Mercia is pleased to announce the profitable sale of one of its direct investments, Clear Review,  for a total cash consideration of up to £26.0million.

Mercia held a 4.0% fully diluted direct holding in Clear Review at the date of sale and will receive cash proceeds of £1.0million representing a 2x return on its investment and a 72% IRR. In addition to this direct investment return, the sale will also generate an 8x return on Mercia’s EIS managed fund investment cost and a 122% fund IRR.

The company, which was first backed by Mercia’s managed funds in 2018 and became a direct investment in June 2019, has been sold to Advanced Business Software and Solutions, the third largest British software and services company in the UK.

Clear Review, which was founded by Stuart Hearn, former HR director at Sony, is a SaaS tool providing organisations with data and systems to improve performance management. Under Stuart’s leadership the company quickly met its commercial milestones, passing £2.0million in annual recurring revenue in December 2019, up 100% from the previous year. Mercia portfolio director Nigel Owens was a non-executive director from December 2019 until the sale.

Stuart Hearn, CEO of Clear Review, said “We’re extremely proud of the success of our Clear Review platform and its role in improving business performance and developing talent around the world. The acquisition will enable us to accelerate Clear Review’s growth as well as integrate with Advanced’s HR solutions, helping organisations retain their best talent and increase performance.”

Dr Mark Payton, CEO of Mercia Asset Management, said: “Clear Review is now our fifth full cash exit from the direct investment portfolio, coming just three months after we announced the sale of The Native Antigen Company. We have been consistent in our stated objective to both source and exit deals well, and I am pleased that we have been able to again demonstrate our execution of this strategy through another successful exit.

“The team at Clear Review has achieved great things in a relatively short period of time and I am confident that under their new custodian they will continue to disrupt the HR SaaS sector.

“This sale process has been handled entirely virtually, which is testament to our team’s effectiveness in transacting deals even during these complex times.”

 

Two advertising executives who quit their jobs to develop their own 3D software have secured over £450,000 in investment to help them launch their product.

Ben Cyzer and Tim Phillips created visual effects for TV commercials for brands such as Sony, Nike and Samsung and were behind the penguin in the John Lewis adverts. They set up Artificial Artists in 2018 to find a way to make quality 3D animation more suited to the faster pace and lower budgets of digital media.

Their software platform 3dctrl reduces production time and costs by up to 80%, and allows marketing managers to make their own 3D video and images for use in digital ads, social media posts and online shopping sites.

3dctrl was developed with support from private investors. The latest funding round, which was led by Mercia’s EIS Fund with backing from Triple Point Ventures and individual investors, will allow the company to further enhance the product and bring it to market.

As 3D allows an item to be viewed from all angles, it is ideal for design-led products such as clothing, cars and electronics. 3dctrl  is currently being piloted by a number of fashion and automotive firms. The company, which employs a team of six, met Mercia after being selected as part of the Digital Catapult Augmentor investment readiness bootcamp.

Ben Cyzer, the company’s co-founder, said: “3D animation has traditionally been reserved for big budget TV commercials and is prohibitively expensive for digital channels. Our mission is to make 3D visual effects more accessible and affordable, empowering companies to generate their own 3D animation in-house, at speed and at scale.”

Chris Kilroy of Mercia added: “Artificial Artists has built a toolkit that provides content creators with the ability to quickly and easily create professional quality 3D videos and images using their brand assets. This investment round will enable the company to further develop the product and bolster its core team. I’m looking forward to working with Ben and Tim as they continue to capitalise on the opportunities available to them moving forward.”

 

An award-winning businesswoman whose software platform helps companies to manage rebate and incentive schemes has raised a further £950,000 from investors.

Leanne Bonner-Cooke MBE, who founded the e-Bate platform, secured the money from the MEIF Proof of Concept & Early Stage Fund, which is managed by Mercia and part of the Midlands Engine Investment Fund (MEIF), Mercia’s own EIS funds and the government’s Future Fund.

With the pandemic having boosted demand for the e-Bate platform, the funding will allow the Leicester-based firm to create five new jobs and further increase global sales. This latest funding round is the second investment by MEIF and brings the total raised so far by the company to over £2m.

Rebates and promotional incentives are widely used in sectors such as construction, pharmaceuticals, consumer goods and automotive, where suppliers offer big incentives to buyers to encourage them to buy more of their products. The e-Bate software platform helps companies to manage and simplify these schemes which historically have been complex and calculated manually using spreadsheets.

Leanne, who also founded Leicester’s Evolve-IT Consulting, was awarded an MBE in 2017 for her services to women in business. She explains: “Rebates can make a big difference to the net price paid and some businesses depend on them to achieve profitability. The pandemic has highlighted the importance of managing rebates more effectively. A fall in sales volumes will have affected businesses on both sides and some will be looking to renegotiate contracts, which are no longer commercially viable.  e-Bate offers greater visibility of the process and provides the data insights needed to make better commercial decisions to boost revenue recovery.”

Sandy Reid, Investment Director at Mercia, added: “Over £100 billion of rebates are processed each year in the UK alone and in industries such as food production they are used all along the supply chain. e-Bate is the only product of its type that helps companies to manage such schemes efficiently. Leanne and the team are making great progress even with the economic backdrop of COVID-19.  We are pleased to be able to continue supporting this fast-growing software business.”

Ken Cooper, Managing Director at the British Business Bank, said: “It is great to see companies like e-Bate building on their initial support from the Midlands Engine Investment Fund.  We saw from The Early Assessment Report into the Fund that investee businesses develop greater confidence in raising further external finance and this investment into e-Bate is a good example of that in practice. Having successfully secured further funding, e-Bate will be able to accelerate its growth.”

Kevin Harris, Chair of the Leicester and Leicestershire Enterprise Partnership Board of Directors, said:“Financial services are one of our key industries here in Leicester and Leicestershire, so I’m very pleased that the MEIF was able to support a business that is taking an innovative approach to helping businesses manage profitability. The LLEP is committed to supporting our businesses through COVID-19, so it’s great to see such a streamlined solution to rebates that will be of great benefit to the wider business community.”

Tom Gray, partner at Knights PLC, provided legal advice to Mercia.

The Midlands Engine Investment Fund project is supported financially by the European Union using funding from the European Regional Development Fund (ERDF) as part of the European Structural and Investment Funds Growth Programme 2014-2020 and the European Investment Bank.

It may seem counter-intuitive for advisers to suggest their clients make a high-risk and potentially high-return investment into a venture capital focused EIS fund, in an uncertain economic climate. However, in addition to the benefit of investing in high growth technology companies at (potentially) the bottom of the market, there are multiple tax related drivers:

1. Clients are sitting on cash in a low interest rate environment
2. Delay of the tax-efficient investments that were planned for early 2020
3. The stamp duty holiday is driving the sale of second homes creating Capital Gains Tax issues
4. The reduction of Entrepreneurs Relief to £1m
5. Future budgets are likely to increase Capital Gains Tax

Most of these tax-related points are a result (indirectly) of Covid-19; whether that’s the actions that clients have taken during the crisis to increase their cash buffer, or selling their second homes. In addition to the points above, Covid-19 has reminded us all of our mortality, and EIS qualifying assets are out of the estate upon death after two years, or immediately if replacement property relief is available.

After the equity markets crashed in March, the recovery has been strong and markets are now potentially overpriced. The companies that EIS invests into are not directly affected by market volatility, as they are unquoted and can grow very quickly in markets that have been positively impacted by Covid-19, such as the medical devices, remote working, digitsation, food delivery and gaming. In isolation, each small company is high-risk, but through diverse portfolio construction, these risks can be managed, and the high-return nature captured.

The combination of managing income tax and capital gains through EIS, and substantial new market opportunities for small companies, means that financial advisers are seeing good reason to consider EIS at the moment.

For more information, please get in touch with Russell Fryer or the Mercia EIS Team.

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A company which develops conversational assistants capable of manning helpdesks and answering technical enquiries has raised £700,000 to help scale up its operations.

Humley secured the investment from the MEIF Proof of Concept & Early Stage Fund, which is managed by Mercia and part of the Midlands Engine Investment Fund (MEIF), Mercia’s own EIS funds and a private investor.

The funding, which follows an earlier round by private investors, brings the total raised by Humley to £1.4m and will allow the Northampton-based company to grow its customer base and revenue ahead of a planned Series A funding round next year.

Humley’s assistants can be used to help customers or employees find the information they need  – such as technical details of a product, search a database or find a research paper – or to field HR enquiries. The assistants incorporate a number of artificial intelligence (AI) technologies and are easy to use. The technology also integrates with other AI solutions including robotic process automation (RPA) which many large firms are using to manage back-office processes.

Humley was established in 2017 as a spin-out from mobile payments provider Infomedia, where it was developed to support customer service. Its technology is now in use by a number of large corporates and has been taken up by two of the UK’s leading advisory firms who are deploying it within client companies.

Adam Harrold, CEO of Humley, said: This investment round represents a significant endorsement of our technology. The conversational AI market is very noisy with many big players. Our unique approach has made us the platform of choice for many global players and has allowed us to roll out our technology. This investment enables us to further establish ourselves in the market as a leading provider of conventional AI for enterprise and take the business to the next level.”

Stephen Windsor at Mercia, added: “Conversational AI assistants are a cost-effective way for companies to deliver high quality, 24/7 customer service across a range of channels. We were impressed by Humley’s platform which is much easier to use, quicker to deploy and more cost-effective than its competitors. We are excited to be supporting Adam and the team as they scale up the business ahead of the next investment round.”

Ken Cooper, Managing Director at the British Business Bank, said: “Supporting innovation is one of the key objectives for the Midlands Engine Investment Fund.  This investment will enable the firm to continue on its growth trajectory and I’d encourage other SMEs in the Midlands that are looking to grow to also consider the options available through the MEIF.”

Vicky Hlomuka, Growth Hub Manager at the South East Midlands LEP, said: “Humley has shown that innovative businesses can grow and develop at a quick pace. It is important that these businesses in our area have the opportunity for investment to grow and innovate further. It is great to see the investment from the Midlands Engine Investment Fund support them in their journey to further scale up.”

The Midlands Engine Investment Fund project is supported financially by the European Union using funding from the European Regional Development Fund (ERDF) as part of the European Structural and Investment Funds Growth Programme 2014-2020 and the European Investment Bank.

 

 

The Mercia EIS Fund will have its next close on 30th September. This will be the last opportunity to invest the entire EIS Fund before the 5th April 2021, which enables carry back to the 2019/2020 tax year.

Dr. Paul Mattick, Russell Fryer and Chris Kilroy hosted the latest webinar titled, ‘EIS carry back to the 2019/2020 tax year’.

In this webinar, the panel provided detail of the investment process and gave examples of the types of companies that are likely to be in the fund.

A university spin-out which has developed a way to detect cancer at an early stage using a simple blood test has completed a £2.4m funding round led by Mercia’s EIS funds.

The investment will allow ClinSpec Diagnostics (ClinSpec Dx) to further develop its technology and expand its team. The Glasgow-based company was founded in 2016 to commercialise research by Dr Matthew Baker at the University of Strathclyde. Through a combination of infra-red light and artificial intelligence, its ‘drop, dry, detect’ technology provides results in minutes.

Mercia first invested in the business in 2019. The latest round – which also includes funding from the Scottish Investment Bank, SIS Ventures, EOS Advisory and the University of Strathclyde – brings the total raised by the company so far to £4m.

Studies have shown ClinSpec’s technology has potential as a multi-cancer early detection test which could also indicate the type and severity of the tumour, allowing doctors and clinicians to prioritise the most effective treatments.

The new funding will allow it to complete its second brain cancer trial, develop an algorithm covering the most common cancers and create a further five jobs, taking its total headcount to 14. The company remains open for a further £1 million to prepare the groundwork for Series A funding.

Mark Hegarty, CEO of ClinSpec Dx, said: “Worldwide, 26,000 people die from cancer each day. Early detection is critical for effective treatment, but many cancers go undetected for too long. This funding is another significant step forward for ClinSpec Dx in our mission to detect cancer earlier and help to increase patient survival and quality of life.”

 

Mercia‘s Head of Sales and Private Investor Relations, Dr. Paul Mattick is with Business Development Manager Russell Fryer in this intriguing webinar based on the parallels between sport and business.

Paul brings deep insight from his own experience as a double World Champion and Olympic rower.

Russell, has achieved something even more impressive, having gone two years playing golf unbeaten, in addition to hitting no less than FOUR holes-in-one!

There are some distinct parallels between sport and business, but often the nuances are missed or not translated into the board room.

Join this unique discussion to hear Paul and Russell’s perspectives on sport and business.

Armadillo has invented an electroplating bath additive that forms regular and well-dispersed deposits within the metal coating matrix. The additive comprises nano-containers carrying functional molecules that release under corrosive and erosive conditions to protect an entire metallic coating, right down to the substrate. Armadillo products are manufactured using non-toxic, environmentally friendly and cost-effective materials.

Mercia’s EIS fund principal Peter Dines discusses with Dr. Paul Mattick the recent sale of a portfolio company for 8x cost of investment.

The pair also discussed:

– The Mercia groups investment model
– Our EIS is a venture capital investment with downside protection
– This exit illustrates the potential when investing with Mercia