Mainstream Venture Fund Finds Way In AltFi World

Regular readers of our News site will be aware that a regular feature of our coverage of the alternative finance (and specifically the FinTech) sector is the attempts at inwards investment by mainstream finance. The transfer of capital as been easily effected – but making a success of the business has proved altogether more difficult. However, today we are pleased to bring news of a smart investor who appears to be making a success of its venture into the alternative world.

Listed venture capital firm Draper Esprit has seen the value of its portfolio rise by 18 per cent in the year to 31 March, now worth £703m, according to AltFi. 

“While its profits were just £40m (down from £111m in 2019), its net asset value (NAV) grew by 6 per cent to 555p as a result of rising tech valuations. 

Looking to this year CEO Martin Davies said he believes Draper’s portfolio will perform well despite Covid-19, he said: 

“Our portfolio companies are likely to be at the vanguard of this recovery given the likely acceleration of trends such as cloud infrastructure, online gaming and entertainment, digital healthcare, remote financial services and automation as a result of the changes made by countries, corporations and individuals.” 

In the space of FY2020 Draper added 9 companies to its portfolio including ThoughtMachine which it invested £16.5m in as part of the cloud banking player’s Series B round in March 2020 and Freetrade which it invested £4m in October 2019. 

Draper Esprit partner Vinoth Jayakumar told AltFi: “The biggest fintech uplift has obviously come from Revolut, which is a driver of NAV for us as they’ve gone from a valuation of £1.7bn to £5.5bn in the space of 24 months, so that’s been key on the B2C side.” 

In total Draper has now invested  £7.4m in Revolut, a stake that was worth £21.7m during the fintech’s latest funding round.

Historical Performance And IFISA Process Guide

  • Money&Co. lenders have achieved an average return of more than 8 per cent gross (before we deduct our one per cent fee). 

That figure is the result of over £21 million of loans facilitated on the site, as we bring individuals looking for a good return on capital together with carefully vetted small companies seeking funds for growth. Bear in mind that lenders’ capital is at risk. Read warnings on site before committing capital.

  • Money&Co. has been lending for over 5 years and has only had two bad debts so far, representing a bad debt rate of 0.03 per cent per annum.

All loans on site are eligible to be held in a Money&Co. Innovative Finance Individual Savings Account (IFISA), up to the annual ISA limit of £20,000. Such loans offer lenders tax-free income. Our offering is an Innovative Finance ISA (IFISA) that can hold the peer-to-peer (P2P) business loans that Money&Co. facilitates. For the purposes of this article, the terms ISA and IFISA are interchangeable.

So here’s our guide to the process:

  • Step 1: Register as a lender. Go to the login page, and go through the process that the law requires us to effect. This means we have to do basic checks on you to comply with money-laundering and other security requirements.
  • Step 2: Put money into your account. This is best done by electronic transfer. We can also process paper cheques drawn in favour of Denmark Square Limited, the parent company of Money&Co.
  • Step 3: Buy loans in the loan market. Once you’ve put cash in your account it will sit there – and it won’t earn interest until you’ve bought a piece of a loan. It’s this final step that requires lenders and IFISA investors to be pro-active. Just choose some loans – all loans on the Money&Co. site can be held in an IFISA – and your money will start earning tax-free interest.

The ISA allowance for 2019/20 is unchanged from last tax year at £20,000, allowing a married couple to put £40,000 into a tax-free environment. Over three years, an investment of this scale in two Money&Co. Innovative Finance ISAs would generate £8,400 of income completely free of tax. We’re assuming a 7 per cent return, net of charges and free of tax here.

Once you have made your initial commitment, you might then consider diversifying – buying a spread of loans. To do this, you can go into the “loans for sale” market. All loans bought in this market also qualify for IFISA tax benefits.

Risk: Security, Access, Yield

Do consider not just the return, but the security and the ease of access to your investment. We write regularly about these three key factors. Here’s one of several earlier articles on security, access and yield.


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Disclaimer: Money&Co.™ is the trading name of Denmark Square Limited, Company Number 08561817, registered in England & Wales, authorised and regulated by the Financial Conduct Authority (FCA). The company is identified on the Financial Services Register under Reference Number 727325. The registered office is 58 Glentham Road, Barnes, London, SW13 9JJ where the register of Directors may be inspected. Denmark Square Limited (ISA manager reference number Z1932) manages the Money&Co. Innovative Finance ISA.