[Music] Hello and welcome to the Irish VC. My name is Marie Nolan and I work with business venture partners and I am delighted to introduce today's guest, Stephen Tolly the CFO of BVP investments. It's great to have you on Stephen Harry Cuban. Good, good. It's very busy this time of year but it's always always great to talk. Absolutely. So today we really just want to get into demystifying the EWBIES scheme and for anyone who hasn't heard of EWBIES before it stands for the employment investment incentive scheme. So maybe just to start off Stephen do you want to give us a brief intro into what EWBIES is and a bit more detail around it? Yeah sure. So basically EWBIES is a government backed tax relief scheme that encourages investment into Irish SMEs. So from the investor's point of view the key feature really is the income tax relief that can range anywhere from 20% up to 50% depending on the type and stage of company that you're investing into. So our fund essentially at BVP will invest into companies across multiple of stages so everything from pre-revenue right through to mature established companies and from I guess the investor side they can make an investment anywhere from 10,000 euro up to a million euro. So it really caters for a broad range of potential investors. Brilliant. So just when you started talking there you said that the tax relief is a major part of the scheme but also then the Irish-based portfolio companies are in other major reason why people want to get involved. So just on that note before we get into the most frequently asked questions about BVP's EIIS fund. I just want to touch base on an article that was featured last Sunday in the business post and it was a feature article about a successful company for one of BVP's EWBIES previous funds and the company was called Astartine. So you might just tell us a bit more about the company itself how it's scaled and got to the stage where BVP could exit the company and provide it investors with a positive return on investment. Yeah so Astartine was a really good success story that we had this year. So we invested in this company a little over four years ago and again that does go back to the actual scheme itself and you do have to hold down to the shares for four years. So Astartine are a company that are involved in essentially everything to do with decarbonization. So if you're putting in heat pumps, if you're putting in solar and you know so they would go into say a large corpus like a Coca-Cola for example and they would do a full assessment on all of their processes from start to finish and then they'd put a plan in place as to how a company that size can essentially decarbonize and try and hit some of their their targets around greenhouse gases emissions etc. Their founder is a guy called Tom Marin and he's really seen as an expert in this space. So he's been I suppose known to BVP for quite some time and he would have provided us with some advice on previous investments and some technical due diligence and Tom then was going out. He was setting up his own company and you know BVP were obviously very happy to support really knowing how I suppose how front and center he is within the industry and so they started off with the team of three or four people when we were investing they had some initial contracts lined up and so they did have a good pipeline which was very important for us when making the the initial investment but really Tom has grown that from essentially a team of three or four people to a team of 25 to 30 people that are operating in Dublin now and they're really at the forefront of the whole decarbonization movement. So just to give you some I guess reference for the scale that this company has achieved they've gone from being you know a small startup company to the really good success story for the EWIS scheme as a whole not just for BVP. Yeah it's incredible isn't it the trajectory there on you know the growth that they've accomplished over the last two years. So just to move on then because we we don't want to keep this podcast maybe too long but we do want to get into some frequently asked questions about EWIS and trying to do bonk it and one of the things that you did mention there as well was just in terms of the tax relief bands. So we hear a lot about risk versus reward and one thing that people should be aware of before making investments in EWIS is that there are different tax bands which are related to companies at different stages from pre revenue companies which would be categorized as an issue risk finance all the way to expansion risk finance with the different tax percentage reliefs and taking that into consideration are these two things correlated when it comes to deciding on an EWIS investment and what is BVP's approach. Yeah so as a rule of thumb I would say yes they are and so the whole reason you're getting a 50% tax relief on some of these investments is because essentially they're pre revenue and if you think any company that's pre revenue doesn't have that track record it's going to be deemed higher risk. So obviously you know BVP's approach is to invest across a blended portfolio so you will have an element of that and most of our investments you're probably achieving 35% relief and these are investments that are in established companies that are say it has to be say seven years from its first commercial sale but what we're going to look at is is trying to focus on companies that have maybe achieved say one to two million in revenue per annum and have got signs that they have strong growth drivers behind them so what we're looking to do is invest in a company at that stage and then exit maybe when they hit that sort of five to ten million range and then we'll blend that with some 50% tax relief investments in maybe the the medtech space or in the renewable energy space where again from our perspective it makes sense in in these sorts of scenarios to invest and because if we just take the medtech space for example so we'll be investing in a company that's maybe going through its FDA approval process so obviously that takes a number of years to get through so there's quite a long period where they're pre commercial right so you know you can look at it as higher risk but also from BVP's perspective there's very high rewards as part of these investments and our funds just to be clear they're only capped so you know investors are going to get the benefits if one of these companies performs exceptionally strongly the investors going to get the benefit of that and that's really important part of of EWIS investing as well to just be sure that you know you're you're not investing in a capped structure whereby you're taking the the equity risk but you're not getting the equity reward so again just to come back to that medtech I suppose investment there be multiple stages and approval stages throughout an FDA approval process and at each of those stages the company is going to attract in new investors new money into it to take it on to its next stage and typically what can happen is a lot of the time one of the the larger players in the market maybe a larger pharmaceutical or a medical device company will come in and actually they'll see the the approvals coming through and they'll just actually buy the company outright that can be quite a good source of exit opportunities for us at each each stage of the approval process and then on the the renewable energy side of things what we'd be looking at is we'd be trying to obviously de-risk the investment as much as we can so we're going to look at a project say for example our company that's involved in if we take a solar firm and so it'll need to have full planning approval it'll need to have its grid connection quoted it'll need to have full quotes from construction company on on the actual building of the solar firm and then we'll be investing as part of that to basically build out the solar firm but we're not going to take on that planning approval risk then what we'd be looking to do is we'd be looking to blend that with more established companies companies that are you know maybe operating in the technology sector a SaaS type company and again they're going to qualify for 35% relief but they're more established so there's lower risk involved and obviously you know you can see that growth trajectory in their historical financials as well so our investment team will do their due diligence on that to make sure they're fully comfortable before investing perfect that was good insight there into the different kind of types categories on so you said there that BVP was aiming to get a blended tax relief ranging from the 20% to the 50% range so just in the past what has your approach been so in the past I suppose our blended diversified fund has achieved 35% rate of relief and then most recently it's it's on track to achieve about 36% or just under 37% rate of relief and that is what we do that is what we say to investors is like we're looking at a blended rate of 35% but it could be higher than that depending on the final allocation but it won't it won't be lower than 35% because we do appreciate that a lot of investors.
use this tool as part of their tax planning as well. So it's realistic to say that somebody that wanted to invest in the 2025 fund are looking at a range of 35 to 40% tax relief for this year. Yeah, yeah, yeah. Okay, so then just looking at the sector, so you did mention MedTech Renewable Energy and some SaaS type companies there just as examples. But in terms of the 2025 fund, if I was an investor now looking to invest and I was asking what kind of companies do BVP invest in? So usually your fund is about six to eight companies, isn't it? So, you know, what kind of sectors are you looking at this year? Yeah, it's going to be very similar, I would say, to prior years. And obviously we've got a proven track record, a proven approach. And so we don't want to deviate from that too much. Looking at our target list for next year, well, there's definitely some opportunities there around solar, potential solar farm. And there's opportunity there for MedTech investment that again is going to be another 50% investment. And again, that'll probably be alongside. There's some SaaS companies that are scaling very strongly that we've been tracking for quite some time. And so right now, I think they've got about 1.5 million ARR. So that's definitely on our target list for next year. And as well as another company that I can think of that's actually involved in. Again, it's around waste management, water waste management. But they've got very strong revenues. They'll probably have two, two and a half million in revenue this year. So that's sort of blended approach again across multiple different sectors. Some from SaaS, some from climate, some from MedTech, all at various different stages of their life cycle. It should be a nice mix of companies. But you're right, it's going to be six to eight companies we probably invest into. And I think as of right now, we've probably got a strong pipeline and a good target list. But what the final six to eight will be is probably yet to be determined. Well, I would say that I did look at the website on the portfolio companies. So there's good examples there of previous investments made. It's a great place to start for any investors trying to see what we would invest into is to actually look at the past companies. Yeah. And then another question I had. So do investors usually go into EWBIES instead of making pension contributions or is it something that can work alongside your pension? Yet typically we see investors use it alongside their pension. There are definitely cases where they will use it instead of pension or they'll use it in certain cases. Like if they have rental income, you can't actually offset pension against rental income. So they'll use EWBIES and that scenario. But it works very well alongside pension because if you think of pension, pension is really it's long term investing. And you know, if you're putting your money into the pension, it's going to be locked up until you're probably 60, 65. Whereas if you're putting your money into EWBIES, it's more that sort of medium term investment. Now it is going to be locked up for a period of time, which you're probably going to be looking at a timeframe of five to seven years. And is this sort of typical timeframe for an EWBIES fund or a BVP EWBIES fund. So it can work as a nice sort of medium term tool for investors. As well as that then you also have investors who are actually at that or around that pension age where they're getting distributions from their pension. And again, they can utilize EWBIES to offset any income tax returns or income tax that they'll have there. Okay, so there is a minimum holding period for the EWBIES fund, which is a minimum period of four years from the day the investment has made before you can actually start exiting just in terms to get the tax relief. But what happens if an early exit, you know, opportunity arises, what do you do there? So this actually, it does happen quite a lot and usually what happens, I'd say at least once in in each fund whereby a company is performing very strongly and a large company comes in just to acquire them outright. And so obviously if, you know, if it makes sense for our investors, we're willing to consent to that. So what would happen with the tax relief is essentially the tax relief that they earned would be clawed back. But our investors will always be compensated for any loss of tax relief. So typically, you know, that'll come in the form of an additional distribution. So basically, our investors will ultimately just get an extra payment back on top of the sale to compensate them for any loss of tax relief. Okay, that's reassuring to know, say, you know, you wouldn't really lose out on the tax relief side of things there that you would actually get the money for it. Exactly. So another FAQ that I have, what type of person can't actually invest in EWBI as funds? So it's really any Irish resident with income tax. So, you know, as long as you have income tax liability, if it's from our distributions, if it's from your salary pension, whatever it is, you're able to invest. And those investors really they can range across, you know, all sorts of different industries. We see hundreds of investors each year. So it's quite a busy time of year for us between now and the 31st of December, which is the closing date for the fund. So the next FAQ that I have that pops up quite often is people are asking, can they carry forward unused EWBI S relief? Good news is they can carry forward any unused EWBI S relief. So that relief won't be lost, but it has to be fully used against your income in that taxable year first before it's carried over. Perfect. I think they are the main questions today. And so there are more FAQs on the BVP website as well as a tax calculator, which is always beneficial for people to use just to see a realistic view on, you know, if you put in your own investment amount and, you know, what the tax relief could be for you. But how can somebody find it more information or apply for this year's 2025 BVP EWBI S watch? So the easiest way is to go to the BVP's website, our website. And basically there you'll find everything you need, you'll find a link to request an application form, and you'll find our EWBI S tax calculator, which can help you maybe decide the amount you want to invest. And you can get our brochure and our information memorandum, as well as, you know, holy FAQs. And there's also an on-demand EWBI S webinar available. Thanks, Mills Stephen, great insights today. And if anybody wants to talk to BVP or find out more information, you can email
[email protected] or look them up on the website at www.bbp.ie. Thanks, Gens. Stephen. Thanks for it. Bye.
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