GUV editor Thierry Heles speaks to Martijn de Wever, CEO of Force Over Mass Capital about how and why he founded the fund and his views on the UK ecosystem.
Our sister site Global Government Venturing recently reported on how the UK’s Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs), which offer income tax relief to investors, have proven successful initiatives.
The report, commissioned by UK government department HM Revenue & Customs and conducted by market research company Ipsos Mori, looked into the use of the two initiatives and concluded they were key drivers for investments in the country. Indeed, 79% of investors listed tax relief as either very important or essential for their investments.
One firm exploiting EIS is Force Over Mass Capital, headed by chief executive Martijn de Wever, who told Global University Venturing that the idea of opening the venture capital space to everyone – whether they wanted to commit £25,000 or £500,000 – was an important factor in launching the firm.
The firm’s portfolio includes companies such as BMLL Technologies, a big data analytics spinout from Cambridge University.
De Wever said: “We reduced risk by adding Seed Enterprise Investment Scheme (SEIS) and EIS for our investors, which is a great initiative by the UK government. It reduces the risk substantially for someone investing in this space.”
He added: “If companies fail, you get an additional loss relief. The overall protection is about 60% of the portfolio, so you run risk essentially on 40% – which, from an investment perspective, is very attractive. You are at a point in the investment cycle where you get the most upside.”
That view correlates with the findings of Ipsos Mori, which spoke to 628 investee companies and 546 investors throughout 2014. The research firm’s report showed that the initiatives led to funding in 62% of instances where a startup may not have been able to secure it otherwise – in fact, more than half of these, 35%, claimed they would “definitely not” have raised money without the tax-advantaged venture capital schemes.
Martijn de Wever, chief executive and co-founder of Force Over Mass Capital.
Image courtesy of Force Over Mass Capital.
For de Wever and his co-founder Theo Osborne, it was not just the tax reliefs that drove their decision to set up Force Over Mass, however. De Wever explained: “We wanted to invest in the early-stage space and we realised that it is quite cumbersome to select the right companies and execute a transaction.
“I think one of the main problems, even if you have the time to actually do it, is you need a decent amount of capital to work with. You can do a few investments, but then you run out of cash.”
The cash problem, he continued, was the primary reason traditionally angel investors were “usually ex-entrepreneurs or very wealthy individuals, who have the capacity to enter this world”.
To get the firm off the ground, de Wever and Osborne set out to forge relationships initially with accelerators, incubators and venture capitalists, though they have since also added universities to that list. Their aim was to create a portfolio made up of 30 companies, a figure which, de Wever said, “has been highlighted in the VC space as the right number to get a diversification effect and is manageable from an execution level”.
He acknowledges that 30 is still a significant level of deals, and access to dealflow was paramount. That endeavour proved to be a welcoming environment, he said. “It is all a very friendly world. Most investors in the early stage co-invest alongside others, whether that is angels or early-stage funds. Where we differ from them is that they are usually backed by a finite number of very wealthy individuals or VCs.”
When it comes to selecting potential investees, de Wever said it was all about brilliant people. “You go in early, so it is all about the team. You make an assessment based on three parameters – are they incredibly smart, are they incredibly creative and are they so determined that they will keep pushing forward? You do not want to have someone who is doubting the strategy or someone who does not have a clear vision of where they want to be.”
When it comes to judging the UK ecosystem, de Wever showed himself enthusiastic. “The dealflow is great. We actually have to restrict the number of companies we are seeing because there are only so many hours in the day, which is a luxury problem.
“The country has a lot of initiatives to make the UK attractive. I think the UK is particularly good in early-stage investing and launching startups. A lot of companies start here, and when they need a bigger market, the US is usually where they go, which makes sense – it is a very large single market, people all speak the same language and they have a lot of experience in the scaling phase of businesses.”
He was also hopeful about the country’s future, arguing that the later-stage ecosystem should improve over the next few years. “The market will get bigger and bigger, and we will have more later-stage funds. We have all the pieces in place – the fantastic tax reliefs that other countries have.”
