Deepbridge Magazine - Spring 2022

MAGAZINE SPRING 2022

Visit Devon & Cornwall We share our team’s top tips for visiting a city or region. After two years of largely enforced holidaying in the UK, we thought that in this edition we’d share our highlights of visiting the beautiful Devon and Cornwall.

Pegasus Racing

Investing in people

We are delighted to be sponsoring the Open 50 Class racing yacht, Pegasus of Northumberland (“Pegasus”).

Sponsored by the Deepbridge Estate Planning Service.

As the proliferation of technology and life sciences advancements continue apace, there is naturally increased investor interest. Technological advancement is also a key theme in financial services and the automation of investment decisions is no‑longer a things of science fiction.

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BUSINESS RELIEF | ONLINE APPLICATIONS | RENEWABLE ENERGY Capital at risk. Business relief qualifying trading companies are illiquid and unquoted stocks and therefore should be considered as high risk. Tax reliefs are dependent on individual circumstances, cannot be guaranteed and may be subject to change. Seek independent financial advice.

Issued by Deepbridge Capital LLP, a limited liability partnership registered in England & Wales, registration No. OC356449. Registered office: Deepbridge House, Honeycomb East, Chester Business Park, Chester CH4 9QN. Deepbridge Capital LLP is authorised and regulated by the Financial Conduct Authority (FRN:563366).

Welcome to this latest edition of the Deepbridge Magazine As we depart one year and enter another year, there is always a mixture of nostalgic reflection alongside hope and expectation for the new year ahead. This New Year has been no different, as we reflected on significant milestones and achievement in 2021. After a record year of EIS fundraising and significant co-funding attracted to our investee companies, we can rightly look back with pride, but such naval-gazing is not our style, with our focus at Deepbridge always being to look to the future and aim to ensure the best opportunities for our investors.

To that end, we are excited about what 2022 and beyond has in store. Given the early-stage nature of the companies we support, there will always be companies which don’t grow as expected, and those that ultimately fail, but our focus remains steadfast on supporting portfolio companies to grow and return significant capital to our investors. With a number of our companies maturing well and developing significant commercial traction, we look forward to sharing future good news stories with you.

In this edition of the Deepbridge Magazine, we take a look at some of the newer companies to join the Deepbridge EIS portfolios, such as Cerneretec and SmallSpark Space Systems, we hear from the British Business Bank, we hear from the CEO of one of our longer-standing investee companies and we take a look at what the Deepbridge team has been up to.

We are delighted to have recently launched our Deepbridge Discovery Podcast series, so if you are interested in hearing more from our investee companies, Deepbridge colleagues and sector experts, then please check out the Deepbridge website for details of how to download these Podcasts.

I hope you enjoy this edition of the Deepbridge Magazine. If you have any queries regarding any of the topics raised, please do not hesitate to contact the Deepbridge team.

Thank you for your continued interest in Deepbridge.

Ian Warwick Managing Partner, Deepbridge

IMPORTANT INFORMATION AND RISKS Deepbridge investments are both illiquid and high risk, not suitable This document is provided for information purposes only and does for all investors and investors should not consider investing unless not constitute investment, legal, tax or other advice. In particular, any tax reliefs referred to in this document are for information they can afford the full loss of their investment. purposes only and based on our interpretation of current law.

This document is a financial promotion for the purposes of Section The application and value of potential tax reliefs depends upon 21 of the Financial Services and Markets Act 2000. The content of the individual circumstances of each person, may be subject to the document has been approved by Deepbridge Capital LLP. change in the future as a result of subsequent changes in law and This document does not constitute, and may not be construed as, therefore cannot be guaranteed. Prospective investors should take appropriate professional advice (including legal, financial and tax an offer or invitation to invest or make commitments pursuant to advice) before making any investment decision, no reliance should Section 21 of the Financial Services and Markets Act 2000. The information contained herein is subject to updating, amending and be placed on any information contained in this document, whether for investment purposes or otherwise and any decisions or actions verification therefore you should not rely upon it for any purpose. taken based on such information is the responsibility of the person Any investment in a Deepbridge proposition will be made solely taking that action or decision. on the basis of the respective product literature and customer Deepbridge Capital LLP is registered in England & Wales, Partnership agreements. Please be aware that past performance is not necessarily a guide to future performance and may not necessarily No. OC356449. Registered Office: Deepbridge House, Honeycomb be repeated. The value of investments may go down as well as up East, Chester Business Park, Chester CH4 9QN, authorised and and you could lose all or any of the amounts you originally invested. regulated by the Financial Conduct Authority (FRN: 563366).

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Meet the Company: Cerneretec Ltd Cerneretec Ltd is an active company incorporated on 25 January 2016, with their registered office located in Chester.

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Visit Devon & Cornwall We share our team’s top tips for visiting a city or region.

After two years of largely enforced holidaying in the UK, we thought that in this edition we’d share our highlights of visiting the beautiful Devon and Cornwall.

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Meet Simon Tutton Simon is Deepbridge’s Regional Director, responsible for supporting our community of financial advisers across the South West of England and South Wales.

10 Meet the Company: Smallspark Space Systems Ltd

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Based in Cardiff, UK; Smallspark Space Systems, backed

by Venture Capital & The Welsh Government, is developing the next generation of technologies that will enable easier, lower-cost access to space. Our vision is to provide the tools and services needed to grow the global space economy, enabling new nations and business to utilise space like never before.

13 Recent Awards Deepbridge Capital performed exceedingly well throughout 2021 and we were delighted to announce the win of many different awards.

14 Investing in People As the proliferation of technology and life sciences advancements continue apace, there is naturally increased investor interest.

16 British Business Investments Donna Battersby (Regional Manager, North West Deepbridge Capital) talks to Sue Barnard (Senior Manager, North West UK Network - British Business Bank) and Mark Barry (Investment Director - British Business Investment).

18 Pegasus Racing Introducing Pegasus of Northumberland, sponsored by the Deepbridge Estate Planning Service.

20 The funding chasm and how to cross it Article by Bernard Ross is founder and CEO at Sky Medical Technology Limited.

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Meet the Company:

CERNERETEC

Interview with Matt Pearce, Founder & Director What does Cerneretec do as a company?

Cerneretec is an In Vitro Diagnostics Development company that is developing a rapid test for emergency medicine triage tests, such as paracetamol overdose.

During the course of the last year, everyone around the globe has become aware of lateral flow testing and PCR testing, so we are developing rapid tests to be used in emergencies like this.

What impact has lockdown and Covid-19 had on Cerneretec?

During the first wave of the pandemic, it was difficult for Cerneretec as the laboratories that are based at the University of Chester were closed temporarily. However, during that time, we took the opportunity to raise funds and we closed our first SEIS round. By the time the first lockdown had finished, we were ready to crack on with work with these new funds.

It has been difficult getting some of the reagents in the early stage, but overall – being in the diagnostics industry, the pandemic has thrown a spotlight on Cerneretec. Certainly for the next few years, that will help Cerneretec gain credibility and investment funding.

Another thing to note would be, due to the pandemic, mental health issues has risen by up to 50% - so looking purely at access to the market, it is increasing – which is worrying. However, at the same time, funding will follow. It is a good time to be in diagnostics.

“During the course of the last year, everyone around the globe has become aware of lateral flow testing and PCR testing, so we are developing rapid tests to be used in emergencies like this.”

Matt Pearce

What stage is Cerneretec at?

Cerneretec’s development is going well.

We have a full functioning diagnostics prototype which is giving the full analytics sensitivity and specificity that was needed. We are currently in the process of clinical trial planning, so the protocols are being written.

We are also working with Liverpool Royal Hospital, so we are looking at starting clinical trials in the second quarter of 2022, with the intention of launching in the first quarter of 2023.

Cerneretec recently secured an SBRI grant, allowing current investors money to remain non-diluted. We should also see the addition of more tests, which should come online over the coming months of the first launch.

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Where were you before setting up Cerneretec?

I have been in the diagnostics industry for over 20 years and my previous role was General Manager at a company named “BioRad”. Then in 2012 I set up my own business called “Med Tech To Market”, which specialises in diagnostic development and out of that, Cerneretec was created.

The technology behind Cerneretec has been in development with a clinician in Liverpool who originally came to Med Tech To Market with a clinical problem, so in order to solve that issue, Cerneretec was founded.

What attracted you to Deepbridge Capital as a funding partner?

I must say, it was a very straight forward fund raising process due to the accessibility and ease. However, what struck me with Deepbridge was the accessibility of the people working there. The culture of Deepbridge is more respectful of the entrepreneur and Cerneretec is empowered by Deepbridge.

“That overall for the next few years I think, certainly, will help us gain credibility and investment funding etc. I think the pendulum swung towards diagnostics over the last 18 months.”

Matt Pearce

“In 2012 I set up my own business called ‘Med Tech To Market’, which specialises in diagnostic development and out of that, Cerneretec was created.”

Matt Pearce

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Visit

Devon & Cornwall We share our team’s top tips for visiting a city or region.

After two years of largely enforced holidaying in the UK, we thought that in this edition we’d share our highlights of visiting the beautiful Devon and Cornwall.

Kynance Cove

DAYS OUT When visiting the coastal mecca of the UK, the natural place to start is the beach. With some of the finest beaches in the country, it is no surprise that on a summer’s day the queue to get to the beach is only surpassed by the mound of bronzing, or burning, bodies littering the sand. But where to head to is the key question.

Phil Thompson, Regional Director at Deepbridge suggests heading towards North Devon; “It can be a long journey from our home in Warwickshire, but the beaches at North Devon are a definitely favourite with the family and, of course, the dog. It’s a toss-up between Westward Ho!, Saunton Sands and Woolacombe but, after much debate, Woolacombe is probably the beach to head to.”

Savvas Neophytou, Partner & Head of Life Science added; “The South West is awash with great beaches; whether it be the far South West of Cornwall and the breath-taking Kynance Cove, the beach at Devon’s Bigbury-on-Sea with the iconic walk out to Burgh Island, where you of course have to stop at The Pilchard Inn, or the world-renowned surfing at Fistral Beach in Newquay.”

If sunning yourself on the beach isn’t your cup of tea, then the South West Coastal Path provides exhilarating and everchanging views of the coast along every mile of the Devon and Cornwall coastline – 630 miles in total, from Minehead in Somerset to Poole in Dorset. Unless you have a good few weeks to walk the entire

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distance, then we recommend small day trips, with numerous options. Perhaps a day exploring the dramatic Valley of Rocks and Lynton and Lynmouth in North Devon, the ancient history told around Tintagel in North Cornwall or the iconic western tip of the UK at Land’s End and the Lizard.

Samantha Piddington, Head of Corporate Finance explained; “When seeking to get away from it all there is no greater escapism than coastal walks in Cornwall. The South West Coastal Path is extremely well signed and well maintained, ensuring there are walks accessible to all competences of walker. The far west of the county is one of my favourite places in the world.”

Burgh Island

Max Warwick, Origination Executive added; “A few years ago, I spent a few days walking the Coastal Path from Newquay to Padstow. With great accommodation and pubs on the route, it was a fantastic few days, even when the weather was less than clement… it’s amazing how a great pub at the end of a day’s walking can lift the spirits no matter what the weather throws at you!”

For those with a more sedate day out in mind, the Dartmouth Steam Railway, running from Paignton to Kingswear offers a slower pace of life. Running along the English Riviera and then cutting through the green hills of South Devon before

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following breath-taking Dart Valley into Kingswear, this steam railway can stop at Agatha Christie’s former home Greenway, now owned by the National Trust, and can be extended with river trips up to the quaint town of Totnes.

Andrew Aldridge, Partner & Head of Marketing reminisced; “Visiting the home of Agatha Christie by steam train and exploring the surrounding countryside, including the aforementioned Burgh Island, gives you a real flavour of how the iconic characters of Miss Marple and Hercule Poirot were conceived for immortalisation in literary.”

Ian Warwick, Managing Partner added; “Dartmouth as a whole is just one of my favourite places. A beautiful town, obviously rich in centuries of naval history, with great restaurants and pubs, offers stunning views across the constant boating activity in the estuary – departing the Sea Horse restaurant after a fabulous meal, and strolling along the banks of the Dart is just fantastic.”

KYNANCE COVE www.nationaltrust.org.uk/kynance-cove ––– SOUTH WEST COASTAL PATH www.southwestcoastpath.org.uk ––– DARTMOUTH STEAM RAILWAY www.dartmouthrailriver.co.uk

EATING OUT Naturally, Devon and Cornwall have an overwhelming choice of sea food restaurants, with many being merely a stone’s throw from where the fishermen unload their catch each morning.

However, with the green farming land and wild moors, the region also produces some of the finest meat, game, fruit and vegetables anywhere in Europe.

This abundance of fantastic resources ensures the region has a plethora of great restaurants.

When anybody mentions food and Cornwall in the same sentence, they naturally mention Rick Stein and his seeming culinary monopoly in the picturepostcard fishing village of Padstow, or ‘Padstein’ if you will! So, where better to start?

Fuchsia Curry, Head of Private Client Marketing commented; “For seafood

enthusiasts, and those enthusiastic about good food in general, then Rick’s Seafood Restaurant in Padstow is a mecca, which doesn’t disappoint. His bistro, café, pub, chip shop and delicatessen are also worth a visit, but possibly not all on the same day!”

Lisa Groome, Administration Executive, added; “I have spent many years working in luxury travel and have been fortunate to visit many great places. However, there is something iconic about Rick’s restaurant, which has only grown over time as he has showcased Padstow to the world.”

For a more relaxed seafood odyssey, the Crab Shack, situated on the beach in Teignmouth, Devon has long been a favourite for the Deepbridge team when in the area. With is catch of the day based menu, and stunning views, it’s no wonder that the Crab Shack seems to always be busy.

Georgian country house restaurant offers everything you could want in the region; views, peace, quiet and great food.

Simon Tutton continued; “Now Lympstone Manor is something altogether different.

All of the Michelin-star skills are employed to provide a culinary experience which is simply stunning, with the views over the River Exe just adding to the whole experience.”

THE SEAFOOD RESTAURANT www.rickstein.com/restaurants/theseafood-restaurant ––– CRAB SHACK www.crabshackonthebeach.co.uk ––– LYMPSTONE MANOR www.lympstonemanor.co.uk

“It’s somewhat of a running joke,” says Simon Tutton, Regional Director for the South West, “that when Ian Warwick or the team are meeting our friends in this part of the world, that they gravitate to the Crab Shack. I’ll be honest, I’m not actually a great fan of seafood, but the steaks and game that are usually on the menu are great, and the frequency of my trips to the Shack are making more increasingly appreciative.”

For those looking beyond seafood, then head up the coast to Lympstone Manor to experience Michelin-Star cuisine using the best local produce. Michael Caines’

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OUT OUT Over such a large region, like with restaurants, there are of course too many pubs and bars to mention, but some of our favourites offer different experiences.

Ranging from your beach bars to your country pubs, and from vineyards to microbreweries, there is a gem for everyone somewhere in the region.

If you’re after night life, then Newquay is the natural attraction, whether it be the cocktails of Tom Thum, the pub life at The Central or the after-hours fun at The Chy, this is certainly the honeypot for teenagers and surfers alike.

For a change of pace, Porthmeor Beach Café located next to the Tate in St Ives, offers guests the perfect beach bar for relaxing as the sun goes down over a glass or wine or a cocktail.

Steve Shallcross, Chief Information and Technology Officer commented; “St Ives is a stunning part of the world where you easily while away hours, but when there is such a stunning beach bar then you can easily get lost for time. A favourite part of the world, with views to die for.”

Heading back to Padstow, you will find Ruby’s Bar as a timeless cocktail bar, serving guests with everything from local beers through to cocktail classics such as a Negroni or an Old Fashioned.

Fistral Beach, Newquay

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Fuchsia Curry adds; “Rick and Jill Stein, of course, also own a cocktail bar in Padstow.

And, of course, it’s also brilliant. It’s cosy charm and great drinks make it a perfect hideaway no matter what the Cornish weather is doing outside.”

Heading across the Tamar and back into Devon, a back street pub in Exeter where guests can find great beers, including their own micro-brewery concoctions, is The Fat Pig. Stumbled upon by accident, their selection of beer and whiskies have become synonymous with a Deepbridge visit to Exeter.

The last word on the region goes to Ian Warwick, Deepbridge Managing Partner who commented; “The Fat Pig is a great little independent bar, serving great food and great beer. From hazy recollections, I believe the whisky selection is also excellent.”

PORTHMEOR CAFÉ www.porthmeor-beach.co.uk ––– RUBY’S BAR www.rickstein.com/restaurants/rubys-bar ––– THE FAT PIG www.thefatpigexeter.co.uk

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Meet

Simon Tutton Simon is Deepbridge’s Regional Director, responsible for supporting our community of financial advisers across the South West of England and South Wales. Simon shares with us what his role involves and what he looks for in investment opportunities.

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y colleagues and I, across the UK, are responsible for providing support to financial advisers in our respective regions, as well as being the face of Deepbridge within our regions. My area covers the South West of England and South Wales, which means I am extremely fortunate to cover such a diverse and beautiful part of the world. Being based in Bristol, I can easily be in any corner of the area when required. As well as working with our brilliant financial adviser community, I also support our investment teams by maintaining relationships with various academia and incubators in the region – with my South West office being at the Engine Shed in Bristol, which is a business hub led by the University of Bristol.

Whilst the global pandemic has created much loss and many problems to businesses, one of the key positives has been the acceleration of the adoption of video conferencing. This increased acceptance of such technology has led me to a unique opportunity. My wife is a paediatric surgeon who was recently offered the opportunity to volunteer her skills in Malawi. Due to the ability to work remotely, and thanks to Deepbridge’s support, our family is currently experiencing life in Lilongwe, the capital city of Malawi, for a few months. The positive feedback I have received from our financial adviser community has been overwhelming and I’m delighted to report that Wi-Fi is good and, so far, it has been very much business as usual. Of course, a particular highlight is to be on team video meetings with the team back in the UK, whilst I am basking in 30 degrees sunshine!

Malawi is a fascinating country, with huge economic and social challenges, and we’re all enjoying our time here. The wildlife is an absolute joy, watching wild elephants bathing in Lake Malawi being a particular highlight, whilst also being as scary as hell… with scorpions and massive spiders making our home their home!

Prior to joining Deepbridge, having graduated from The University of Glasgow with an MA (hons) in History and French, I had spent a number of years working as a financial adviser with my latter role advising specifically on tax-efficient

investments. The move to Deepbridge, in 2015, was therefore a no-brainer as I’m keen to highlight why and how investors can utilise venture capital investments, with the significant potential tax reliefs available via the Enterprise Investment Scheme, to create growth-focused portfolios.

As well as continuing our adventure in Malawi, I’m excited about the coming twelve months as we have so many companies in our portfolios which are at exciting stages in their development – which will mean lots of good news stories to share with our advisers and investors. I’m also excited by Dr Brian Moretta’s (Hardman & Co) recent white paper* which investigates the effect of adding venture capital to equity/bond portfolios for investors in order to significantly improve investor returns without altering the overall portfolio risk profile. It’s a very interesting read and could be a real driver in shaping how many financial advisers and investors think about venture capital and specifically the Enterprise Investment Scheme. * TES white paper: how much should clients invest in venture capital? – Hardman & Co.

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Meet the Company

Based in Cardiff, UK; Smallspark Space Systems, backed by Venture Capital & The Welsh Government, is developing the next generation of technologies that will enable easier, lower-cost access to space. Thier vision is to provide the tools and services needed to grow the global space economy, enabling new nations and business to utilise space like never before.

Could you give a description of what SmallSpark does?

Joe Ward (CEO & Founder, SmallSpark): SmallSpark is a space transportation company based in Cardiff, Wales. Primarily focusing on the development of innovative hardware with propulsion systems and software such as AI power design tools.

Looking for new technology to develop is what separates SmallSpark from our competitors, our approach is what differentiates us from all the other players in this competitive market. With a singular focus, we differ from a lot of other space transportation companies. We have a core mission and we develop adjacent technology to support this.

How has the pandemic impacted SmallSpark?

JW: As much of a challenging time as it was for everyone around the globe, SmallSpark actually did quite well during the course of the pandemic. The founding members of SmallSpark are distributed across the United Kingdom, so years before the pandemic struck we were all taking full advantage of Zoom to communicate and work together. So once the pandemic did hit, it wasn’t too difficult to begin working remotely again, as the whole team were veterans of Zoom technology. One issue we did face was manufacturing delays which was very unfortunate. However, this let us focus on our digital technologies and software products. So although the pandemic was unfortunate, we as a team at SmallSpark came out stronger and it didn’t really stifle our growth too much.

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What stage is SmallSpark at currently?

JW: SmallSpark is currently in the last few weeks of being pre-revenue. With great news recently about getting a commercial deal with a major defence company within the UK. Interestingly enough, this was backed off of the digital technologies built within the pandemic. As part of our core mission, we develop these digital technologies so getting a commercial deal with a major defence company helps us accelerate technology development.

In parallel to that, we are still doing major research and development on our propulsion technologies – we’ve just concluded a very successful test campaign which included testing one of the largest engines of its type, within the UK. All of this work is moving towards us creating a much larger engine early next year, which will be the largest commercial rocket engine within the UK. So very exciting times ahead for SmallSpark.

Could you give a little background as to what you were doing before SmallSpark?

JW: SmallSpark was actually founded during the course of my master’s degree. Having finished my bachelor’s degree in physics at Cardiff University, I moved on to a master’s degree in physics with experimental propulsion system development and approximately six months into my master’s degree, I decided to put all of my time into SmallSpark. Even before my degree, I have always been involved in the physics industry, having written for the American Society for the advancement of science,

working for EurekAlert Writings for publications based on scientific work and interviewing major heads in the physics world such as Robert Zubrin. I am a scientist at heart, surrounded by engineers at SmallSpark.

What are the biggest achievements to date for SmallSpark?

JW: Most recently, we conducted an incredibly successful test campaign of our engine architecture. We had the confidence that the engine was going to work, but it was the first time it had been tested. However, it almost worked too well – we actually got into trouble with the site we were testing on for the engine being too loud, which was nice to see. In terms of business achievements, our core achievement is getting our recent commercial contracts with the defence company within the UK. Having those commercial contracts provides real validation of what we’re working towards and helps motivate you further as it shows what you’re working on is worth it.

What is the biggest challenge(s) that you’ve overcome?

JW: The biggest challenge is definitely trying to find good engineers to work on what we’re working towards. As the United Kingdom doesn’t really have an abundance of propulsion engineers, it can be increasingly difficult to find one that is a good fit. However, we’re starting to develop a good strategy for overcoming this which is essentially growing our own.

We bring in graduate engineers and we teach them what we’re doing, which is working exceptionally well.

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What are you working on at the moment and what are the next steps for SmallSpark?

Essentially at the moment, our work consists of constant testing. We’re now starting to experiment and work with far more energetic propellants with our propulsion systems. Right ahead of our scale-up next year.

In parallel to that, we are heavily supported by Research England in exploring other areas of innovation with our technology. A number of Universities and Research England are helping us develop a new satellite thruster variant of our propulsion system, which could gain us a massive foothold in the space transportation market.

As I mentioned earlier, we’re working with a major defence company within the UK, on our optimisation technology. We’re in the very early stages of developing a cloud based platform to do design optimisation for anywhere in the world.

What attracted you to Deepbridge Capital as a funding partner?

JW: In all honesty, it was the faith that Deepbridge Capital had in myself and SmallSpark as a company right from the start. I first spoke to Deepbridge Capital in November of last year, as we were working with the Development Bank of Wales. From the get go, Deepbridge understood what we were trying to achieve at SmallSpark and now I can proudly say all the work has been worth it as we have had a highly successful year. Deepbridge Capital will also see the benefits of this, as SmallSpark are going to now grow at an exponential rate.

Are there any trends that you’re spotting within the space transportation sector?

JW: Absolutely. Interest in the space sector is growing rapidly in all areas, such as our focus which is primarily space transportation. Within this market, we are focusing on low mass payloads as the market is growing fast and its getting easier and cheaper to build very low mass satellites. Some satellites can weigh as little as 10s of kilos. Whereas before these low mass satellites were introduced, the satellites would weigh multiple tones.

“With a singular focus, we differ from a lot of other space transportation companies.”

Due to the new satellite weights, more and more companies are looking to enter into this market and right now, what they need is a way to transport their satellites to space at a relatively low cost. That is what SmallSpark are trying to provide, short lead times for launch on an incredibly reliable system, at a price that is cheaper than all of our competitors.

What key factors do you think drive innovation?

JW: For us at SmallSpark, it’s the pressure that we thrive in. Pressure within a team that really believes in what you’re trying to achieve. There are numerous examples of companies in the aerospace industry that have far too much funding and are too relaxed, meaning they take decades to do what they’re trying to do. However, at SmallSpark it’s having like-minded people in a team that strive to achieve a common goal, that’s what I think drives innovation.

It’s a team that believes in what you’re doing, with a good lot of pressure and coffees on the go.

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Recent

Awards Deepbridge Capital performed exceedingly well throughout 2021 and we were delighted to announce the win of many different awards.

One of which, was in the coveted ‘Industry Game Changer’ category, at the seventh annual Growth Investor Awards, organised by Intelligent Partnership.

Deepbridge also came away with a win in the ‘Most Valuable Player’ category, as well as runner-up in the ’Most Impactful Investment’ category.

The winners of the 2021 Growth Investor Awards were announced at a black-tie ceremony on 4th November 2021, held at the London Hilton, Park Lane. This year’s awards were hosted by TV presenter Claudia Winkleman, alongside Intelligent Partnership’s founder Guy Tolhurst.

Commenting on being named a Winner at this year’s Growth Investor Awards, Ian Warwick, Managing Partner – Deepbridge Capital: “Since inception, Deepbridge has always aimed to challenge industry norms and being recognised as an ‘Industry Game Changer’ reinforces that approach.

This award was in recognition for the educational series our great team have provided over the past 12-18 months.

Financial advisers wanting to know more about tax efficient investments should contact their local Deepbridge representative for details of upcoming or bespoke training courses.”

Dr Savvas Neophytou, Partner & Head of Life Sciences - Deepbridge Capital was also awarded winner in the prestigious and fiercely contested Most Valuable Player category, at the seventh annual Growth Investor Awards, organised by Intelligent Partnership.

Commenting on being named a Winner at this year’s Growth Investor Awards, Ian Warwick, Managing Partner – Deepbridge Capital: “Savvas joined Deepbridge in 2016 to launch the first Life Sciences focused EIS fund. With over £50m of capital now raised and deployed across a maturing portfolio of great Life Sciences innovations, Savvas richly deserves this industry accolade and I am personally delighted for him.”

Regarding our award the judges commented: “Pleasing to see so many successful fund raises for funds during the pandemic period. It is clear EIS providers are innovating and supporting the Industry and reinforcing the impact that EIS is making in a number of different areas that truly matter.”

To read more about our recent awards and stay up-to-date with upcoming award events, scan the QR code below to visit the news section on our website.

Deepbridge also came away with the ‘Spirit of EIS’ Award at the 2021 EISA Awards, which took place in The Cholmondeley Room at The House of Lords on the 7th October 2021.

The 2021 EISA Awards denote excellence in a number of EIS/SEIS fields and recognize the achievements of EIS/SEIS practitioners during the past year. The Awards were presented to firms, advisers, companies, individuals and journalists that achieved outstanding performance in the context of the EIS & SEIS schemes during 2021.

Presenting this year’s awards were TV presenter Claudia Winkleman and Intelligent Partnership’s founder Guy Tolhurst. Andrew Aldridge accepting the award for “Most Valuable Player”.

E ISA AWARDS 2021 & 2020

WINNER

SPIRIT OF EIS 13

Investing in

People As the proliferation of technology and life sciences advancements continue apace, there is naturally increased investor interest. Technological advancement is also a key theme in financial services and the automation of investment decisions is no‑longer a things of science fiction.

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owever, investing at any level still requires a human judgement and is reliant on human behaviour. Large corporations being traded on the world’s stock markets are still run by human beings and their actions and experience can directly influence the Company’s performance and thereby investment portfolios internationally. At a very direct level, we should all remember the ‘human behaviour’ of Gerald Ratner and the effect that had on his company.

More recently we have all witnessed Elon Musk’s social media chatter influence investor behaviour.

Resilience is key

On a more local and lower level, this importance of human behaviour is critically important for early-stage companies. The personality, experience and endeavour of entrepreneurs is one of the key attributes that venture capital investment managers look at when considering which of the highly innovative companies they see should be fortunate to receive their capital.

It is also important that founders have the drive to grow a business and aim for an exit opportunity in line with investors’ goals. When raising venture capital, it is important the entrepreneurs realise that their goals need to be aligned and the business cannot drift.

At Deepbridge, we see thousands of Enterprise Investment Scheme qualifying investment opportunities each year. We screen companies based on stringent criteria, including the protectability of the Company’s intellectual property, the global market they are targeting, their revenues to date, and much more. However, it is the people behind the product or service which are ultimately the reason behind why we invest and for this there is no onesize-fits-all. In some instances, it may be the founders’ experience and track record of starting and exiting companies which is the ‘X factor,’ whereas in other scenarios, it may be the academic and sector knowledge the founders bring.

However, the key attributes that commonly set great entrepreneurs apart include resilience, drive, teamwork and an understanding of their own limitations.

Anybody who has ever run their own business will understand that things never go as planned. An entrepreneur may have the most articulate business plan, but there will be crosswinds and headwinds which delay and distract the business from this perceived trajectory. Having the resilience to continue to steer the business through these challenges and ensuring that the core objectives are met is how successful business leaders earn their stripes.

Your team is everything A key challenge for any Company that is seeking to grow is finding the right hires. A founder who shows the ability to work in and lead a team, is therefore critically important or you’ll find your capital being used up on hiring and firing and not progressing with long-term committed professionals.

Know your strengths and weaknesses

The final key point is that founders need to have the humility and self-awareness to understand their own weaknesses and where help is required. For example, academics may know the science and purpose of their life-changing discovery, but they may not have the commercial experience to build a business or the sales aptitude to take the product to market. Only by understanding their gaps can the founders then bring in the required team-members to expedite the growth of the Company. Understanding one’s own weaknesses is very much a strength.

Conclusion At Deepbridge, we are extremely fortunate to work with great investee companies, with great management teams but it is far from luck. A fundamental part of what we do is identifying the right companies in which to invest and working with the great founders to ensure their Company has the right skills and structure to drive the business forward, with Deepbridge often helping plug these skills gaps.

So, whilst the world we live in is becoming increasingly tech focused, which is of course of particular importance to us as an EIS investor in tech innovations, there remains a need for empathy and the understanding of human behaviour and skills. You might be investing in a Technology Growth EIS or a Life Sciences EIS, but part of what you are investing in is human capital.

Adrian Neilan COO & Investment Director, Technology, Deepbridge Capital

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Interview with

British Business Investments (BBI) Donna Battersby (Regional Manager, North West - Deepbridge Capital) talks to Sue Barnard (Senior Manager, North West UK Network - British Business Bank) and Mark Barry (Investment Director - British Business Investment).

Can you provide an overview of the background, purpose and the goals of British Business Investment?

Sue Barnard: The British Business Bank is just over 8 years old and was created to ensure the SME Finance works better across the United Kingdom. BBI is government backed and we support startup, scale-up and stay-ahead businesses.

However, we do not directly invest into these businesses ourselves, we work with over 180 finance partners across the UK, one of which being Deepbridge Capital.

We work with Deepbridge Capital to identify gaps in the market where BBI can share the risk and co-invest into growing businesses across the UK. Before the pandemic, BBI was funding around £8 billion a year in equity loans and guarantees across our partners. However, during the pandemic a lot more companies would have become more familiar with BBI, as we were providing support with bank loans, business interruption loans and future funds. During the last 12-18 months, that on-going support provided by BBI, scaled up British Business Bank and we were then funding in the region of £87 billion across 1.6 million business across the UK. Where does BBI sit within the structure of fund raising?

Mark Barry: British Business Investment sits as one of two commercial investment arms within the BBB group and BBI was initially set up to co-invest alongside the

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private sector into debt yielding products.

Going to lower mid-market debt through a range of strategies including debt funds, asset finance, FinTech, challenger banks.

Our team currently consists of 70 people, so we have a cumulative balance sheet of commitment of about £3 billion.

More recently, we have started to move into equity, Deepbridge Capital being one of our partners in one of the equity programs. We are seeing quite a bit of growth in British Business Investments activity and reach too.

Deepbridge has been mandated to manage £15 million from British Business Investments’ Regional Angels Programme, can you give context as to why you’re working with Deepbridge Capital?

MB: We primarily picked our funding partners based on the due diligence we did on them and the regions they are also based in. We then co-invest into every deal that they do so that they can do more deals, slightly bigger deals and help them in their own growth journey too.

Bank do. I was originally meeting with Andrew to do a promotion of Northern Powerhouse Investments and people started to look at what exactly British Business Bank actually is. Then that led to having a conversation about Andrew, suggesting Deepbridge take a look at one of our other programs which has been around for a while. I did explain that it isn’t an overnight process by any means, and there were no promises either, nor was it my own decision! However, it’s always very satisfying for me to see when a Northern Finance Partner such as Deepbridge begins working with British Business Bank. It is part of the job, yes and like I said earlier, quite exciting.

Would you be able to give some insight about the rationale as to why Deepbridge was chosen to manage these funds alongside BBB?

Sue, I believe it was your introduction that led to Deepbridge managing £15 million from British Business Investments’ Regional Angels Programme, is this a key role of what you’re involved with?

MB: To date, we backed 10 managers with total commitments of £115 million.

Of that, Deepbridge manages £15 million. We actually look for quite a lot in our investment criteria, it is not an overnight process by any means. British Business Bank are putting up £15 million to be invested over four years and the agreements themselves are actually 15 years long, so it really is patient capital.

They are very serious, kind of institutional like commitments that we take very seriously and manage professionally.

SB: In all honesty, it was pure coincidence when chatting to Andrew Aldridge at Deepbridge about what British Business

The areas that we look at mainly around the management team are track record, the investment strategy, deployment and

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Donna Battersby Regional Manager, North West - Deepbridge Capital

Sue Barnard Senior Manager, North West UK Network - British Business Bank

Mark Barry Investment Director - British Business Investment

structure. What we at British Business Bank especially liked about Deepbridge was they had a great track record, over a number of years of doing exactly what they said they were going to do. With two main strategies of Technology Growth and Life Sciences. They built a great infrastructure, team and have great resources behind all of that.

We especially liked how Deepbridge deploys its funds, deploying a lot of capital efficiently and well is very positive.

Are you noticing any trends in the EIS market?

MB: Primarily talking in regards of early stage equity, particularly over the last two years or so, some of our partners see most of their EIS capital being raised at the end of the tax year. I personally think the whole market had a bit of a wobble and some of our partners who were expecting a large inflow of capital, raised on average, around half of what they expected. We’ve started to see a trend of these managers actually adapting to the market.

Are there any areas in particular that are more progressive or is it throughout the entire United Kingdom?

MB: Generally, it is throughout the entirety of the United Kingdom. However, to pick a few areas where we’re seeing our partners being more engaged with are areas such as the North West. Which

three of our partners are based in such as Deepbridge, DSW and Matura Ventures.

Other areas include Northern Ireland and across Scotland, in each of those regions we see a lot of advanced manufacturing engineering type of businesses which is great. Going forward, I believe we will continue to see the North West are a growth area, but also the South West.

There’s a lot of biotech and healthcare start-ups popping up from the universities and accelerators, which should be very interesting to watch.

Recently, we’ve seen the Chancellor announce an extension to the Regional Angels Program.

Could you tell us a little more about the Chancellor’s most recent comments?

MB: Initially, when we launched it was £100 million pounds, which was then increased by about £30 million, and now this £150 million is a great validation for the program. So the total is now £280 million and we’ve got £165 million to make new commitments.

The other announcements that caught our eye was the other commercial investment subsidiary, British Patient Capital is managing a new program called Future Fund Breakthrough, completely separate to the Future Fund. That is a £375 million program to co-invest into research and development companies raising later stage capital. The idea is that they will be up to 30% of these latest stage rounds.

The rounds themselves have to be about £30 million at minimum, so big tickets coming in. A lot of these companies where they are mainly focusing in life sciences, heart hardware, manufacturing companies etc are capital intensive and you need to do lots of rounds and produce a lot of capital to get the products complete and ready to go to market.

Here in the UK, I think we lack that later stage capital for capital intensive companies, so this is where we’re going to increase the supply of that later stage capital raising. There have been a few deals announced recently, which means they are really getting moving, which is great to see.

Do you think there is a certain area that your partners are focusing on in their businesses, due to the pandemic?

SB: What we’re seeing is a lot of companies are now seriously thinking about the future and the companies’ growth. The pandemic was a difficult time for people all around the globe, but it has actually made a lot of businesses fully understand what their business is and what they need to do in order to survive, thrive and grow in future. We are noticing a lot of our partners diversifying, upskilling their own staff and also bringing in training programs. They are also doing a lot more research and development too.

The pandemic, in a way, has focused the minds of a lot of our partners and enabled them to firmly put in place what they are going to do in order to grow.

What are your hopes for across the region in 2022?

SB: I know we’re definitely going to be extremely busy with all of our different funds. From my point of view, I want to see more appetite for growth and equity, from the more rural areas. I would also like to see more investments and understanding of what exactly is outside of the city centres. That is definitely something I will be looking for going forward.

Another hope of mine is to try and better understand how we can better support our partners and raise the awareness of what BBB and BBI have available.

If you could ask the government for one Christmas present, what would that be?

MB: Well, a few years ago we invested some debt capital into a challenger bank called ATM, by face dome. They have recently announced moving to a four day working week – which is perhaps something we could all consider. So if that was announced, that would in my opinion, be a great present to enhance productivity and team moral too.

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Introducing Pegasus of Northumberland, sponsored by the Deepbridge Estate Planning Service.

We are delighted to be sponsoring the Open 50 Class racing yacht, Pegasus of Northumberland (“Pegasus”).

The Pegasus team is led by Adrian Banks, who was diagnosed with Parkinson’s several years ago, with the Pegasus Racing team aiming to highlight the positive impact sailing, and sport in general, can have on Parkinson’s sufferers – whilst maintaining the ultimate objective of challenging and breaking world records.

The crew is made up of Adrian, Professor Ross Hobson, Chris Briggs and Jon McColl, who between them have competed in and won many prestigious races over the years.

We spoke with Adrian to discuss the plans for Pegasus.

Adrian, we are delighted that the Deepbridge Estate Planning Service is sponsoring Pegasus, can you tell us a bit more about the background of this team?

Firstly, thank you to Deepbridge for sponsoring us. Having a headline sponsor enables us to prepare and race effectively and is therefore invaluable.

My background is that I am a financial adviser by trade, which is how I came to know the Deepbridge team, but my passion has always been sailing.

Having been diagnosed with Parkinson’s several years ago, my immediate assumption was that the diagnosis would prevent me from enjoying and competing in yacht racing. However, I was delighted to discover that whilst sailing many of my symptoms either disappear or are significantly reduced. This direct positive link between sailing and Parkinson’s was something I was keen to highlight. The freedom, both literally and metaphorically, that I am afforded by sailing is something I absolutely treasure.

You’ve assembled an impressive crew and have lofty ambitions. Can you tell us more?

I’m delighted that Ross, who I have previously referred to as being the

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‘Indiana Jones of the sailing world,’ was there at inception, as without him this wouldn’t work. His track record is outstanding and he, Chris and Jon have known Pegasus for many years – with their racing of Pegasus being the reason she is such a regarded yacht. All of the team have achieved significant success over the years and we look forward to many years of success as a team – with our first races in 2021 having already shown some impressive results.

So, what are your future plans?

Our plan is simple: to win races and set world records. By doing so we will hopefully be able to show those with Parkinson’s that diagnosis does not mean the end of their world or stop them from enjoying active lives. Ross, Chris and Jon have been absolutely brilliant in helping me make this point, but from an entirely selfish angle we want trophies and records!

We are delighted that the Deepbridge Estate Planning Service is sponsor of Pegasus.

Once we heard what Adrian, Ross, Chris and Jon wanted to do, we were immediately enthused and keen to support. Not only does Deepbridge support life sciences companies aiming to create treatments for Parkinson’s, but with a number of keen sailors amongst the Deepbridge team it seemed a natural fit.

We look forward to seeing Pegasus compete at the highest level, setting records and hopefully inspiring those with Parkinson’s.

Ian Warwick Managing Partner at Deepbridge Capital

For more information please visit www.pegasus-racing.co.uk

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The funding chasm and how to cross it

By Bernard Ross, Founder and CEO at Sky Medical Technology Ltd. The UK is a renowned international home for tech start-ups; particularly medtech and biotech.

This should not be a surprise, given the various initiatives that have consistently aimed to provide funding support to match the enviable academic output from our great universities and research hospitals.

When we started Sky Medical Technology, ten years ago, we found our initial seedstage funding relatively easy to access.

The mixture of Angel support and grant funding available made this part of the journey relatively straight forward.

Nowadays, an even more developed Angelecosystem and a mature crowd funding sector means pre-seed funding is arguably more accessible than ever.

Indeed, once a company is producing significant revenues and ARR, then series B funding is also relatively easy to access.

A key metric for these growth-focussed venture capitalists appears to be £1m+ of annual recurring revenue. At this point, you could well hold a beauty parade of abundant VCs to find the right partner.

However, there is a potential gap between these early seed funding and late Series A/ early Series B stages where it can be more difficult to raise the capital and receive the support growth-driven innovation requires.

This is, perhaps dramatically, named by some as ‘the chasm of death.’ This is where a company needs significant cash, we can be talking millions, to go from initial proof of concept through to revenue growth. This is where the UK Government’s Enterprise Investment Scheme (EIS) provides incentives to private investors to support growthfocussed early-state companies.

Our journey at Sky Medical would not have been the same without EIS – I am sure we would have got to where we are without EIS funding, but it may have taken considerably longer. Having EIS funding to help us to build on early commercial and clinical interest was invaluable. Therefore, my ‘top tip number one,’ for anybody seeking to start and scale a medtech company in the UK, is to ensure you check out the Enterprise Investment Scheme and Seed Enterprise Investment Scheme and, if you meet the criteria, gain Advance Assurance from Her Majesty’s Revenue and Customs. This simple exercise will ensure that your options are widened.

The UK is home to great funding and support, so it was no surprise to me that a PWC report in 2017, commissioned by the European Union, reviewed more than forty tax incentivised schemes from across the globe and, when ranked by good practice, found the UK to have four of the top six schemes.

Once you have an outline of funding journey plan, then my ‘top tip number two’ is choose your funding partners carefully.

Decide whether you want passive (also known as ‘dumb’) capital that gives you the cash and then leaves you to crack on and report back, or whether you want smart capital from investors which provide active support to assist you to grow your business with more than just money. We were fortunate to work with Deepbridge Capital and other partners that not only believed in what we were doing, but importantly understood the commercial route we needed to take and the sector in which we were operating. This smart capital allowed us access to support and advice when required. Developing a business is hugely rewarding, but it can be a lonely existence at times, so to have a supportive VC backer is a big positive.

Finally, my ‘top tip number three’ is to understand the funding journey. Whatever you think you need at the outset will change, and probably multiply, as time passes. Matters will probably take longer than you expect, which is why funding for growth companies is rightly described as patient capital. Understanding the types of funding available and when they might become appropriate is important.

Every stage of funding represents a significant milestone for any company.

At pre-seed, it could represent a single individual agreeing with your concept. At seed-stage, it could be business angels or an early-stage VC putting faith in you and your team to develop your product.

At the Series A level, it probably means that you have developed initial commercial or clinical traction. At Series B, you are likely to be receiving the backing that your business has global opportunities to exploit. Then of course, could be an IPO or M&A activity as the company grows. When it comes to Series B and beyond, you will likely have access to international funding opportunities, so you can choose where in the world works best for you - in our case, this has worked hand-in-glove with our global distribution partners.

Having travelled the world with Sky Medical, I can honestly say that if I was starting over again, I would absolutely start the company in the UK and would be delighted to work with our funding partners again. There may be a funding gap for those companies at the early stage of commercialisation, but I would suggest that in the UK this is not the ‘chasm’ it is sometimes portrayed to be.

Being an entrepreneur and starting a tech-based business is the best job in the world, but it is important to choose funding partners carefully.

Sky Medical Technology Limited received £3.25m of funding via the Deepbridge Technology Growth EIS. In 2017, a partial exit provided investors with returns of up to 4.8x.

The Deepbridge Technology Growth EIS has to date provided over £100m of funding to highly innovative early-stage companies.

Source: https://ec.europa.eu/taxation_customs/sites/taxation/files/final_report_2017_taxud_venture-capital_business-angels.pdf

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IF IT AIN’T BROKE, DO FIX IT. The mindset of innovators and entrepreneurs is to constantly challenge accepted norms and identify solutions for problems many of us would not even know existed. This is how great technology and life sciences innovations are founded.

Deepbridge’s EIS funds invest in growth-focused innovative technology and life sciences companies, allowing investors to reap the potential rewards of supporting great innovations from an early-stage, whilst benefiting from the generous tax reliefs available via the UK Government’s Enterprise Investment Scheme.

www.deepbridgecapital.com

EIS MONTHLY DEPLOYMENTS | ONLINE APPLICATIONS | GROWTH FOCUSED Capital at risk. EIS and SEIS investments are illiquid and unquoted stocks and therefore should be considered as high risk. Tax reliefs are dependent on individual circumstances, cannot be guaranteed and may be subject to change. Seek independent financial advice.

Issued by Deepbridge Capital LLP, a limited liability partnership registered in England & Wales, registration No. OC356449. Registered office: Deepbridge House, Honeycomb East, Chester Business Park, Chester CH4 9QN. Deepbridge Capital LLP is authorised and regulated by the Financial Conduct Authority (FRN: 563366).

Deepbridge Capital LLP is registered in England & Wales, registration number OC356449. Registered Office: Deepbridge House, Honeycomb East, Chester Business Park, Chester CH4 9QN. Deepbridge Capital LLP is authorised and regulated by the Financial Conduct Authority (FRN: 563366).

E ISA AWARDS 2021 & 2020

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SPIRIT OF EIS

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