Eating Your Own Cooking: Specialist Investment House Hails New Fund

Tom Burroughes, Group Editor, 31 October 2018


The firm says its new Enterprise Investment Fund plays to private clients’ desire for more hands-on involvement in firms while offering a robust screening process.

In this era of crowdfunding, direct investing and other more “do-it-yourself” approaches to finding hot ideas, there is still a need to work with committed professionals who have skin in the game when it comes to making investments.

That is the argument of UK-based firm Nexus Investments, which is road-showing its EIS Scale-Up Fund, an Enterprise Investment Scheme concentrating on sourcing and backing new firms in the data privacy, health and education tech sectors. The fund is pitched at private investors, family offices and entrepreneurs. To get into the fund, investors must put in at least £25,000 ($31,932). The fund has a target total capital of £10 million. This is definitely not in the BlackRock, Vanguard or Fidelity league of investing – but it is backing businesses with the potential to one day appear on the radar of large-cap funds.

What Nexus Investments brings to the table is the promise that its team have screened and sorted through a large number of investment ideas and are willing to back them with their own money – a compelling proposition for investors, Matthew O’Kane, MD at Nexus Investments, told this publication. Chartered Accountant O’Kane, who was hired from Deloitte by Harry Hyman, owner of the Nexus Group, to head up this new division about five years ago, explains how this proposition is put into practice.

“Because we see so many deals that have come our way and we are personal investors ourselves, we can be a trusted source of perspective about sectors that we know well, valuations of early stage companies, and what makes a compelling and backable entrepreneur who can genuinely drive a brand or a business through the scaling up process, with our help” he said.

Besides O’Kane, there is a growing team of people working on the deals and liaising with investors. These include Douglas Lidgitt who joined from EY in 2017, who, along with O’Kane and Harry Hyman, sits on the investment advisory committee to the fund, which includes Alan Newman, the former finance director of the public opinion and data company YouGov, and the chairman of PwC London, Keith Mansfield.

Enterprise Investment Schemes, which carry a range of income tax and capital gains tax reliefs and are designed to steer money into young firms and start-ups by bridging the funding gap, and rewarding some risk-taking by investors, are the right kind of vehicle for the sectors Nexus wants to be in, O’Kane said.

Wealth managers face the risk that some DIY-inclined clients increasingly want to seize control over how they manage investments, via crowdfunding, or by directly backing friends or family.

As far as Nexus is concerned, sometimes those deals involve eye-watering sums of money but are done in a vacuum over what constitutes a realistic valuation or projection that the founders may have pitched, or lack an acceptable shareholder agreement or Articles of Association. Nexus Investments has carried out more than 50 rounds of EIS investment since 2014. The firm selects 20 companies out of more than 300. Nexus argues that by going via a kind of pre-vetted Alternative Investment EIS Fund, it provides a smarter approach for sophisticated investors and their wealth managers or IFAs.

“This is akin to curated services,” O’Kane continued.  “These are busy times … we have got lots of firms pitching to us for funding. Our job is to select the best opportunities and provide a diversified portfolio. We have a good understanding of what is an acceptable level of price or risk for EIS private investors when investing in an entrepreneur-led business at different stages of its development, and can therefore identify good entry points for them. Investing in early stage companies requires diversfication, and we provide access to some of the most pioneering companies in the UK that are in some cases literally trying to change the world in the fields of, for example, data privacy, radiotherapy treatment, or digital English Language teaching in overseas schools”.

The areas that the EIS fund invests in, such as personal data and education technology, or “edtech”, are very much in the public eye, as concerns about data security and privacy have been fuelled by controversies such as Facebook’s alleged misuse of private information, and by how concerns about child literacy rates are putting more pressure on schools to come up with solutions, he said.

When it comes to assembling the EIS range, Nexus argues that one of its other differentiators is the calibre of people who sit on the boards of portfolio EIS companies. As well as the investment advisory committee assembled for the Scale-Up Fund, chairpersons who sit alongside O’Kane on existing Nexus-backed companies include Mark Wood (formerly Editor in Chief of Reuters, and now Advisory Board member of PwC) and Mike Rusbridge (formerly CEO of Reed Exhibitions PLC, and currently board member of the National Exhibition Centre (NEC)).

As for its  latest Scale-Up fund, Nexus thinks it is the first UK EIS fund specifically focused on scale-up opportunities to launch since the UK government’s £2.5 billion British Patient Capital programme which was introduced last June. (The idea being that such “scale-up” funds are to help businesses expand significantly, hence the term.)

So how does the fund work and why the £10 million long-term capital target?

“We are raising the money in tranches, but putting an overall target cap on our new fund of £10 million feels the right level to refer to. We have shown over the past four years or so our ability to raise and introduce over £7 million of investment across over 50 EIS rounds, and 19 of our companies are still going strong, many growing very fast still indeed,” O’Kane said.

“The latest valuations of our portfolio suggest existing backers of those companies are sitting in a very positive position on paper, with more potentially yet to come – and that excludes any EIS tax benefits, such as the initial 30 per cent income tax relief. We believe that if we are given the opportunity to deploy up to £10 million of funds within our target timeframe of 12-24 months into businesses which we believe will perform well, we should be able to do this smartly and nimbly for our investors, without being in the position of some other EIS and particularly VCTs [venture capital trusts] who anecdotally one hears can sometimes struggle with finding suitable opportunities for the large piles of cash they are sitting on, and are often restricted by their own internal economics in terms of minimum deal sizes they will do” O’Kane said.

“Our position is supported by our historical performance and based on the deal flow we are currently sourcing. We believe 8-10+ investments are appropriate as any less would not provide sufficient diversification to reduce the risk of any one company not performing, while any more would see the amounts invested potentially fall into companies where neither sufficient fuel is provided nor value add created. We believe that investing between c.£100,000 to £1 million, if necessary on a phased basis or even as part of larger rounds, into each specific company, will provide it sufficient runaway to reach a point where it will be attractive to larger funds and institutions, ultimately enabling us to exit and obtain a return,” he continued.

“The fund will invest primarily in smaller, unquoted companies. It may also invest in companies eventually seeking a quotation on AIM. This is just one of the potential exit routes that may become available to the fund’s portfolio, as they scale with our input. Excluding tax reliefs, over a four-year period, our existing portfolio of 20 companies has (based on latest valuations as at 31 May 2018, derived from subsequent equity round prices) generated over 20 per cent IRR. Whilst unrealised as of yet, many portfolio companies are just getting started and are still within their three-year requirement EIS holding period. We have seen offers for two of our companies, and some are now valued by external investors at 5x or more compared to the first Nexus entry price. Our Key Information Document (“KID”) sets out the position the fund believes could be achieved for Fund Investors under a favourable scenario” O’Kane said.

“Nexus is a very active investor. As an early stage investor, we already sit on the boards of a number of our existing portfolio companies, and the fund intends to do the same. We provide tax, corporate finance and business strategy advice to our portfolio companies above and beyond what they may initially expect. We have been described by existing co-investors and board chair-persons as `over-indexing’ compared to many more established venture capital or private equity investment houses: putting in much more time and resources than what would be expected in relation to the size of our investments and stages of companies.”

“But we believe this is the right thing to do as an early stage investor. In fact, given the risks of being an early stage investor – and I make this point to anyone who has put their own money into an EIS or start-up or similar company, even for a “bit of fun” – you absolutely need to put in the extra leg work if you want to reap the benefits, or have someone on hand who can do that for you, like Nexus. Entrepreneurs and young brands meet all manner of obstacles in the years following the initial early glow of attracting backers with a shiny business plan or slide deck. Often investors are completely unaware of what is really going on.  This is one area of investing where you cannot have your cake and eat it. If you want to reap the potentially much higher returns from being an early stage investor, you need to put in the work required to support and grow. We are not here to help with the `child-birth’ of a company, we are not start-up investors. Our role is to help companies grow and mature from the toddler stage through and into its teenage years, perhaps even into young adulthood. If our chosen companies succeed, then we and our investors should succeed. That is our motto.”

As Amazon faces Vine controversy, how can retailers ensure customers trust their product reviews?

This week saw Amazon come under fire after it was accused of manipulating product reviews through its Vine programme.

Vine allows highly ranked reviewers to post opinions on new and pre-release items on the site. Participants can receive specific products for free.

This week Bloomberg reported that Amazon appeared to be trading free merchandise for reviews of its own products. Since the service is not available to other merchants, this would appear to be disadvantaging possible competitors.

The marketplace denied that it acted improperly, saying that it did not dictate which products Vine reviewers review within the programme and that they were free to select any eligible product. Amazon also said it was working to open the programme to other sellers, saying that it was only closed due to a “technical limitation.”

Whatever the ins and outs of this dispute, it does illuminate the fundamental problems online sellers face in benefitting from reviews while ensuring that they are credible to consumers.

Recent research by Feefo found that 94 percent of consumers use online reviews when looking for a product or service, but 89 percent said they were concerned about fake reviews, up from 75 percent the previous year.

James Dunworth, director at ECigaretteDirect, sums up the problem: “Any site that is running an internal review system is open to the accusation that it manipulates its reviews.”

Dunworth says that his company decided to use an external reviewing system in response to this problem.

“An external review system does not allow you to remove or edit reviews and increases consumer trust in the reviews,” he said.

Dunworth adds that this can be demonstrated to customers through the display of a recognised logo from a reputable review company. However, external reviews do require the service to be genuinely good.

“Some companies are worried about the possibility of getting poor reviews, but as long as your customer service is excellent, and you do everything you can to resolve issues for customers as speedily as you can, your overall score will be excellent.”

Joe Rohrlich, general manager for EMEA at Bazaarvoice says that review manipulation “prioritises short-term gain”.

“By providing a framework which encourages customers to try new goods and leave more content in the form of ratings, reviews, images and comments, retailers can effectively build a platform of trust not only for the brands that they are partnered with, but also the retailer itself.

“Today’s consumers are increasingly digitally savvy and for the short-term gain of increased sales, the inevitable effect is a loss of authenticity and trust in the marketplace. It’s a great example for other online retailers to note and take direction from.”

It is not just sellers themselves who are responsible for unreliable views on their pages. Matthew O’Kane, MD of Nexus Investments, which owns stakes in a number of growing retail companies including home delivery butcher Heartier, says that B2C companies must proactively search for fake reviews from another source.

“[Retailers] have to be resolute in spotting fake reviews that other competitors, customers and/or investors leave on their pages, and focus on getting these removed. This can be quite acute on Ocado where new “healthy” brands are in strong competition.

“Many of these new brands have also received crowd-funding backing and have large numbers of supporters who are keen for them to do well, and sometimes over-keen for others to do less well.”

Meanwhile, Jimmy New, director of marketing at, says that retailers and sellers must resist the temptation to remove reviews which are not to their liking.

“Ensuring the review process remain a priority within the overall customer experience is key to success, as all businesses rely on honest customer feedback, regardless of how big or small they are,” he says.

“Don’t feel tempted to delete or ignore poor reviews and product flaws; there may be underlying issues that the business needs to address and feedback is key.”

The best strategy, he says, is for retailers to “join in the conversation with their customers early on and directly.”

“By engaging with your audience first-hand you can leverage reviews to their full potential and ultimately foster long-term brand loyalty.”

Investor Views: I’m Backing Start-ups for Growth

Matthew O’Kane, Managing Director of Nexus Investments, is interviewed by Morningstar on how EIS investments fit into his portfolio

Emma Simon17 October, 2018 | 3:14PM

Private investor Matthew O'Kane

Matthew O’Kane says one of his main investment priorities is retirement, but he also wants to contribute towards his children’s university fees.

O’Kane trained as a chartered accountant and is now the managing director of Nexus Investment. So it is no surprise that he started investing young and has built up a diverse portfolio.

He says: “I have been investing in ISAs and pensions since graduating from university. My first job was at PwC where I participated in the company’s pension scheme. In the last five years I have also been investing personally into EIS [Enterprise Investment Scheme] qualifying companies.

“I believe that if you are fortunate enough to get paid a salary, you should ‘pay yourself first’ and set aside a certain percentage for your savings every month.

“I also like to invest in a business that I think will be good for the UK and help develop the next generation of successful entrepreneurs.”

O’Kane, who lives in Milton Keynes with his wife and two children, is keen to make sure his investments are tax-efficient.

“I allocate my investments based on their investment merits and also depending on the tax benefits that different products offer in any given year. Allowances and tax relief rates have been changing and being ‘tax literate’ can add extra return to an investment portfolio at no extra cost.

“I have participated in various corporate pension schemes when these were offered by my employers, but not all of them did, so I also have a SIPP. If an employer offers a pension scheme, it makes sense to seriously consider it.’

He mainly invests in funds offering exposure to defined sectors or geographies.

O’Kane says: “I like investing in growing companies and sectors, and the Far East offers many such opportunities. I am a long-term investor in the Jupiter India fund that has grown in value since I invested.

“I also hold the Schroder Managed Balanced Fund. It is a fund of funds that invests in a diversified portfolio of equities, debt and other assets and take a somewhat contrarian view to the markets. It provides balanced exposure and helps to hedge and protect me against some of my more illiquid investments.”

Jupiter India has a Bronze Rating from Morningstar. Morningstar analyst Lena Tsymbaluk says: “Despite weak recent performance over the short term we continue to like the research-intensive approach applied here.”

She points out that the manager, Avinash Vazirani, has over 20 years of experience investing in Indian equities and has run this fund since its inception in February 2008.

Tsymbaluk adds: “The manager aims to identify under-researched stocks with strong growth prospects. This approach has led the manager to favour mid- and small-cap names over benchmark heavyweights.”

She points out the fund’s long-term track record remains strong, although its three-year record has been weaker. This is mainly due to a poor 2017 and the year to date.

Schroder Managed Balanced Fund has a four-star rating from Morningstar, reflecting relatively strong performance against its peers. Over the past three years it has produced annualised returns of 7.82%, and over the past decade it has delivered annualised returns of 9.86% according to Morningstar data.

AIM Still Unpredictable

O’Kane says: “I have made some relatively successful investments in AIM-quoted companies in the past.

“But my personal experience is that the AIM market is too unpredictable and that, despite abolishing stamp duty and allowing AIM shares to be included in ISAs, it is not worth the risk.

“Having said that I do hold some diversified funds quoted on AIM, including TMT Investments (TMT) which offers exposure to a portfolio of mainly US-based tech, start-up and software companies and start-ups.”

O’Kane adds: “Investors in AIM need to be mindful that significant shareholders can sometimes engineer things to take control of a company, sometimes at a low market value. In such situations, private investors have little leverage over developments.

“I prefer to be an early investor into EIS-qualifying private companies as a direct investor. Although they are illiquid compared to an AIM-quoted company, they can offer more shareholder protection in terms of pre-emption rights and other rights.”

He has invested personally in over 15 EIS-qualifying companies. This includes a wide range of different companies, such as and Perfect World Ice Cream.

He says his work at Nexus Investments has helped him as when he joined the company in 2013 it was to spearhead their EIS division. He also invests in the company’s scale-up fund, which is open to private investors.

When it comes to his fund, ISA and SIPP holdings O’Kane invests through the Hargreaves Lansdown platform. He says: “I am increasingly paying attention to fees, both at the platform and fund level. A number of platforms are catching up with Hargreaves’s platform in terms of service, and may steal business I expect in coming years.”

When it comes to selecting funds he looks at performance as well as fees. “A well-known manager is not always the best one. So I follow closely performance over one, three and five years and since inception as well as finding out as much as I can about their investment process.”

Nexus Investments: Crossing the t’s and dotting the i’s

In the first of two articles about Nexus Investments, GBI City Editor Neil Martin quizzed Matthew O’Kane, Managing Director, about the formation of their first fund, Scale-Up EIS and their investment strategy. They now delve deeper into more aspects of the fund.

In part two of the article, we touched on the strategy behind the fund – in this third part, we take a closer look at some of the key differentiators.

The sector appears keen on the term entrepreneurial led and Nexus Investments is no exception, but I asked Matthew, are these courted CEOs aware of the importance of scaling-up for the next stage of their development?

Mission-driven founders

Over to Matthew: “We focus on exceptional ‘Mission Driven’ Founders with a high level of commitment combined with the right level of experience and skills to be able to execute a plan. A key element of our involvement which is known by all entrepreneurs that we deal with is the ultimate goal of an exit and the growing of the business. We only progress with founders that understand this and inherently want to achieve the same objective.

Nexus Investments“It is also true to say that not all people skilled in being able to start or launch a business will necessarily be skilled in, or want to be part of the scale-up process. We are watchful for serial-entrepreneurs, we are also wherever possible looking out for those who may be in love, or “in-like” with the idea of entrepreneurship, but not necessarily aware of what it entails. The entrepreneurial CEO tends to look forward and seek to make things happen – but that alone is rarely enough. The best ones also seek out and listen to a wide range of viewpoints prior to taking bold steps with their business and shareholders’ cash.”

Global potential

In a similar vein, the firm’s investments have to be UK based companies, so how easy is it to see which ones might have global potential?

Matthew has a blunt answer: “It is certainly NOT easy – we reject plenty of business plans that show unsubstantiated intentions for international growth, or lack demonstrable reasons why a foreign nation is going to fall in love with a UK product or company.

“Software and platform companies in particular seem to think having 20,000 users in the UK must then equate to a dead-cert future of 200,000 users by next year in the US or Europe!”

Matthew also highlighted the fact there was a general need to be invested in something defensible, and something clearly advantageously British to appeal to other territories.


For example, education is something the UK is globally respected for, so Pobble and boclips play up their UK origin when selling to the Middle East, the US and the Far East.

A further example is Soupologie and Perfect World Ice-Creams’ packaging for France and Holland respectively. It has been translated into local dialect and not led with the Union Jack. Many of these things may seem to be common-sense, says Matthew, but add value for companies if they think about it early.

“We seek businesses that are scalable and products which naturally lend themselves to international growth, we also seek founders that have the potential and aspiration to achieve this – but are realistic on executing this. IT WILL BE DIFFICULT. IT MIGHT NOT WORK.

“A founder cannot be in all places at once. But in relation to why we think this is important, we can only point to our track record of businesses to date, in terms of expansion, which shows that of our existing portfolio, almost 40% are making sales internationally, with a number of them already having a significant amount of their revenue derived from abroad.

“Some of those have still not convinced sceptical UK investors, or UK customers that they are onto something transformational. But in time they just might. We take time and care to invest in businesses who are open to understanding what could be achieved outside of the UK, and will continue to do so.”


Once the investment has been made, how much does Nexus get involved?

“We were described recently by the chairman of one of our existing portfolio as ‘massively over-indexing’ in terms of the time and value-add and strategic input that he sees us provide to his investee company currently. This was compared to any other investment houses, whether VC, or EIS, he has ever come across. The chairman has a long history as CTO of some very large retail brands.

“We try not to get in the way of what the businesses are seeking to do operationally, but our involvement on questions of strategy, finance, tax, investor relations, are undoubtedly hugely valuable to people who are usually talented in four to five areas, but rarely have experience in each of the seven to eight areas a successful early stage companies need to be strong in if to successfully grow and scale.

“However, we don’t believe sitting on the board is a significant differentiator alone – some boards only meet every quarter: that is a lot of time in the gaps when unless guided soundly, founding teams could head off down a different path than which the sounder, wiser and more experienced investor might know they should better plan to take.

“So we seek to add value through supportive analysis, key staff introduction, general support and advice to help enable a company make well informed decisions on an ongoing basis. We believe this is a differentiator from others in the market.”

Investor profile

As for the firm’s typical investor profile, it’s typically HNW individuals, sophisticated investors and industry-focussed professionals. They are UK-based, often in South-East, although Matthew is clear that they would like to develop this into other regions.  They tend to have invested in a number of private equity, or private businesses in the past, or are entrepreneurs themselves. Many have a professional background perhaps as bankers, accountants or lawyers.

“Going forward we think this will be true of our fund’s typical investor profile: those who generally would like to be backing vibrant and scalable brands and people whose clever ideas have the potential to make a positive difference in global terms as a by-product of a successful financial investment. For example, healthier food indulgences for our children and grandchildren to enjoy; better use of technology in schools to bring learning to life; and, catch up with use of technology in some homes.

“They will also occasionally be thinking about capital gains tax deferral or inheritance tax considerations as part of their assessment of making an investment.”

Exit route

We finish on two favourite questions for investors; firstly, what is the team’s favoured exit route?

“It will be on a case by case basis and predicting this at the start of the fund is difficult. We do envisage that trade sales are most likely, however, as two of our portfolio have received trade approaches so far. But we have the ability to engage with trade, PE and IPO to exit a business as circumstances dictate (there is deep experience in our team regarding M&A processes).”

And secondly, what are your aims for the fund in terms of return?

Matthew is like most EIS providers who do not set firm targets. What he does say is that their 2014 funds deployed are currently sitting at over 3x excluding EIS/SEIS benefits, and so this gives them confidence that they have the ability to generate a meaningful return for investors in the new fund, if they can replicate their selection going forward.

As for that hackney question about a typical portfolio of ten investments, how many would you expect not to make a return, perform averagely, perform well, or be rockets, Matthew believes the outcome is likely to be this, broadly speaking:
–        one to two exceptional performers – rocket;
–        two strong performers – perform well;
–        three average performance – averagely;
–        four struggling / not succeeding – poor.

Good news

Asked how this related to the current portfolio, Matthew has some good news.

“To date, across our portfolio we are in the fortunate position where over ten of our companies would currently be classified as “performing well”, whether as a function of valuation growth, or a function of sales, turnover, and profit and loss development since Nexus’s first involvement.

“There is only one that has performed poorly enough to be discontinued. We cannot yet point to any exits, which makes sense in the context of EIS where you need to hold for 3 years. Over 50 rounds of investment have been have arranged and the vast majority are still yet to pass the three year minimum holding period. However more than one of our portfolio have received trade offers for their business, at meaningful appreciations in value to entry price for Nexus Investors’, which is also very promising.

“To give some perspective, the monies invested into our portfolio in 2014 are currently sitting at more than 3x carrying value on gross performance basis, excluding SEIS or EIS factors. With SEIS and EIS factored in, one or two are sitting at a 5x or more paper gain for early investors who co-invested in 2014 as it stands.”

So the old saying that you’re only as good as your last deal, won’t weigh too heavily on the shoulders of the team at Nexus Investments and one thing is for certain, investors will like the fact that the joy, and sometimes pain, will also be shared by the home team. All for one, and one for all, has a special meaning at Nexus Investments.

If you haven’t read part one and part two, take a look now.

Nexus Investments: Scaling up

It’s a strategy that has served them well, attracting a savvy investor following and one that they wish to take to the next level with their first formal EIS fund. GBI City Editor Neil Martin talks to Managing Director Matthew O’Kane about the approach they will take with their Scale-Up EIS Fund.

Nexus Investments are inviting wealth managers and forward-thinking advisers to a series of lunch events throughout September. The events will focus on how to identify the right funds and why a unique approach can be the right way to go.

We’ve already heard how the fund its EIS Scale-Up Fund has been launched to address a large gap in the market by providing investors with access to exciting but curated UK entrepreneur-led private companies.

The fund has a comparatively broad focus with an exciting spread of health, EdTech, FinTech, AdTech, internet of things, medical devices, university spin-outs, media-tech, healthy drinks, HR tech, healthy food and data SaaS companies.

Current Nexus Investment Ventures portfolio companies include KnowledgeMotion (boclips), Perfect World,, Soupologie and Benivo.

Deal by deal basis

The team has raised over £7m from co-investors over the past four to five years, on a deal by deal basis. The new fund has defined boundaries. And the right level of investment, in the team’s eyes, is £10m.

Attractive sectors

As to why the data, digital, education and health sectors are so attractive, Matthew O’Kane is clear:  “The Fund is focussing on what we believe to be four of the most exciting areas of challenge, change and opportunity in the world today and tomorrow. Sectors in which the UK can become global leaders. Not only are these large markets in their own right they have also been shown to be growing strongly.”

And what would happen if opportunity falls outside of those four key areas – would the team still make an investment?

“It is very likely they will not be attractive to us, and by extension, to our investors. It is important to focus on areas we profess to understand, and where our investors would like to be invested.

I move on to ask Matthew, as to how he reconciles the fact that the Government is moving away from safe harbours, yet a key aim of the firm is to reduce investor risk?

Core attributes

The firm is likely to continue to source and favour investment opportunities into types of companies with one or more of the following core attributes:

  • platform companies (scalable);
  • knowledge-intensive companies (defensible);
  • healthy food and drink companies (scalable).

Matthew continues: “Through our involvement in these sectors over the years we have established a significant network of HNW, portfolio company referrals and board member referrals. We are in the very fortunate, but hard-earned position, of seeing a high number of very attractive opportunities consistently come to us.

“The Advisor and Manager are also sister companies to Investor Publishing – the eyes and ears of both the health investment and education investment communities in the UK and globally. This makes a positive difference when assessing the merits of potential investment opportunities, knowing who the potential competitors are, both in the UK and overseas, who may already by three steps ahead, but also in later years when assessing optimum exit opportunities and potential acquirers.”

Next step

So the next question has to be, how big is the pool in which they fish. Do you see a large number of companies that fit their criteria and who are ready to take the next step?

“From inception, we have sourced in excess of 300 opportunities which has led to only 20 investments. The number of opportunities arising has increased over the period and we are seeing in excess of 100 opportunities a year and growing, of which a small proportion ultimately have become investments. This gives an indication of our level of diligence and review of opportunities to ensure they meet our criteria.

“Prior to the launch of the fund, we have already identified a number of opportunities which meet our criteria and could be potential investment opportunities. Recently we have discussed a sports-team app, a gluten-free bread, a VR led medical device, an international art-app.

“In addition to newly originated opportunities, we have the opportunity of investing in our current portfolio as the outstanding performers push on to take later investment. Despite already being well-known to Nexus, those will be subject to the investment committee approval process if they are to receive any funding from the fund in later rounds.”


The team believes that the number of opportunities will increase over time, although this will naturally be impacted with changes in the economic cycle. But, importantly, the conversion rate we believe will roughly remain consistent.

In the final part of the feature, we mine down deeper into certain aspects of the fund.

Nexus Investments: one for all, and all for one

Nexus Investments has just launched its EIS Scale-Up Fund. The aim is to address a large gap in the market by providing investors with access to exciting, but curated UK entrepreneur-led private companies. GBI City Editor Neil Martin talks to Managing Director Matthew O’Kane and takes a look in a three-part article at what makes the Nexus proposition so attractive for advisers and their clients. And why they are all in it together.

Part One: ‘Skin in the game’

The first question for any firm investing in the EIS space, is what marks you out from the other firms who seem equally determined to spot the fledglings with potential to become winners.

Matthew O’Kane

Matthew has a clear answer: “One main USP is that in all our investments to date,  as individuals we have already put our own skin-in-the-game. This alignment of risk and reward with co-investors – if we win, we win together; if we lose, likewise – is we believe relatively rare.

“Either myself, or founder Harry Hyman has invested in all the current portfolio. Douglas Lidgitt, our Investment Director, has put his own money into all newly originated entities since starting at Nexus Investments.

“This  motivates the key decision makers in the business to select strong businesses and then help them to grow. This alignment of interest will continue with the investment team already committing in excess of £200,000 to the new fund.

Firm’s first

The fund which Matthew refers to is the firm’s first and marks a major milestone in its evolution.

The team believes it to be the first UK EIS fund specifically focused on scale-up opportunities to launch since the UK Government’s £2.5bn British Patient Capital programme which was introduced last June.

The fund is highly targeted, focussing on four of the most exciting areas of change in the world today and one where UK early-stage companies can become global leaders: data, digital, education and health.

Matthew explains: “The Government has identified scaling-up as the next big policy priority if the UK is to capitalise upon the start-up boom of the past five to ten years. At the same time, the era of limited life or ‘asset-backed’ EIS Funds has effectively come to an end with the new Risk-To-Capital condition introduced last year. The Government is instead encouraging a shift away from historical safe harbours toward knowledge-intensive, entrepreneur-led companies, in value-add industries.”

Harry adds

Founder Harry adds: “Since the UK Government’s Patient Capital Review, the focus for EIS investment criteria has shifted to high potential, growth investments. This is the area in which we specialise, and have done for some time. We have put our money where our mouth is in our own EIS deals to date. Our Scale-Up Fund is specifically designed to help investors access these UK investments within a diversified fund portfolio that reduces risk.”

Harry Hyman

Harry is founder and owner of the Nexus Group, which is a privately held company created in 1994 and has grown to over 70 staff. Harry is also managing director of Primary Health Properties PLC, a FTSE-250 listed company that specialises in the ownership of property leased on a long-term basis to healthcare providers.

Nexus Investments, part of the Nexus Group, is run by Matthew and was formed in 2014 when Nexus Investment Ventures was started. The new Scale-Up Fund is managed by Nexus Investment Management, which is an FCA authorised small AIFM.

Matthew has over 15 years’ experience in tax and investment and puts to good effect a unique blend of skills. He possesses a wealth of knowledge and experience in tax from acquiring his ACA at PwC through to being a Senior Tax Manager at Deloitte.

He also has experience of investment management at a recognised UK EIS investment house, and most relevantly worked on secondment at Bridgepoint Private Equity in 2012 and 2013, covering many aspects of UK M&A transactions.

Personal funds

He has sourced and advises the vast majority of Nexus Investment Ventures’ existing portfolio company clients, investing personal funds into 18 of them, and currently sits on the main board of two of Nexus’s portfolio companies, and the Advisory Board of three others. He is an FCA (ICAEW) and a Chartered Member of the Securities and Investments Institute (MCSI).

It was in late 2013 that Matthew joined Nexus from Deloitte to spearhead a new EIS division, which has evolved into Nexus Investments. This was against a then backdrop of long-term low interest rates; caps on both annual and lifetime pension contributions; a trend towards government-supported initiatives to promote positive behaviours; and, heightened interest and abilities in entrepreneurialism in the UK.

Nexus Investments has over the past four and a half years identified a number of exciting EIS eligible opportunities operating in sectors experiencing significant growth. And because the investment team and over 75 other co-investors have put their own personal funds into backing these companies, there has been a natural transition to a fund structure. The team have demonstrated their ability to select wisely, to date, and in particular add -value to these companies. They also prepare them so they can attract later stage capital and high-quality non-executive director support.

Firm’s USP

Returning back to the theme of the firm’s USP, Matthew is happy to elaborate further.

He points out that: “We have also learned over time that our active management and hands-on approach is a differentiator from our competitors. We provide support to our portfolio through introductions, analysis and advice that makes a material difference to the speed and sustainability of growth of each business.

“We don’t purely focus on having a board position to support our involvement, although a representative of Nexus will sit on the advisory, or main boards for the majority if not all of the fund investee companies.

“We seek to identify businesses early, but with real capability to grow and attract that next stage of step-change capital. But, of course, we fully appreciate that the price and valuation are key to generating returns for investors.

“We also know how hard it is to scale businesses, how long this can take, but also the rewards that can come with steady and meaningful scalable investment and growth.

“Take our founder Harry, who has grown both PHP and the Nexus Group over a period of many years – the former has grown its dividend every year for the past 20 years. We believe we understand how to cultivate and support an environment of responsible entrepreneurialism in those whom we back.”

Served its time

In many ways Nexus Investments has served its time, raising funds on a deal by deal basis for a top-tier collection of businesses, with an investment and company-led focus. The Scale-Up Fund is a new and logical chapter, offering its expertise to investors seeking a collection of EIS qualifying holdings of comparable potential and quality.