Few, if any, managers can say they are immune to the current pandemic related economic uncertainties. However, the Fuel Ventures EIS Fund’s focus on e-commerce platforms and marketplaces, gives it a clear advantage over many competing EIS Funds. It is not hard to see why the current Coronavirus ‘lockdown’ will mean an increase in demand for the provision of goods and services online. If consumers and businesses aren’t out and about, then there is little alternative…
However, there are also important, but less obvious reasons why these sorts of businesses are well placed to weather the storm. Here are just a few characteristics of why digital businesses are better placed to survive and in some cases thrive, in the coming months and years ahead….
- Ability to operate remotely, without disruption / impact on their day to day operations. Their staff are likely to be extremely tech savvy, productive whilst working remotely and in many cases already operating to an extent from multiple locations.
- ‘Asset light’ – their requirement for capital is not to service large fixed overhead expenses like premises or equipment. Capital raised is typically to grow the business at a faster rate and win new business, as opposed to servicing existing customers – giving important flexibility.
- High gross margins. Once you have a product/service that works (the Fuel Ventures EIS Fund only invests in revenue generating businesses), these types of business are highly scalable and cash generative. The marginal cost associated with servicing an extra customer is miniscule. Most of the revenue from that customer will drop straight to the bottom line.
- Not reliant on supply chains. Whilst the disruption to supply chains due to the pandemic is hopefully only going to be temporary, it is not the only imminent threat. The trading uncertainties related to Brexit and broader simmering trade tension have not gone away.
- Flexible and able to ‘pivot’ swiftly. If a particular opportunity suddenly presents itself with a particular client or in a particular market, they are generally able to react more swiftly than ‘old world’ businesses.
Examples of the types of companies your clients might get exposure to include….
OnBuy – https://www.onbuy.com
A marketplace that allows consumers to buy products online in a similar manner to Amazon. Whilst clearly tiny in comparison, OnBuy has several advantages over Amazon in terms of its focus and technology. Last month OnBuy achieved its highest sales to date.
Distributed – https://distributed.co/
A platform that allows businesses to tap into a global talent pool of highly skilled computer coders and developers for short term projects. Rather than employing expensive full time employees, companies are able to operate more flexibly and have lower costs than they would otherwise.
For more information on the Fuel Ventures EIS Fund, or our other funds, please see our Open Offers page.
Please note, past performance is no indicator of future performance and may not be repeated. EIS investments are long term, high risk and you may lose all of your capital and any tax breaks received. EIS investments are not suitable for all investors. Investors should be experienced in investing in Venture Capital or preferably seek advice from a suitably qualified IFA or financial adviser.