Octopus launches institutional venture fund

The fund structure sees the Octopus Titan VCTs 1-3 sell their holdings in four portfolio companies – Zoopla Property Group, Graze, Calastone and Secret Escapes – to the new fund.

The latest vehicle is financed by institutional investors including DB Private Equity & Private Markets, the private equity platform of Deutsche Bank Group's Deutsche Asset & Wealth Management division, and European fund-of-funds Seligman Private Equity Select LLP.

As part of the sale, the VCTs will retain 50% of their original investment through ownership of a stake in the new fund, allowing VCT investors to profit from the predicted future growth of the portfolio companies.

The proposal ensures that each VCT remains qualifying and tax reliefs are maintained, while further institutional funding is directed into the UK venture capital scene.

"One of the things that occurred as a result of the success we were having with the funds and some of the assets in the VCTs was likely to cause a problem for the VCTs in the future with regards to the qualifying test," explained Alex Macpherson, fund manager for the Titan VCTs and head of the venture team at Octopus.

"And if we want to back these companies the whole way to being multi-hundred million pound businesses, then this problem is something we have to face," Mcpherson told unquote". 

"VCTs are a brilliant vehicle for helping businesses grow to the £50-100m range, but growing to multi-hundred million valuations is not what they are designed to do. So we have been able to access institutional money alongside that VCT money to help bring them to that next stage," he added. "And if these companies are going to be a game-changer in a certain sector then we want to continue to be involved with them, but we appreciate that is not what VCTs are designed for." 

Bluetower Associates advised Octopus on the transaction.

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• UK / Ireland
• United Kingdom
• Octopus Investments