Investment Strategy
What do we invest in?
The Haatch EIS Fund invests in Seed-stage B2B businesses that have proven their product solves a deep pain by securing contracts with a consistent customer profile and showing early signs that customers will renew or expand those contracts. We target a minimum of £10,000 of monthly recurring revenue; however, in most instances, companies have more.
Companies will have built an efficient go-to-market strategy to source these customers and close new business with a conservative scope to reach £100,000 monthly recurring revenue within 12-18 months, which is the current Series A benchmark.
Our Differentiated Source of Deals
The Haatch EIS Fund leverages the information rights from previous Haatch SEIS investments, to observe the fastest-growing companies that can efficiently reach and acquire customers with the scope to be incredibly successful companies, and we re-invest through the Haatch EIS Fund. The Haatch SEIS Fund makes 15-30 new investments per financial year, providing an abundance of quality deal flow for The Haatch EIS Fund. These investment rounds are typically highly competitive and oversubscribed; however, our relationship and demonstrable go-to-market support win us allocation.
Tier 1 Funds Seek Us Out
In addition to investing in the top-performing Haatch SEIS companies, The Haatch EIS Fund also invests alongside Tier 1 investment funds we have relationships with as part of a larger investment round. Such funds share companies they’re investing in with Haatch as we’re considered strategic value-add given our go-to-market focus differentiates our money from other sources of funds.
As seasoned entrepreneurs and operators with over £100m of personal exits, we focus on revenue, the quality of it and business profitability. We spend less time hypothesising and more of it on the practicality of backing great entrepreneurs who can build quality businesses.
Why should EIS form part of a portfolio?
Brian Moretta, Head of Tax Enhanced Research at Hardman & Co recently wrote on ‘Does Consumer Duty oblige you to add venture capital to client portfolios?” which sparks an interesting debate. With the introduction of Consumer Duty this year, portfolio diversification is now more important than ever.
He says, “it is true that individual venture capital investments are riskier than the usual quoted equities or bonds, even after the excellent tax reliefs that SEIS, EIS and VCTs bring. But as a whole, they are also a diversifying asset class, and this is the key to making them essential investments.”
He also adds, “If past performance is replicated, you can improve expected returns without increasing portfolio risk. A sprinkling of venture capital should be a normal part of most investors’ portfolios.”
Brian has written a summary of his original white paper, which is highly relevant and a quick read. You can read Brian’s latest summary of his original white paper here.
“Since our last review, Haatch has refined its investment thesis. To a large extent, this is simply restating what it was doing already and creating clearer expectations for both investors and investee companies. Even under its previous digital disruption focus, over 90% of investments were in B2B SaaS (business-to-business software-as-as-service).”
– Hardman & Co, September 2023
“Haatch Ventures has some experienced entrepreneurs as its investment partners who have successfully built and sold companies, including Scott Weavers-Wright who sold Kiddicare.com to Morrisons for £70 million cash along with Elevaate for $25.7 million (the latter in conjunction with Fred Soneya), and Simon Penson who sold Zazzle Media to the world’s fourth largest advertising and marketing network after a successful merger.”
-MICAP, December 2022
The Haatch SEIS Fund invests in pre-seed companies that typically have less than £100,000 of revenue or a proof of concept live with a lead, used as evidence they’re solving a deep pain. A Haatch SEIS fund comprises 10-15 such businesses.
Haatch EIS and SEIS Funds both target 10x blended returns to investors (not guaranteed) and offer a diversified portfolio of investments.
Comparatively, The Haatch EIS Fund has a more concentrated portfolio than The Haatch SEIS Fund as it invests at a later stage where companies have more information to diligence and, therefore, higher confidence levels for success.
The tax treatment of each Fund depends on the individual circumstances of each client and may be subject to change in future.
Haatch VIP, exclusively available to existing Haatch fund investors, invests in businesses outside the scope of The Haatch SEIS Fund or The Haatch EIS Fund for reasons such as high valuations, B2C rather than B2B, which is our core focus or non-tax efficiency.
Haatch VIP is a non-discretionary vehicle where investors carefully make investment decisions on companies presented by the Haatch team; however, it is not diversified as it’s a single-company investment.
By being exclusively open to investors in the Haatch SEIS or EIS Funds, VIP opportunities present the opportunity for investors to invest in sectors they align with, increase their portfolio diversity and become an active part of the Haatch community.
The tax treatment of each Fund depends on the individual circumstances of each client and may be subject to change in future.