chris has transacted over 50 investments and has sat on the boards of a number of unquoted and quoted portfolio companies across a variety of commercial sectors.
Francesca WarnerFrancesca joined Downing in June 2015 as an Associate in the Downing Ventures team. Before joining Downing, she worked for three years in creative advertising at AMV BBDO on some of the UK’s biggest brands including BT. She graduated from Cambridge with a first class degree in 2012.
Peter NaylorPeter is a corporate solicitor and joined Downing in 2014 following a decade in private practice with TLT LLP. He has experience in leading M&A transactions and equity investments across a range of sectors together with advising on corporate reorganisations and compliance issues. Peter supports the investment team in the structuring and execution of our investments.
Kostas ManolisKostas is a Partner of Downing LLP. He works across the investment team and is a member of the Ventures Investment Committee. He has more than 11 years’ private equity experience as investor, board director, portfolio manager, advisor and business angel. Kostas holds a degree in Biochemistry, a PhD in Molecular Genetics and is a chartered accountant with ICAEW.
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Claiming income tax reliefOnce you have received your EIS3 certificates, you should enter the amount invested on your tax return for the year you are entitled to claim the income tax relief. If you have already submitted your tax return, then the claim section of the EIS3 certificate should be completed and sent to your tax office.
Please note that you will receive one EIS3 certificate per investment per EIS Company (i.e. you do not receive one certificate for your entire investment through the Service), and these are likely to arrive separately. If a follow on investment is made in an EIS company, you will receive a further EIS3 certificate.
If your shares were issued in the current tax year and you pay tax under PAYE, you can apply to claim relief for that year now.
Fill in the claim certificate on page 3 of the EIS3, then tear off and send that page to your HMRC office.
Remember that if you are sent a tax return after the end of the year, you will also have to enter details of the claim on that return.
If you want to claim relief for a previous tax year for which you either did not receive a tax return, or you received a return and you have already sent it in, fill in the claim certificate on page 3 of the EIS3, then tear off and send that page to your HMRC office. If the claim is made in time it will be treated as amending the tax return.
Please keep your EIS3 certificates safe as it can take time to source replacements from HMRC.
Claiming capital gains tax deferral reliefIf your chargeable gain accrues in the current tax year and the shares were issued either in the current tax year, or in a previous year, fill in the EIS 3 Certificate and send it with your tax return to your HMRC office after the end of the tax year.
If your chargeable gain accrued in a previous tax year, fill in the EIS3 certificate and send it to your HMRC office with your tax return if not already submitted.
In both circumstances, you will need to enter the chargeable gain(s) details on the appropriate capital gains summary page.
For further details on how to claim your tax relief, please contact HMRC directly on 0300 200 3300.
Guide to claiming EIS income tax relief
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Important noticeThis document has been prepared for investors and their advisers by Downing LLP (“Downing”), Ergon House, Horseferry Road, London SW1P 2AL. It is for information only and does not constitute an offer or invitation to apply for shares in the Service and no reliance should be placed on it. Any subscription to the Service should be made solely on the basis of the memorandum relating to the Service and investors should note that their investments may be illiquid, high risk and are long term in nature. Past performance is not a guide to future performance.
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About Downing
Downing is owned by its partners, has over 85 staff, and its main office is in Westminster, London. We have specialised in tax efficient investments for over 20 years and have raised in excess of £1.7 billion from over 35,000 UK investors.
We are experienced in providing equity finance to early-stage businesses that qualify for attractive tax reliefs, having invested over £300 million in the sector since 2010.
Structure of the Service
The Service is a discretionary managed portfolio of EIS Companies, where each investor will own, through a nominee, a beneficial holding in each EIS Company. The Service is not an unregulated collective investment scheme.
The Financial Services Compensation Scheme, which provides compensation to eligible investors in the event that an FCA authorised and regulated party (Downing, a custodian or retail bank) fails to meet its liabilities, will apply to the Service.
Ergon HouseHorseferry RoadLondon SW1P 2AL
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Downing LLP is authorised and regulated by the Financial Conduct Authority
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