Angel investing in Europe is getting another boost: DFJ Esprit, a UK-based division of the Draper Fisher Jurvetson network of VCs, is preparing to close its second EIS Angel Co-Investment fund, up to £10 million ($15 million) that will be used to help angels invest as syndicate partners alongside DFJ Esprit’s larger investments from its institutional funds, with the latest of these valued at £90 million ($137 million).
Richard Marsh, a DFJ partner and manager of the EIS fund, says that they are currently 80% subscribed for the £5 million first close on the new fund, with the expected final range to be between £5 million and £10 million.
Last year’s angel fund was a pilot program, valued at £5 million and twice oversubscribed. Investments from that fund included Achica, Unbound, Lyst, Datahug and Aveillant, with Horizon Discovery, Sport Pursuit and one other expected to close soon. DFJ Esprit’s portfolio has included LOVEFiLM (sold to Amazon); Kiala (sold to UPS); and Nimbus (now a part of Tibco).
The Angels EIS fund is part of a scheme DFJ first announced last year, and is related to a UK government initiative called the Seed Enterprise Investment Scheme (SEIS), created to increase early-stage investments for startups from individual investors. That scheme encourages investments by way of tax breaks: private investors, DFJ Esprit points out, “benefit from institutional, investment-led deal quality with a tax wrapper that enhances returns,” which include 30% income tax relief on investments; zero capital gains on profits; and possible deferral of prior capital-gains tax on the initial investment.
While the U.S. has been very fertile ground for angel investors (some might argue too fertile), it has been less so in the UK and Europe, with the knock-on effect being, so the thinking goes, fewer startups in general.
What’s interesting is how the EIS scheme ends up changing the game for angel investing in general.
Here, angels are brought into the game as a syndicate partner to invest alongside DFJ Esprit’s institutional investors, which are part of the larger fund. It opens the door to bigger opportunities for those angels and gets them more involved potentially in later stages beyond seed as well. “It looks and acts and has the deal flow and scale of a full scale VC fund, and gives access into top tier VC deals to angel investors and has 10-20x scale compared with what EIS alone has had in the past,” says Marsh. “We believe this fund is setting new horizons for what can be achieved with EIS.”
Marsh says that targets for its investments are startups with potential $100 million+ exits, with 3x-10x returns on investment.