Worth Capital

How risky is investing in Seed EIS investments?
Feb 11, 2021

<strong>Matthew Cushen, co-founder at Worth Capital, and Andy Davidson, founder at Nova, explore the risk of investing in Seed EIS funds</strong> Many investors think investing in early stage, growth companies is a high risk investment strategy, particularly when compared with the public markets where many of the businesses listed on the London Stock Exchange have decades of trading histories. But as this pandemic has shown, just because a company is listed on a stock market or has been trading for a long-time, doesn’t make it low risk. So should private growth companies, many of which has used Seed EIS investment and the follow-on EIS investment be viewed in a different way? Well two specialist investment groups, Worth Capital and Nova, sometimes known as We Are Nova, believes investors need to think about how they view risk and effectively don’t immediately think Seed EIS equals high risk and large, listed companies equals low risk. <a href="https://smallbusiness.co.uk/how-risky-is-investing-in-seed-eis-investments-2552094/">Click here to read the full article.</a>

Matthew Cushen, co-founder at Worth Capital, and Andy Davidson, founder at Nova, explore the risk of investing in Seed EIS funds Many invest read more
Genius is evenly distributed, Opportunity is not (What Investment)
Oct 07, 2020

An investment manager’s record of inclusion and funding diversity is not just about whether they are doing the right thing for our society. Matthew Cushen of Worth Capital explains. <a href="https://www.whatinvestment.co.uk/genius-is-evenly-distributed-opportunity-is-not-2618638/?mc_cid=745ba9d03e&mc_eid=fb064c1cc2">Click here to read full article.</a>

An investment manager’s record of inclusion and funding diversity is not just about whether they are doing the right thing for our society. Matthew Cushen of read more
Post Pandemic Start-Up Valuations
Jul 17, 2020

By Matthew Cushen For early stage investing under the Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) in the UK, the timing of the onset of the pandemic added to the turmoil. March arrived – normally the busiest month for tax advantaged investing – and we were struck with something where none of us could anticipate the short or long-term impacts. Hence a reticence from investors to commit. Anecdotally we hear most funds were at 50% of the prior year levels. The Start-Up Series Fund invested just a little more than in 2019 – but well behind our growth trend. It’s only as we turn from June to July that investor activity seems to be picking up. With a common question – what can we expect to happen to valuations? And by implication, are investors better off waiting before committing to seed investments? SCENE SETTER 1: VALUING A START-UP We have a simple way of looking at start-up valuations. It is only vaguely related to the science of valuing an established business – there is not enough data to make objective calculations. It’s more a way of having an objective conversation. We talk about Evidence x Momentum x Potential = Valuation. It is a qualitative framework not a quantitative equation, but one maths principle is deliberate. It has multiplication signs, not plus signs. If any of these elements are missing the result should be zero. Evidence: the proof points the start-up has already gathered – early revenue, or even some insight or research. Momentum: an entrepreneur capable of executing, a clear plan for the next steps and delivering on previous promises. Potential: the scope and scale of market, the competitive dynamics, the strength of innovation and the probability, speed & multiples available for exits. Entrepreneur column by Matthew Cushen: The Valuation equation SCENE SETTER 2: THE PRE-CORONA CONTEXT Many seed investors have seen valuations getting ‘frothy’, or in some cases egregious, for a while. Overweighting the value of potential, based purely on a great idea with very little in the way of evidence or momentum. This seems to be particularly true of crowdfunding, probably as there is not a proper objective conversation between entrepreneur and investor. We have always been conscious of not getting sucked into sectors where valuations have got out of step with potential and ensuring that the entrepreneur is clear on the value we add and therefore is motivated to keep the valuation fair for both parties. So, to the question: what can we expect to happen to valuations? In our view, there are three forces in play: impact on individual sectors & propositions – from lockdown and then the more sustained changes in behaviours that are starting to emerge macro-economic spending & investment supply of & demand for funding. 1. IMPACT ON INDIVIDUAL SECTORS & PROPOSITIONS When the pandemic broke, we moved quickly to help our portfolio businesses understand the impact and how they had to change their priorities. And frankly, for the first few weeks we struggled to comprehend the full impact. Over the last couple of months this has become clearer and we use this simple matrix to contrast the short-term impact of lockdown from the long-term impact of systemic changes to behaviours. I’ve included 5 examples from our portfolio: Weekly10: subscription software for companies to measure and improve employee engagement and business culture, and performance on business objectives and goals. The immediate impact of the lockdown was to suspend all the conversations they were having. But they were fortunate to have launched their Microsoft Teams add-in a fortnight prior to European/North American lockdowns (to add to desktop, iOS, Android & Slack versions). Then fundamentally, they are perfectly positioned to take advantage of a long-term shift to remote working. Therefore, the job here was to shift the sales & marketing effort from a sector-based strategy to maximise short term customer acquisition driven by remote working. Since then they have been adding customers quickly and now their more strategic conversations are starting back up again. Bedfolk: direct to consumer retailer of their own ethically produced, high quality bedding. They had already been growing very quickly – delivering 25% more sales than promised between our first investment in April 2019 and April 2020. Concurrently with further improving their brand, marketing and introducing new product, they have benefitted from a huge increase in eCommerce whilst shops have been closed and a particularly marked increase in spending on homewares as consumers spend more time at home. Their proposition, centred around nesting & wellness, is well positioned for current, and we expect continued, consumer sentiment. At some point, they will lose the homewares tailwind but the long-term shift to eCommerce is here to stay, so we are confident they will maintain a strong growth trajectory, just a little less spectacular. Both Weekly10 and Bedfolk have added to their evidence and accelerated their momentum. Then systemic deepening of remote working (for Weekly10) and the even faster growth of eCommerce (for Bedfolk) have increased their long-term potential. Vitrue Health: smart motion detection and depth sensing hardware and software for physiotherapists & orthopaedic surgeons assessing & treating musculoskeletal (MSK) conditions. The lockdown has been difficult as it curtailed some very successful event based selling activities. But the team changed their approach quickly to both selling (going to virtual demos) and to product development, including a smart and timely method of assessing posture through a webcam, so posture assessments can be conducted at scale for home offices. Their solution – that has patients in an out more quickly than current assessment – should prove a little more attractive as physiotherapists return to their practices with a reduced capacity. And the increase in home working is not reducing the incidence of poor posture! So, whilst they lost and then regained momentum through lockdown, the proposition is a net a little positive for the long term. Zobi: has a first product, the Hedgehog, a patent pending cybersecurity device using artificial intelligence to discern between routine and non-routine communication between Internet of Things (IoT) devices on a network. Zobi are pre-revenue, busy getting their first production run started and finalising their software. For which there has been no impact of lockdown. There is maybe a slightly positive impact in the long term, as more people are working from home, so more corporate IT boffins are getting exercised by home network security – exactly Zobi’s target market. Nightly: a new way to book hotels – giving travellers the option to switch hotels once during their trip to get the best value, a different experience and save as much as 70%. Unfortunately, a devastating impact of lockdown – zero revenue. Then we expect the increased hassle of travelling over the next 18 months (at least) and a sensitivity to turnaround times (for both traveller & hotel) makes their core proposition much less attractive long-term. This is the one business in our portfolio that we will lose as a result of the coronavirus. 2. MACRO-ECONOMIC SPENDING & INVESTMENT Our view (lightly held – this is evolving) is that consumer and small business spending will, of course, be heavily impacted but that it will be polarised. There are plenty of individuals and small businesses that have not had their income impacted by lockdown and have some pent-up disposable income to splash. But sadly, there will be swathes of unemployment. Looking at sectors, the pain to a large extent looks likely to be felt by those that were suffering before, in a further widening of the wealth gap. So we expect premium products & services (like Bedfolk or Zobi) to be less impacted by consumer spending slowdown than those targeted at a more mainstream audience (likely Nightly). Business investment appetite is very sector specific, but we expect enlightened businesses, that have the cashflow, to continue to invest. For a business like Weekly10 that appeals to progressive leaders looking after high value employees this could bode well. For those like Vitrue Health selling to large & small healthcare providers, that are likely to have been heavily cash impacted, this might prove to a headwind. 3. SUPPLY OF & DEMAND FOR FUNDING Anecdotally funding has slowed up over the last three months. And most deals seem to be follow-on from existing investors, with the occasional business that has a short-term opportunity and needs cash to fund it fast. We see pent-up demand for funding that is likely to lead to a downward pressure on valuations. It’s difficult to predict how supply will pan out over the medium term. Clearly investor sentiment is impacted by losses in public equity markets, but equally many investors see that early stage businesses are less impacted by global turmoil. Young businesses are generally quicker to adapt. They have relatively little revenue to lose, cash flow is more driven by spend – when resources become cheaper. Although inherently high risk/high return, the relative risk between seed investing and public equities narrows when risk with public equities increases. We anticipate that the remainder of 2020 will be a behind 2019 but volume will pick up in the first quarter of 2021. There is an argument that investors able to act early could pick up extra-keen valuations this year. So, I’ve laid out some forces at work and some examples. Whilst studiously avoiding a broad-brush prediction of decreasing or increasing valuations. The pandemic, and more importantly the longer-term changes to behaviours that result, will have an impact. But, as ever, valuations deserve to be looked at opportunity by opportunity and it will have a positive impact if more investors and the entrepreneurs they are talking to, take more objective and considered views to get to a fair valuation.

By Matthew Cushen For early stage investing under the Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) in the UK, the timing of t read more
SERENDIPITIOUS INNOVATION
Mar 08, 2019

Our approach to EIS & SEIS investing is different to other investors. It’s been very deliberately designed by my business partner Paul Soanes & I, based on insight from 14 years of angel investing together and our experience from entrepreneurial, corporate and consulting careers in brand, marketing, retail & innovation. We landed the insight, on a napkin in a pub, from considering where we have been successful in our investing, as well as challenging the reasoning behind backing a couple of turkeys. The insight might have been scribbled down roughly, but the innovation that we created on the back of it took several experiments and a couple of years to iterate. <a href="https://worthcapital.uk/serendipitious-innovation/">For further information and to read the full article, please click here.</a>

Our approach to EIS & SEIS investing is different to other investors. It’s been very deliberately designed by my business partner Paul Soanes & I, bas read more
Deal Flow and Deployment for IFA’s Considering S/EIS Investment
Mar 01, 2019

Co-founder of Worth Capital Matthew Cushen discusses deal flow and deployment for IFA’s considering S/EIS investment in the coming weeks. Our approach to EIS & SEIS investing is different to other investors. It’s been very deliberately designed by my business partner Paul Soanes and I, based on insight from 14 years of angel investing together and our experience from entrepreneurial, corporate and consulting careers in brand, marketing, retail and innovation. We landed the insight, on a napkin in a pub, from considering where we have been successful in our investing, as well as challenging the reasoning behind backing a couple of turkeys. The insight might have been scribbled down roughly, but the innovation that we created on the back of it took several experiments and a couple of years to iterate. <a href="https://www.gbinvestments.co.uk/article/deal-flow-and-deployment-for-ifas-considering-s-eis-investment/">For further information and to read the full article, please click here</a>

Co-founder of Worth Capital Matthew Cushen discusses deal flow and deployment for IFA’s considering S/EIS investment in the coming weeks. Our approach to E read more
FUNDING GROWTH
Feb 04, 2019

The focus of The Start-Up Series has been on the earliest stage businesses – ready for their first or very early equity funding. The type of funding supported by the government’s Seed Enterprise Investment Scheme (SEIS). Where investors are encouraged to invest the first £150,000 of a company’s equity funding by being given generous tax reliefs – including 50% of the investment being knocked off their income tax bill. The businesses funded might only have an idea and some market insight to give a sense of the potential. Or the business might have bootstrapped a product or service launch but still be in the foothills of growth. <a href="https://worthcapital.uk/funding-growth/">For further information and to read the full article, please click here.</a>

The focus of The Start-Up Series has been on the earliest stage businesses – ready for their first or very early equity funding. The type of funding supported read more
SETTING YOURSELF UP FOR VALUABLE ADVICE
Jan 08, 2019

Being an entrepreneur can feel lonely. Particularly for a someone founding a business by themselves. But even for a pair or threesome discussions can soon get stuck in a rut. That’s why it’s super useful to have some good external input and support, and to know how to get genuinely valuable small business advice. However, having advisors, mentors and others around can too often cause more problems than value.

Being an entrepreneur can feel lonely. Particularly for a someone founding a business by themselves. But even for a pair or threesome discussions can soon get s read more
The Start-Up Series: Your chance to receive up to £150, 000 equity investment
Nov 07, 2018

The Start-Up Series competition searches for the brightest entrepreneurs with the smartest ideas to qualify for seed investments from a total of £3.6m equity funding... The UK’s largest ever seed funding search competition – The Start-Up Series – is now open for entries for November! Winners will qualify for funding from a Seed Enterprise Investment Scheme (SEIS) fund created by Worth Capital which totals £3.6m. For more information and to read the full article, <a href="https://startups.co.uk/thestartupseries/the-start-up-series-your-chance-to-receive-a-150000-equity-investment/">please click here</a>

The Start-Up Series competition searches for the brightest entrepreneurs with the smartest ideas to qualify for seed investments from a total of £3.6m equity f read more
Co-Founder of Worth Capital, Matthew Cushen Features on the Adviser Hour
Apr 19, 2018

<h4>Matthew Cushen features on episode four of the Adviser Hour, <em>Lifting the Barriers to Advising on Tax Efficient Products</em></h4> <a href="https://webinars.growthinvest.com/archives/episode-4/">The fourth episode</a> delved into uncovering the barriers to advising on tax efficient investing and how to remove these. You are able to watch the panel discussion on demand by <a href="https://webinars.growthinvest.com/archives/episode-4/">clicking here</a>, featuring Matthew Cushen along with guests from BWB Compliance, the EIS Association and Lark Insurance who assessed the reasons why some may assume investments of this nature are simply too risky. Below you can watch Matthew Cushen's interview with Catherine McQueen: <center><div style="width: 50%; text-align: center;"> <video width="450" height="225" controls="controls"><source src="https://s3.amazonaws.com/growthinvestlivesite/Episodes/Episode4/Episode+4+-+Matthew+Cushen+Interview.mp4" type="video/mp4"></video></div></center> To watch the full episode or panel discussion we welcome you to do so by <a href="https://webinars.growthinvest.com/archives/episode-4/">clicking here</a>. To learn more about Worth Capital's Start-Up Series Fund, <a href="https://growthinvest.com//investment-opportunities/fund/start-up-series-fund">click here</a>, and feel free to contact the GrowthInvest team with any queries you may have by <a href="mailto:enquiries@growthinvest.com">email</a> or by telephone on 020 7071 3945.

Matthew Cushen features on episode four of the Adviser Hour, Lifting the Barriers to Advising on Tax Efficient Products
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Winners of the start-Up Series Myza
Dec 22, 2017

Recognising the benefits of good night’s sleep, MYZA is the first curated online platform dedicated to retailing products and publishing editorial content designed to encourage healthy sleep. Founded by Helen Collins and Olivia Collins, MYZA’s first landing page gained exciting levels of traction – but the duo knew a funding boost was needed to launch the business in full. So, in March 2017, they applied for The Start-Up Series: Startups.co.uk and Worth Capital‘s monthly funding competition, which now sees two start-ups per month winning up to £150,000 equity investment each and access to expertise from investment promoters Worth Capital. The duo won the competition and – propelled by the funding and guidance offered to them by Worth Capital – are preparing to officially launch their website this week. <h4>SO, HOW HAS OUR MARCH START-UP SERIES WINNER ACHIEVED THIS – AND HOW COULD YOUR START-UP BENEFIT FROM THE START-UP SERIES?</h4> Ahead of this monumental milestone, Startups’ caught up with the Collins’ on how The Start-Up Series has helped them to reach this point. They tell us: “Doubtlessly, Worth Capital’s investment has enabled us to get this far, we have been able to make our idea a reality and develop a website as we originally envisaged. “In addition, Matthew Cushen [co-founder of Worth Capital] has provided a great sounding board for us, enabling us to ‘bounce ideas’ off him, gain the benefit of his retail experience and generally receive constructive and objective feedback about our brand.” So how exactly has Worth Capital’s investment and guidance helped MYZA to develop from a concept to a ready-to-launch website? Here’s what the business has achieved in the eight months since its Start-Up Series win… <h4>A HUGELY EXPANDED OFFERING</h4> According to the duo, MYZA has attracted a number of quality brands, all of whom have signed up to retail their sleep products through the platform. By no means limited to the UK, the start-up has also captured interest overseas: “In addition to UK brands, we are already featuring US brands and an Australian sleepwear brand who were very keen to partner with us, plus European brands – so the website is looking global from the offset. “A big highlight for us has been the really positive feedback from brands about our website. It has taken a lot of hard work to get to this point but it seems to be paying off!” Alongside securing a range of products to sell, MYZA has been able to kickstart the website’s specialist editorial content by recruiting Dr. Alanna Hupe, who runs the Royal Brompton Hospital’s sleep clinic: “She will be writing articles, conducting Q&A sessions and heading up our team of sleep experts.” <h4>A TALENTED TEAM</h4> In fact, MYZA has had the means to recruit a talented team which has helped to propel the start-up – once just a two-woman team – towards launch, including an “extremely experienced” CTO, two full-time content writers and a head of customer services. According to the duo, Worth Capital’s business guidance has filled in the cracks in their own knowledge and experience here, pointing them in directions that they otherwise may not have followed – but which have brought fantastic benefits to the business: “We are not from an technology background. Worth Capital suggested at the outset that we hire a CTO and although initially we were concerned by the potential cost implications, we now appreciate that this was great advice; our CTO is proving to be a tremendous asset and well worth the financial outlay.” <h4>PLANS IN PLACE FOR THE FUTURE</h4> With the help of Worth Capital, MYZA is able to make plans for the next stage of its marketing efforts: “Following our official launch we intend to focus heavily on [social media] as a means of engaging customers and spreading awareness of our brand. We are also looking at the possibility of appointing a PR who has marketplace expertise.” The Collins’ ultimate goal for the website? “We are aiming to become the go-to online shopping destination for all sleep needs. We are at the start of our journey but we have some great, innovative ideas for our brand so watch this space!” Source: <a href="https://worthcapital.uk/150000-later-what-happened-after-the-start-up-series-myza/">Worth Capital Blog</a>

Recognising the benefits of good night’s sleep, MYZA is the first curated online platform dedicated to retailing products and publishing editorial content des read more
Winners of the Stat-Up Series - Not Dogs
Nov 11, 2017

From a top national accolade to team and menu expansion, here's what the veggie hot dog start-up has done since winning £150,000 in December 2016. For vegetarians, vegans and meat reducers, finding a quick but hearty meal that scratches the itch of a fast food craving is notoriously difficult. That’s why, in March 2014, Jane Yates and Katie McDermott founded Not Dogs: the vegetarian hot dog start-up that serves mouthwatering meatless toppings on Quorn bratwursts. By late 2016, the duo were in need of a funding boost to truly kickstart their business, and so they applied for the Start-Up Series competition: the UK’s largest monthly seed funding competition – run by Startups.co.uk and investment promoters Worth Capital – which now sees two fledgling start-ups per month win up to £150,000 equity seed funding each, along with business guidance from Worth Capital. Not Dogs won the December competition, taking home the funding and access to Worth Capital’s expertise. With this, they were able to launch officially in December 2016, opening a flagship restaurant in Birmingham’s iconic Bullring shopping centre. But that’s not all they’ve been able to do with their winnings. When we spoke to Not Dogs in April 2017, the duo assured us they had “a lot of things up our sleeve”, and with all that they have achieved in the six months since then – and in the ten months since they were crowned Start-Up Series winners – it’s clear that they were telling the truth. <h4>So, what is our December Start-Up Series winner up to now – and how could your start-up benefit from The Start-Up Series?</h4> Here are just a few of the milestones Not Dogs has surpassed following its victory in winning £150,000 equity funding: <h4>A bigger team</h4> Having started as a two-woman team comprised of just Yates and McDermott, by June 2017 Not Dogs had hired 12 crew members for its Birmingham restaurant. Though the business’ days as a team of two may now seem far behind, the start-up has also had the means to revamp the restaurant with added grass and bunting in a nod to Not Dogs’ early days, which Yates and McDermott spent serving up their offering from a pop-up food truck at music festivals. <h4>Social media success</h4> With their past experience in PR and online campaigns, Yates and McDermott have been engaging customers online from the start. But things have been supercharged since the pair’s Start-Up Series win, and Not Dogs now has over 12,000 social media followers. With a fun tone, recognisable branding and simple competitions, the business serves as a great example of how to engage customers and drive awareness of your business through social media. Their #SausageSelfie competition, for example, spans across Facebook, Instagram and Twitter and has been entered by hundreds of customers, all hoping to win free and discounted Not Dogs treats by sharing photographs of themselves with their vegetarian hot dogs. And the At the end of July 2017, Not Dogs partnered with high-profile veggie initiative Meat Free Monday to announce Meat Free Mondog – a competition which saw customers inventing new Not Dogs for a coveted place on the restaurant’s menu. <h4>A spot among the UK’s top 100 start-ups</h4> In May 2017, Not Dogs’ achievements were recognised as the business was listed in the Startups 100 2017 – the index of the 100 most exceptional start-ups to have launched in the UK in the last three years – gaining national attention as one of the country’s most exciting fast-growth businesses. <h4>A freshly expanded offering</h4> Having already sold thousands of heavily-topped dogs and with access to the resources needed to develop new dishes, last month McDermott and Yates introduced a range of new menu items, all of which keep innovation at the forefront. The new items include Not Pots, which see classic Not Dogs toppings loaded onto pots of rice instead of sausages; a range of five flavoured milkshakes; and new burger and hot dog variations, including a ‘chicken’ and ‘bacon’ burger and a unique hoisin ‘duck’-topped hot dog – all of which are entirely vegetarian. With fashionable personalisation in the mix, customers are now able to request their waffle fries to be covered in toppings of their choice, and capitalising on the ever-growing vegan market (according to Ocado, sales of plant-based foods in the UK increased by a staggering 1,500% in 2016) Not Dogs now offers a vegan version of every meal. Not to mention that when UberEATs – Uber’s answer to Deliveroo – launched in Birmingham in March 2017, Not Dogs became one of the service’s first launch partners in the city, expanding operations to enable courier pickup and delivery of the restaurant’s meat-free fare. Source: <a href="https://worthcapital.uk/the-start-up-series-winner-march-myza-2/">Worth Capital</a>

From a top national accolade to team and menu expansion, here's what the veggie hot dog start-up has done since winning £150,000 in December 2016. For veget read more

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Matthew Cushen features on episode four of the Adviser Hour, Lifting the Barriers to Advising on Tax Efficient Products

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