An Investment Outlook: Looking forward to 2021

Richard Moore – Co head of Investments

2020 impacted businesses both large and small. Covid-19 and government mandated lockdowns created a very uncertain economic outlook and companies across the board took measures to strengthen balance sheets and preserve cash. The impacts were not felt equally and sectors such as consumer, leisure and retail were hit the hardest.

Whilst Calculus Capital’s origins are as a generalist investor, a few years ago we refined our investment strategy to focus on the fastest growing sectors in the UK – technology and healthcare, and more recently, the creative sector, with the launch of our Calculus Creative Content EIS Fund. 2020 proved this was an important shift – with little of our portfolio operating in the most ‘at risk’ sectors.

We remain positive about the long-term growth prospects in the areas in which we invest. Demand for many technology companies’ products actually accelerated over the last 12 months. The technology heavy NASDAQ market rose by over 40% in the course of 2020, compared to a fall of 14% for the FTSE100. The vital role healthcare and biotech companies have to play in our society has been brought into stark relief by Covid-19. We were pleased that a number of our portfolio companies were able to use their technology to help in the fight against the virus – from developing rapid antibody and antigen tests to helping the NHS build more agile and efficient rostering systems (

For an investor coming into our Calculus EIS Fund or Calculus VCT, the focus will be on the following. Within technology we predominantly look for companies providing software as a service (SaaS) to an already established client base. SaaS companies benefit from significant operating leverage, they are asset light and capable of very rapid, non-linear growth. A good example is Rotageek, an investment we made in May 2020. Rotageek uses cloud-based technology and automatic scheduling to help multi-site businesses manage and schedule staff to meet demand, drive efficiency and reduce costs. Last year the company offered a three-month free trial of its software to the NHS and other healthcare teams impacted by the pandemic. The offer attracted significant interest was implemented in hospitals across the UK.

When assessing healthcare companies, we look for validated platform technologies as opposed to point solutions and we favour businesses that have existing partnerships with large pharma companies. For example, Oxford BioTherapeutics (investment made in August 2018) is a clinical stage oncology company committed to the discovery and development of novel therapies for various cancer types. At the point of our investment the company was generating revenue through its relationships with global pharmaceutical companies including The Menarini Group and Boehringer Ingelheim. The business continues to expand and only this week announced a new research collaboration with Kite, a part of the NASDAQ listed Gilead group (

Not surprisingly we reviewed fewer opportunities in 2020 than in previous years, around 450 compared to a usual average of 600. Although a number of companies came to market looking for emergency funding, there was a decrease in quality companies with strong growth prospects that were looking to raise capital. This was especially the case during the first national lockdown when there was a significant fall in the number of opportunities that fit with our growth orientated investment strategy. Deal flow did pick up from the summer onwards and we closed 12 investments in 2020 (we target 8-15 in a year).

We approach 2021 with the same strategy which has served us well over recent years and through the pandemic – focusing on companies with established, proven products and business models that are operating in the UK’s highest growth sectors. We continue to emphasise the importance of strong and adaptable management. The acceleration towards digitalisation across the globe means our tech portfolio is well positioned for future growth and we will selectively add to our bench of SaaS investments. UK based healthcare companies which are transforming lives for the better and which have demonstrated some incredible science will also be a key focus. We are about to close a tech business focusing on the healthcare sector (a good blend of both) and a new healthcare investment, for both our Calculus EIS and VCT funds.

Although 2021 has not started the way the country hoped, with yet another full national lockdown, there are reasons to be optimistic. As Covid-19 vaccines are rolled out across the globe and a Brexit trade deal brings some long-awaited clarity for businesses, the outlook for smaller companies in growth-focused sectors is strong.