Investing in private single companies: manager interview

Manager’s view: 60 seconds with Gayle Bowen from Wealth Club

Q: What type of single company deals have proved most popular with investors?

A: For experienced investors, the main appeal of early-stage EIS investing is the chance to invest in exciting new, and thus high risk, businesses that have significant growth potential – with the added benefit of tax relief. 

At Wealth Club, we have broad investment criteria so can consider a range of stages from Seed to Series C in high-growth sectors, including e-commerce, B2B software, healthcare, data analytics, diagnostics, MedTech, AI and more.

In addition to our EIS deals, we also seek out more established, profitable businesses which we believe can still offer strong growth prospects and value for investors but with slightly reduced risk compared to start-ups. We’ve participated in several MBOs alongside buy-out funds, giving our investors direct access to private equity deals.

Our most popular investment to date, in terms of amount raised, has been a Series C private offer for oxygen wound therapy developer, Inotec AMD. Wealth Club investors co-invested just under £5 million in a single round alongside global tech investor Amadeus Capital Partners. 

Q: Where do Wealth Club deals come from?

A: Our extensive network of family offices, VCs, private equity and EIS funds and advisory firms provide most of our deal flow.

Notably, some of our more popular deals have been introduced by founders of our existing portfolio companies – they understand first-hand the key success factors in growing a business, what it takes to lead a successful management team, and whether the companies would be a good fit for Wealth Club.

We see around 50 new opportunities every month, which we review closely to form a shortlist. We typically launch only two new deals a month – we aim to present only those we believe are the most commercially compelling deals to our investors, so they can form their own view.

Some of our growing number of portfolio companies may also plan follow-on rounds. 

We always have an eye on exit – delivering positive returns to our investors is our key objective – and therefore we work closely with our portfolio companies to help them through their journey.

Q: How do you assess new investment opportunities and what’s your role post investment?

A: There are no “perfect” investment opportunities – all carry significant risks. But those with the most merit and commercial opportunity, in our view, tend to have the following in common:

• Strong founders and management teams 
• A rapidly growing market 
• Commercially compelling product or service that is innovative, IP-led, and already with traction in the market demonstrating competitive advantage
• A credible financial plan that has the potential to deliver high-growth revenues, profits and cash
• A route to exit
• Governance and alignment of interests.

We look for management teams that have passion and flair, along with discipline and determination. They need to appear capable of taking a start-up to a potentially multimillion-pound business, and need to be adaptable.

We like capital-efficient companies that carefully deploy their capital to achieve maximum impact. Call us old fashioned, but if you give management teams too much cash to spend, it can lead to bad decision-making and inefficiencies. 

Post investment, we monitor and track performance and offer advice to management teams on how to execute their plan and what key milestones to deliver ahead of planned follow-on rounds. We provide them with market updates, comparable transactions and can introduce them to potential new funders / acquirers. 

My team brings many years’ experience in both private equity and venture capital investing, corporate finance, due diligence and company valuations.

Q: What are some examples of Wealth Club portfolio companies? 

Aparito Ltd

Aparito is a HealthTech company that has set out to transform clinical trials and reduce the time and costs to develop new drugs. Its patient-centric technology enables clinicians to collect and analyse real-world patient data through mobile apps, video-based assessments, and wearable devices. 

Wealth Club first invested in 2019. Since then, Aparito has opened an office in the US and its annual recurring revenues (ARR) have grown from £0.5 million to £1.8 million in 2021, moving into profitability. This year the Company is forecasting ARR of £5 million. 

The Ralph Veterinary Referral Centre Plc

The Ralph is a specialist veterinary referral centre based in Buckinghamshire. Vets from a wide geographical area refer cats and dogs to The Ralph for specialist and 24/7 emergency care. 

Wealth Club first invested in 2018, when the business was pre-revenue and starting to develop the centre. In 2021, it generated £8.5 million in revenues. This year, it is on track to generate over £12 million and employs more than 180 staff. To keep pace with demand, the Company plans to expand the centre and, at full capacity, forecasts around £20 million of annual revenues and £3.4 million EBITDA.

Oak Tree Mobility and Middletons Mobility (trading names of World Class Finance Ltd)

Oak Tree and Middletons provide branded high-end mobility furniture (assisted riser/ recliner chairs and adjustable beds) direct-to-consumer and through retail – allowing older people to stay comfortable in their own homes for longer.

Despite the Covid-19 disruption to the retail operation, the group has grown revenues from £20 million in 2018 (when Wealth Club invested) to forecast revenues of approximately £47 million in FY22, generating EBITDA of £1.6 million.

SafeToNet Ltd

SafeToNet is a British cyber-safety company that uses Artificial Intelligence and behavioural analytics to help safeguard children online. Since Wealth Club’s initial investment in 2017, the company has grown from pre-revenue to generating £14 million, following the acquisition of parental control software company Net Nanny in 2021. Management forecast sales of £24 million in 2022.

We also have numerous companies at exciting stages of commercialising their IP and products, which, if successful, could achieve rapid success over the next 12 to 24 months, although this is in no way guaranteed. 

Please remember, these investments are still relatively young, both in terms of the length of time our clients have held them and the age of the company concerned. In any portfolio of early stage businesses, you should expect some to fail: you should not invest money you cannot afford to lose. Past performance is not a guide to the future.

Q: How could experienced investors benefit from our service?

Investing directly in a range of private companies can add diversification and value to an investor’s broader portfolio. Over the years, private equity and venture capital have become an increasingly established asset class for experienced investors, generating superior returns.

We aim to make private company investing accessible: we have the expertise to review credible opportunities and set out both risks and opportunities in our Research Reports in an easy-to-digest, transparent way – to help experienced investors make their own decisions and build wealth through direct investment in private companies. 

Once the investment is made, we dedicate time and resources to support companies as they work to deliver their plans and hopefully help them achieve a successful exit.

Our service makes it easy for our investors to select, apply for and monitor investments – a secure portal gives them information on all their investments, in one place.

Our overall aim is to help our rapidly growing number of experienced investors build wealth – and to provide them with the very best tools, information and service make informed decisions on which investment to choose.