Letter from Ralph Singleton

1. Cornwall & Isles of Scilly Investment LP acting by CIOSF General Partner Limited
Registered Office: Riverside House, 4 Meadows Business Park, Station Approach, Blackwater, Camberley, Surrey, GU17 9AB
Registered in England, Company Number: 09501209, VAT Number: 900541372
Hi Mark
Some interesting comments that I feel need answering now but we will also cover on Tuesday.
You say we are more PE than VC. I think you either misunderstand the fund or misunderstand
the difference between PE and VC. PE investors typically invest in more mature companies, often
involving delisting or complete take-over of underperforming assets. If we were a PE business
we might consider taking over Hirst Magnetics and then providing funding to grow your
business. PE businesses often put in new management teams. We are very definitely a VC style
business (taking small stake in businesses to support growth) but perhaps one that is more
focused on providing funding for early stage growth businesses (we tend to avoid pre revenue
or businesses that have not achieved MVP ) rather than pure start-ups. This can be seen from
the portfolio. See the equity investments made here (the case studies cover debt and equity
investments) https://www.ciosif.co.uk/case-studies/ (one more will go up shortly) The typical
debt portfolio clients are a little more mature due mainly to requiring some projected cash flow
to pay back the loans. The nature of the companies we lend to are above the risk levels that the
banks will consider and as a consequence the costs (to cover the increased risk) are higher
which again leads us to supporting growth businesses that have rising sales that can afford to
pay back the loans.
You mention that we are at a disadvantage by having to have matched funding. Whilst COVID
19 has reduced the EIS and Angel demand we have just completed one deal with the required
match and have 3 more to complete in the next 2-4 weeks and more in the pipeline beyond this.
So currently we do not see this as an issue more of a benefit to those companies. We are
looking for good quality businesses that want to grow. When we find them, achieving a match is
not an issue. If other investors don’t want to invest, we and you should ask why. The answer
usually is that the company is viewed by the majority as not a viable investment. Having an
independent (not another fund run by us) co-investor validates the investment thesis and will
ensure better returns in the longer term for the benefit of the Cornish economy. The matched
Cornwall and Isles of Scilly Investment LP
c/o The FSE Group
Lowena House
Glenthorne Court
Truro Business Park
Threemilestone
Truro
TR4 9NY

2. Cornwall & Isles of Scilly Investment LP acting by CIOSF General Partner Limited
Registered Office: Riverside House, 4 Meadows Business Park, Station Approach, Blackwater, Camberley, Surrey, GU17 9AB
Registered in England, Company Number: 09501209, VAT Number: 900541372
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funding is also bringing further substantial funds (generally from outside the county) for the
benefits of Cornish companies and should be viewed as being positive and not a negative as
you allude. Finally having a co-investor on board makes it easier to support subsequent funding
requirements.
Why is it important to invest and lend to good quality companies? The fund is aiming to back
businesses that will be successful and either repay our loans or enable us to achieve an exit. In
the longer term these funds will remain in Cornwall for the benefit of future Cornish businesses
that want growth funding. In the current structure this may be overseen by the Cornwall and
Isles of Scilly LEP who are a key strategic stakeholder in the long term success of the fund. So
you are right that the fund is looking to be an evergreen fund but that doesn’t mean that we
can be reckless with our investment decisions.
Is the fund too Small? We can invest up to £2m in a business and the fund is £40m. If it is too
small I am sure we will find additional funds to meet the requirements. As the fund is not a PE
fund it does not need to make the large investments that the PE funds require. You mention
Kensa as a high value growth business and I think one you believe that the fund should have
invested in. You are correct and we would have been more than happy to do this. Coming back
to your point about PE vs VC. Had we been a PE business and able to buy existing equity then a
deal like Kensa would have been very possible . Had the joint investor not been a FTSE 100
company wanting to own more than 25% of the equity (thus meaning that Kensa was no longer
deemed to be an SME) then we could have potentially made an investment alongside that
investor had the company felt that we were the best option for them. I think choosing the
investor they have’ will be very positive for Kensa’s long term growth aspirations in what is a
very exciting market given the legislation changes coming in in 2025.
Finally you suggest that we will find it easier post Covid19 to invest in “bounceback “ businesses
rather than new businesses addressing new markets. You are probably correct there. The fund is
able to look at this sector and more than happy to support such businesses. Those businesses
are likely to have a strong management team, a product or service which is innovative and
capable of high growth and be able demonstrate traction in its chosen market. The government
has provided other resources such as Furloghing, Bounceback loans Coronavirus Business
Interruption Loans, delays to VAT payments etc to try and help businesses. The Future Fund (we
have one application in) is also there to support some companies that have already received
equity investment but perhaps where valuations are uncertain due to Covid19.
So, to summarize, the fund is very much a VC style investor and not a PE investor. We will invest
time with businesses to help them get to a stage when we can invest (speak to us early and
there is more chance of receiving an investment when our requirements are met) and our

3. Cornwall & Isles of Scilly Investment LP acting by CIOSF General Partner Limited
Registered Office: Riverside House, 4 Meadows Business Park, Station Approach, Blackwater, Camberley, Surrey, GU17 9AB
Registered in England, Company Number: 09501209, VAT Number: 900541372
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pockets are more than deep enough to meet the requirements of the fund to provide funding
to growth businesses in Cornwall. We are committed to ensuring the fund is invested in the best
companies we can find and kept for the longer-term benefit of the Cornish Economy.
I hope that answers all your concerns about the fund and what its aims are. Unfortunately you
will appreciate that we can’t and shouldn’t invest in every company we meet much as I / we
would like to play at being Father Christmas.
Ralph

4. Cornwall & Isles of Scilly Investment LP acting by CIOSF General Partner Limited
Registered Office: Riverside House, 4 Meadows Business Park, Station Approach, Blackwater, Camberley, Surrey, GU17 9AB
Registered in England, Company Number: 09501209, VAT Number: 900541372
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