About the early-stage companies
By investing in an EIS, your chosen fund manager will create a portfolio of exciting, early-stage businesses with high-growth objectives. EIS is one of the few ways you can own shares in companies at this stage in their journey, potentially benefiting from returns as they grow.
Disruptive
Businesses that are disruptive to existing markets or have created new markets.
Innovative
Highly innovative with a clear USP, and distinguishable from existing market competitors.
Robust IP
Robust intellectual property which may provide patented or have patentable IP protection.
Energetic Team
Entrepreneurial founding team willing to make tough decisions in their growth journey.
Growth
Companies must grow with demonstrable customer interest and market traction to receive EIS funding.
Markets
Product or service must be able to service multiple vertical and lateral markets.
Scalable
Product or service should be scalable and have the potential to be global.
HMRC Assurance
This may be received before deployment into companies, demonstrating that they qualify for EIS funding according to HMRC qualification rules.
The ‘Blue Sky’…
Unicorns! And no, we’re not talking about the magical horse with the horn here! A unicorn is a privately owned startup worth $1 Bn (around £764 Mn, 2023 conversion rates). Some examples of UK based Unicorns that you might recognise are above.
And it’s no surprise that these companies typically belong in the tech and life sciences industries, which act like a window to the global market, allowing large-scale growth ambitions to be achieved faster.
Typically, you will hear EIS funds being split into two categories:
- Generalist EIS
- Sector Specialist EIS
Growth objectives will also be impacted by levels of diversification within a portfolio, with most EISs investing in a range of small, high-growth businesses.
Popular sectors include high-tech firms and retail and general enterprises, and it could be argued that these portfolios are closer to the true spirit of EIS funding.
Some say these categories can be pretty misleading, as you might imagine that a generalist EIS may provide more diversification. However, generalist funds often exclude intellectual property-driven or deep-tech businesses, meaning they can concentrate on consumer-focused, brand-heavy businesses. Conversely, categories such as tech and life sciences are extensive, e.g. tech might include companies operating in engineering, software, gaming, communications, finance, AI, cyber security and more.
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