FAQs

WHAT IS AN ACCELERATOR?

The start-up accelerator model is designed to help early stage technology businesses reach a point where they are ready to receive considerable funding. Most are based on the Y Combinator model founded in Silicon Valley in 2005 who were the first to deliver this platform and have helped launch companies such as Dropbox, Airbnb and Reddit. The Accelerator Programme works with mentors from all around the world. Each mentor, successful in their individual fields with a variety of skill sets, will help tech entrepreneurs best equip themselves for the future. In a nutshell the accelerator provides training, mentorship and networking to the start-ups.

WHAT IS AN INCUBATOR?

The incubator model works slightly different. Where the accelerator takes a team with an idea and creates the perfect environment and right tools to accelerate the start-up. The incubator takes a ground-breaking piece of scientific technology (the idea) and arranges a team around the innovation to incubate. Both models suit the same purpose of creating the perfect environment to propel starting technology companies.

WHAT ARE THE RISKS?

As with any early stage equity investment, there are some significant risks investors need to be aware of when investing in the Fund:

  • Unquoted start-ups are inherently riskier than other investments.
  • The value of shares in start-ups can go down as well up and you may not get back the full amount invested. Please only ever invest what you are prepared to lose.
  • Investments in start-ups are highly illiquid and difficult to value. They are not like shares in listed companies which can be easily sold. There is a very limited market for unquoted shares. There are only likely to be exits for our investors through trade sales, IPOs or new private equity acquirers.
  • Tax treatment is dependent on individual circumstances and may be subject to change in the future. Availability of the tax reliefs is not guaranteed.
  • Past performance is not a guide to future performance and may not be repeated.

Please carefully review the risk section of our website


WHO WOULD FIND AN EIS/SEIS INVESTMENT USEFUL?

This investment may be suitable for investors who are looking to:

  • Take advantage of income tax relief
  • Defer payment of capital gains tax
  • Shelter investments from inheritance tax
  • Harness the potential for significant tax-free capital growth in today’s financial markets
  • Diversify their existing investment portfolio
  • Find a complementary solution to pensions

WHO IS ELIGIBLE FOR THE TAX RELIEFS?

Any UK taxpayer is eligible for the tax reliefs. The initial relief is limited to the amount of tax the individual pays.

HOW DO I INVEST AND RECEIVE THE TAX RELIEFS?

The relevant date for income tax relief, from a tax year perspective, is the date on which investments are made into each qualifying company and the company sends you SEIS3 and EIS3 forms, rather than the date on which you invest into the Fund. Your claim can be made via your self-assessment tax return for the tax year in which the shares were issued. If the shares were issued in a previous year, and/or if the claim is for capital gains deferral relief, the claim part of the SEIS3 and EIS3 forms must also be completed and sent to your tax office. If you have an EIS3 and/or SEIS3 that would allow you to claim income tax relief in the current tax year, you can request a change to your PAYE tax code, or an adjustment to any self assessment payment on account due. You will still have to make the claim itself on your tax return when you obtain it. Full use of these tax advantages will depend on individual circumstances and if you are unsure of your own potential tax liabilities, you should seek professional advice from a qualified tax adviser.

WHEN WILL THE INVESTMENTS EXIT?

SEIS and EIS investments will be in unquoted companies, which are not readily realisable investments. You should be prepared to retain any (S)EIS investment for at least three years or you will lose any initial reliefs claimed. Once the company in which you are invested has been trading for at least three years, the following options may become available to you, or the Manager on your behalf, to realise your investment at a later date:

Disposal of shares to a third party or back to the company

  • Management buyout
  • Trade sale
  • Liquidation of the company on a winding up
  • Initial Public Offering

ARE THE SHARES OF THE INVESTEE COMPANIES REGISTERED IN MY NAME?

Under the terms of our investor agreement, each investor appoints FOMCAP Nominees Limited as its nominee. Each time an investment is to be made by the Fund, we will direct the nominee to purchase and hold a specific number of investee company shares. The nominee will then be the registered owner of the investee company shares, but for legal and tax purposes individual investors will be the beneficial owners of such shares. When your subscription is fully invested you will have a small beneficial shareholding in 30 investee companies. 

IS THERE A CLOSING DATE OF THE FUND?

The Fund has an evergreen structure which means there is no final closing date. If you invest tomorrow and the money is received by the custodian, we will aim to start deploying from the next investment onwards and your 30 companies will start from then. You are unlikely though to be invested in the same companies as earlier investors. 

IF I INVEST TOMORROW WILL I HAVE ALL THE COMPANIES IN THE OPPORTUNITIES SECTION IN MY PORTFOLIO?

We will do our utmost to try to get new investors in the upcoming transactions. We have in most cases agreed some room on the upside of our investment with the investee companies. Whether we can is dependent on timing, the specifics of each transaction and how quickly the investee company wants to complete the fundraising. We cannot guarantee that you will be part of the next deal but we will do our best. 

WHY 30 COMPANIES?

In 1970, Lawrence Fisher and James H. Lorie released "Some Studies of Variability of Returns on Investments In Common Stocks" published in The Journal Of Business on the "reduction of return scattering" as a result of the number of stocks in a portfolio. They found that a randomly created portfolio of 32 stocks could reduce the distribution by 95%, compared to a portfolio of the entire New York Stock Exchange. From this study came the mythical legend that "95% of the benefit of diversification is captured with a 30 stock portfolio." 

CAN I PICK AND CHOOSE WHICH COMPANIES GO IN THE 30?

FOM selects and manages the first 30 companies in your portfolio. If you have invested more than £25,000 in the Fund, when you make a further investment in the Fund, you may request into which of the companies listed on our portal your additional subscription monies are invested. We do our best to meet investors' preferences but our ability to do so always depends on the individual circumstances of the company's fundraising round and the need for us to ensure we treat all of our investors fairly.


DO I GET DILLUTED?

There is a general misperception of how dilution works and more importantly what it means to you. Let's say you have a company with 4 shares priced at £2 each. The total value of the company is £8. If that company raises more capital and issues two more shares they now have a total of 6 shares outstanding and let's say they sell them for £2 a share. Now the company raises £4 at £2 a share each. Did dilution take place? On the one hand yes - your percentage as a shareholder has changed from 25% to 16%. But generically there is a misperception that the value of the share is different. Before 4 shares represented £8 value and now you have 6 shares representing £12. In other words the value of the shares is exactly the same (£2). Does it matter that the percentage has changed? The percentage is only relevant if it is material enough to express voting power over key corporate decisions. For most investors that have a small minority stake this will be irrelevant. Just like owning shares in listed companies the effect you can have on material decisions is very small. 

IS THERE AN ANNUAL MANAGEMENT FEE OR CUSTODIAN FEE?

No, we do not charge an annual management fee or other annual fees. We charge investors a subscription fee and a performance fee and we charge our investee companies a corporate finance fee. Please find details set out here  Fee/ Tax Section


WHAT HAPPENS TO MY (S)EIS RELIEF IF I LEAVE THE COUNTRY?

The EIS and SEIS relief is linked to your income tax bill. The relief obtained is based on the year we make the investment on your behalf. You can carry back the tax relief to the previous tax year assuming you have paid tax in that year. Leaving the country will have an effect on reliefs obtained in the future. This is mainly the tax free element of the exit proceeds and the loss relief that can be obtained when a company fails. By moving outside the UK you will be subject to the tax regime of the new country. See more on taxes in the Fees/tax Section

IF I MAKE AN INVESTMENT IN THIS TAX YEAR WHEN CAN I GET MY TAX RELIEF?

Your EIS and SEIS tax relief can be taken in the tax year the investment is made or carried back to the previous year. Please bear in mind that it is dependant on when we at FOM execute the investments. As we invest in your 30 companies over a period of 12 months, some may fall in this tax year and some may fall in the upcoming tax year. We will keep you posted and take care of the (S)EIS forms which can be viewed at all times online. Please see the Fees/tax Section for more information. 

WHAT IF A COMPANY FAILS BEFORE THE HOLDING PERIOD OF 3 YEARS?

If one of the Fund's investee companies fails and is therefore wound up for a genuine commercial reason before the end of the 3 year holding period, this will not jeopardise investors' EIS or SEIS relief (as applicable).

HOW IS THE PERFORMANCE FEE CALCULATED?

We charge the performance fee after your full subscription to the Fund has been returned see the Fees/tax Section for more information. Let’s say you invest £100k in the fund. Net of subscription fee and VAT £95.2k will be invested which is £3,173 pounds on average per company. Now let’s say one of the companies has an exit at 35x which means we receive £111,055. First £100k will be returned to you and on the surplus of £11,055 we charge a 20% fee which is £2,211 and the rest is returned to you in addition to the £100k which is £9,044+£100k. So in total you receive £109,044 on that one exit. If company 2 then exits with a 15x you have already received your subscription back and therefore the 20% will be applied on that exit amount – returning to you 15x £3,173 x 80% = £38,076 etc, etc..

WHO ARE THE ADVISORS?

We have created an advisory programme from our network of global leaders and industry experts to fully aligned with our investments. We believe this helps mitigate risk further by supporting early stage tech companies with more than just capital. Successful people are busy and as such we feel that we need to give them a bit of 'skin in the game'. This will further align them with the investee companies and will resonate with their competitive nature. We have set aside 5% carried interest to incentivise our advisors. The list of people online is a fraction of our global network. Some have chosen to not be publicised and we respect their identity. 

HOW MUCH HAS THE FUND RAISED AND DEPLOYED SO FAR?

As the size of the fund and how much we deploy is constantly growing, we have decided to not disclose it to the public. 

IF A FUNDING ROUND OF A COMPANY IS OVERSUBSCRIBED HOW WILL THE ALLOCATION PROCESS TAKE PLACE FOR THE INVESTORS?

When it comes to divying up the Fund's allocation in an investee company carrying out a further funding round, the Fund's investors are prioritised in the following order:

1. Firstly, Fund investors who already have the company in their portfolio will be able to fully take up any subscription rights they may have under the company's or any statutory (if applicable) pre-emption provisions which apply on the issue of new shares.

2. Secondly, and where there are no pre-emption provisions triggered by the further funding round, Fund investors who already have the company in their portfolio in the proportion to which their investment in the company bears to the other Fund investors' investment in the company.

3. Thirdly, Fund investors who do not yet have the company in their portfolio.

We will do our best to keep 20% of the Fund's total allocation in companies listed on the portal carrying out live funding rounds for investors who requested that the Fund invest in that particular company. This is conditional however on there being sufficient demand and provided that Fund investors who have the benefit of pre-emption rights have received their full entitlement under them.

We have an overriding obligation to treat all Fund investors fairly and if in our opinion the above allocation basis creates an unfair outcome then we do reserve the right to depart from this.