£20,000, for 10 shares.
There are no fees payable by investors in addition to their initial investment. The Company provides for external distribution and intermediary charges of up to 6% of the funds raised. There are no annual ‘fund management’ fees, neither are there any success fees. The management team does not draw salaries either, until the company is revenue-generating and profitable, i.e. it is able to sustain the salaries through profitable revenues. The management team are incentivised by their respective equity stakes in the company, and therefore their goal is completely aligned to that of any investor, i.e. a profitable exit upon refinancing, IPO or sale.
The Company is targeting revenues in the range of £0.8m – £3.6m in 2019/20 with a corresponding potential EBITDA of between £580K and £3.1m, depending upon market penetration into the IFA and non-IFA markets. Using current industry standard multiples of EBITDA for this business sector to calculate a projected valuation, investors could potentially receive between 1.6 and 14.6 times the original investment. See pages 22, 23 & 33 of the IM for more detail.
The Company will sell annual subscriptions of the service to Independent Financial Advisors, Financial Intermediaries, High Net Worth Individuals, Sophisticated and Professional Investors at a minimum rate of £299 per year. No recognition is made within the IM for the potential revenues that may be generated through advertising on the site or bespoke reports produced for product promoters. See pages 14, 15 to 18 and 22 & 23 of the IM for more detail.
The breakeven point for the company, described as number of subscriptions, is targeted for 2018/19 and is 803 subscribers at £249 each, net of VAT. See Schedule 1 of the CIDG Information Memorandum.
An MBO, IPO or financial restructure of the Company in 2019/20. It is much more likely that it will be an MBO, as the management team has a strategy of growing the company into other markets. If a trade sale or financial restructure is available at a suitable return for investors and management, this will also be considered. CIDG would also like to offer Investors and independent exit via Asset Match, see www.asset-match.co.uk.
There is no dedicated facility or service currently available to High Net Worth Individuals, Sophisticated Investors, Professional Investors or IFAs where they can compare Alternative Investments products like SEIS, EIS, BPR or VCT on a like-for-like basis, and from a website that is objective and not compromised by payments for reports from Investment product providers and promoters, or the facilitation of introductions and sales of products to Investors.
CIDG is the only website where Investors can see objective and uncompromised scoring of Alternative Investment products across 5 areas, namely;
1. Fees & Charges
2. Investment Offer
3. Commercial Opportunity
4. Risk Factors
5. Management Team.
There are a number of companies and individuals that offer specialist investment reports, though they are mainly for IFAs and Financial Intermediaries, including The Tax Efficient Review and Allenbridge. The services are not on-line comparisons, and neither are they designed for individual investors themselves.
The exception is MICAP, which is wholly an on-line proposition, but again this is marketed at the IFA and Financial Intermediary communities. However, this site is compromised by the fact that it charges product providers and promoters for reports. It is further compromised by the facilitation of introductions to Investors and sales of Alternative Investment products to Investors through its website. See page 13 of the IM for more details.
There are a number of operating principles, which are embedded in VN-CP projects generally, that make CIDG completely different from the competition, namely:
1. Only one senior team member is salaried. The management team is incentivised by its equity participation – which ranks equally with all other investors in terms of dividend and capital entitlement – and is focused on making the service and site content as compelling as possible, thereby attracting as many paying subscribers as possible. Since all of the management team are equity participants, their incentive is to ensure a successful MBO, IPO or financial restructure at the optimal point for investors, i.e. to ensure that the best exit-multiple is achieved for investors whilst maintaining their EIS tax reliefs
2. No ongoing management fees are charged to CIDG or the Investors, as it is not a fund and the management team does not act or charge like one
3. No success fees are charged to CIDG or the Investors
4. The management team includes over 25 years experience in tax-efficient investment and funding structures. The Chairman is a Chartered Accountant and senior tax advisor, and the team also includes David Newman who was extensively involved with Yell and Mark Gilmore who has extensive experience in this sector, having previously started a successful multi-media web design and marketing agency from scratch
5. Complete financial transparency on all financial aspects of the project, providing investors with full access to details of development expenditure, revenue generation and with consultation on periodic equity distributions and disposal gains at exit.
1. Whilst it has access to a substantial amount of research and data, which has been compiled regarding the market opportunity, there is no guarantee that the market will react in the way forecasted in the IM.
Mitigation – Independent research, (The Alternative Investment Report 2014) demonstrates the gap in the market for this type of service and the growing demand for “quality of information’, and the need for “access to more information and historical performance data” as “being essential to improve the EIS market”.
Mitigation – The key value in the site for subscribers will be the Objective reporting and objective scoring metrics that will enable the like-for-like comparisons to be made.
The fact that CIDG does not charge Investment Product providers nor promoters for reports put on the site, and the fact that Investors are not introduced to, or sold these investment products either, will ensure the site retains its unique blend of objective, unbiased reporting, and completely uncompromised scoring. These unique features will ensure the Company retains the credibility and trust required for the service to be a success, and retain complete differentiation in the marketplace.
Furthermore, by populating the site with as much pertinent data as possible, keeping the site up-to-date and retaining all historical data for further comparison and value-based services will help the site remain relevant and valuable to the Intermediary and Investor community alike.
Mitigation – The Directors have used all credible and reference-able sources for market research, independent reports, and experience in other projects to formulate the CIG proposition and business model.
The market uptake for CIDG-type services is unproven. The project’s continued success is partially driven by legislation and regulations that are currently being considered or enacted, and the IFA and Financial Intermediary communities’ motivation to offer clients advice on Alternative Investments where they currently have been unable to do so – primarily due to lack of transparent, objective and centralised data, to enable them to make informed comparisons and suitability recommendations to their clients, and be compliant with FCA regulations.
Mitigation –The CIDG business model is targeting the Investor community first, i.e. High Net Worth, Sophisticated and Professional Investors. The IFA and Intermediary community are a secondary, though not to be ignored, market for CIDG.
EIS Tax Reliefs – A condition of HMRC’s approval is that the conditions relating to the Company and its trade have to be complied with throughout the 3-year period following the issue of the Shares. Although it is the intention that the Company’s activities should qualify under EIS, if the conditions are not complied with the Company would have breached the EIS regulations and the income tax relief would be withdrawn
Mitigation – The Company will trade as per the EIS regulations and there are no intentions to do otherwise.