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Highgate Associates – Manager Overview

Who is Highgate?

Highgate Associates was established in 2001 by Andrew Muir and Ken Nelson, each having over 25 successful years dedicated to starting and building and selling technology companies globally.

Highgate deploys a very focused hands on approach to the Highgate Tech Funds EIS investments, taking board positions and active roles in guiding, mentoring and counselling the management teams within the investee companies. This “bare hands” approach brings added value and synergies to the company management teams. Of particular focus is close scrutiny of the exit strategy and opportunities for returns to investors that may arise during the company’s investment period.

What Highgate says about itself

Winner of the Allenbridge EISA Best Fund Innovator Award 2011

Operational Experience:

• The team build businesses with their bare hands
• The team is 100% committed full time to the Fund
• Fund management take an active role (not just a board seat) to guide, mentor and counsel the investee management team.
• Operational experience combined with financial depth
• Comprehensive Due Diligence on Investee Companies
• Flexibility is key and the team will act opportunistically to capitalise on exit opportunities, notwithstanding the 3 year EIS period, if an early exit is in Investor’s best interests.
• Equally, on exit, profits are immediately distributed to investors or can be rolled over into another EIS fund and are personal to the Investor. Their value depends on the individual circumstances of the Investor. Investors should obtain advice from their own professional advisers as to their tax position in respect of their own Fund. Please note that tax advantages are only available on the actual amounts invested in Investee companies.

Value Add:

As well as taking a seat on the board, we will provide investee companies with:

• Assistance in establishing controls and procedures and financial reporting at a standard required for exit
• Advice, guidance, mentoring to impart the wealth of experience Highgate has (eg having started and built numerous tech companies from zero to IPO) with a view to growing the company quickly, and more profitably
• Advice from and/or secondment whenever appropriate, of our team of experienced business builders, Marketing Directors, CFO’s, Sales Directors etc.
• Assistance in establishing worldwide distribution through our network of partners and distributors around the world.

How Highgate describes their investment process

Access to private investment opportunities

Enterprise Private Equity Limited works closely with Highgate Associates, which has been involved and has much expertise in working with EIS companies and early stage technology businesses in the UK, Europe and the USA.

Please note that Enterprise Private Equity also have an EIS offering on the Kuber platform that focuses on capital growth/asset-backed private equity but is not focused on technology industry

Private company investments are often difficult for the private investor to access, they are often snapped up by larger financial institutions, for their higher growth potential. Both Enterprise and Highgate are uniquely positioned through their longstanding operation in the unquoted sector to source, identify and assess suitable investment opportunities that are normally not available to private investors.

Hands on Management: Highgate builds businesses with their bare hands. Growing companies need help as well as adequate funding to stay focused on their strategies, exploit new opportunities and prepare for the next stage of development or exit. Investments will only be made in companies where the Fund either engages or has vetted experienced professionals to work with the management team. The Fund will take board positions in all investee companies and takes an “active role” to guide, mentor and counsel the management team.

Low entry prices: The shortage of availability of capital for early stage companies and SMEs together with the Investment Committee members’ expertise in the sector should enable highly attractive terms to be negotiated with investee companies thus creating greater upside for investors.

Unique market positioning: Strong deal flow in the sub-£5 million arena is further advantaged as the majority of private equity and venture capital houses are targeting substantially larger deals.

Intellectual Property Rights (IPR): The last decade has seen a significant increase of IPR arising from the now-generic usage of web based and mobile applications. Increasingly, technology based companies develop or acquire intellectual property which has become a standard category of asset and easier to value. Whilst the Fund will avoid areas such as biotech, it will consider opportunities with demonstrable IPR, content ownership, viable markets and quantifiable product deliverables. One such area, the media sector, offers much in the way of the exploitation of IPR and content providers are a particular target area, as well as mobile applications and location based services delivered via mobile devices.

Early stage companies: The Fund will target companies that are in the early stages of their development and organisation, which show a particular innovation or product development that have a significant high growth opportunity, either in new or established markets. These companies can typically accelerate rapidly, generating better than average results within a short time frame.

The Board will:

• Unanimously approve every investment purchase or sale prior to the transaction being agreed
• Report to the Fund’s Investors
• Liaise with active Investors on a regular basis to review and report performance
• Appoint specialists such as investment, legal, accountancy and technical professionals
• Monitor portfolio balance and exit to Investors
• Manage the winding up of the Fund

The Investment Committee will:

• Source investment propositions
• Research investment proposals and carry out due diligence involving relevant active investors as appropriate
• Prepare investment recommendations to the Fund Board
• Negotiate terms of investment
• Monitor performance of investment and report to the Board

Exit Strategy

Investee companies will need to demonstrate a clear exit strategy in order to provide investors with their returns. Whilst EIS shares must be held for a minimum of 3 years to obtain the full value of the tax breaks, experience shows that it may take longer in order for the company to maximise its value. The Fund should therefore be viewed as a 4-7 year investment for full exit potential. However, early stage Tech companies can move rapidly and it’s possible that exit opportunities may arise before the 3-year EIS period is completed. Highgate’s team will monitor this carefully and recommend taking profits if this benefits shareholders and roll these forward with CGT deferral or distribute the proceeds to the Investor.

Full Due Diligence: Robust and thorough comprehensive in-depth due diligence skills deployed by the Investment Committee members and its team for each potential investee company. The Enterprise core discipline is advisory corporate finance, a significant part of which is to review every aspect of the business and to set strategy as appropriate. Highgate members have specific technological, operational and financial management experience in tech companies from early stage to exit and conduct due diligence on each investment to a level of detail that is not often found in other comparable funds.

Extensive network resource: The Investment Committee has an extensive network of serial entrepreneurs and business people with skills in relevant disciplines and sectors. The Fund can call on these resources to support and mentor investee companies to maximise returns.

Considerable experience of all market conditions: The Investment Committee members have operated throughout a variety of economic cycles and market conditions, enabling adverse conditions to be weathered and new opportunities to be exploited. Attention will be paid to current economic circumstances and the investee company’s ability to withstand sustained adverse conditions as well as to exploit growth opportunities, which may arise consequently.

Sound EIS Process: The Investment Committee deploys good quality advice from tax professionals teamed with its own management, who understand the need to monitor the investee company’s growth, which considerably reduces the risk of inadvertent breach of EIS status, unless otherwise advantageous to Investors.

The Highgate team

Andrew Muir & Ken Nelson co-chair the Fund Investment Committee and work closely with Enterprise Private Equity in allocating EIS Funds to the investee companies and managing the Fund Investments.

Andrew Muir

Co-Chairman of Fund Board and Co-Chair of the Investment Committee
Muir is a software engineer turned businessman, with more than 25 years of executive and general management experience in the computer software and services sector. He has held numerous high-profile business roles that have focused on spearheading major international sales and marketing initiatives for US-based corporations, as well as the development of global strategic partnerships. He is a specialist in start-ups, turnarounds and delivering rapid profitable growth.

Kenneth Nelson

Co-Chairman of Fund Board and Co-Chair of the Investment Committee
Nelson brings a unique combination of senior-level operational and financial expertise and investment experience. He is a seasoned corporate executive, with a background of over 30 years in international finance and operations. Nelson’s strong history in structuring corporate financial offerings, including IPO’s and various debt and equity instruments, resulted in raising over USD1 billion dollars in public and private financings, and orchestrating over 100 mergers and acquisitions.

Henk Nieuwenhuizen

Member of the Investment Committee, Nieuwenhuizen is an experienced executive, with a background of over 25 years in international finance and operations. He has significant expertise in the areas of corporate finance, accounting, audit, tax, personnel and administration. Nieuwenhuizen has started several successful European operations for US software and technology companies over the last 25 years. His detailed knowledge of IFRS and UK and US GAAP accounting methods serves him uniquely in the global marketplace in which he works.

Emma Chablo

Member of the Investment Committee, Chablo is a highly experienced marketing professional with the proven ability to deliver global strategy to high tech software solutions, telecomms and marketing services sectors globally. With more than 20 years experience in senior marketing positions and as an independent consultant, she has successfully delivered marketing at the highest levels. She also has extensive experience working with large, medium and smaller tech sector businesses and has been involved in developing marketing strategy though the full range of growth stages including re-brand, MBO, VC, IPO and acquisition, disposal and trade sale.

Susan Phillips

Fund Board and Investment Committee member, Phillips founded Enterprise Private Equity Limited in 1992 and has a track record in corporate finance, specialising in development capital in the sub-£5m market. To assist with fund-raising exercises for SMEs, she has become an acknowledged expert in the EIS and is a Director and Council member of the EISA, the official trade body for the EIS (see www.eisa.org.uk) and acts as its Director General. The objective is to promulgate investment activity in the SME marketplace, an activity which dovetails with advisory and investment management activities in this area.