What is the most rewarding aspect of your role?
Very interesting question! The most rewarding aspect of my role is also the most challenging. We invest in Growth stage, post revenue (£1m+), technology companies. Any adviser or investor reading our due diligence papers and valuation metrics on our investee companies will appreciate the depth and breadth of this critical workflow. You can have a fantastic product or service, USP’s and a great go-to-market strategy but, unless the board and senior management are unified, cohesive and collectively working towards the same end game, then the product or service will not realise its full potential. This is where sitting as a non- executive board member and being actively involved with the infusion of human capital is critically important.
Growth stage companies are living, breathing organisms and, as they evolve and grow, obstacles naturally arise in all manner of areas including people. The importance of being on hand to help companies overcome these obstacles cannot be over-estimated, and helping companies achieve this is very rewarding.
What is the most challenging aspect of your role?
“We have invested in 33 EIS qualifying investee companies, and made 19 exits and two partial exits, of which 20 have been profitable and just one has made a partial loss.”
What are three areas of focus for your firm this year?
Growth, growth and growth. Growth in terms of increasing AUM, increasing the number of portfolio companies and increasing the size of the team.
Growth in AUM - we have been very fortunate, since the launch of our discretionary Growth EIS Fund in December 2014, having benefited from doubling AUM year on year and have surpassed the £50m level in the last 12 months. We have set ourselves the ambitious target of doubling again by April 2021.
Growth in portfolio companies - we had 15 companies in the current Growth EIS Fund portfolio, but this is now 14 having exited FSB Technology Ltd on 31st July 2019, which saw us sell our shares to a strategic buyer and generating a return to investors of 2.71x ROI (excluding tax relief). We have access to very strong deal flow through our network of investors and entrepreneurs and expect to invest in to 2‐3 new companies in the next 12 months, in addition to supporting existing portfolio companies with additional funding rounds.
Growth in size of the team - we have recently expanded the team by hiring a dedicated compliance manager, an additional fund administrator and are in the process of interviewing for two new investment managers.
What is the one thing that you would like advisers/investors to know about your firm?
- Dynamic market – fast growing or changing addressable market with low competitive intensity.
- Well‐positioned company – strong management team, robust forecasts for rapid growth over the investment period and clear exit potential.
- In‐demand product – fully developed product or service, addressing a clear market need, with a sustainable technology‐based competitive advantage.
- Post revenue – the company must be already generating significant sales (typically in excess of £1m annually).
- Investor Protections – a significant minority (often 20‐40%) of the equity sought, a board seat and typical shareholder rights required.
How have the recent legislative changes affected your firm?
The PCR brought about welcome changes that realigned the legislation with the purpose for which it was originally intended. We have invested in growth stage companies since 2001 and so the changes are positive for us, as we are amongst a handful of fund managers that can demonstrate relevant track record in this growth space.
What character trait(s) help you succeed in your role?
Discipline and focus on a specific investment approach. I previously served as an officer in the British Army and a number of skills essential in the Army translate across to Venture Capital investing, including discipline, focus, resilience under pressure and adaptability. These same skills are essential in establishing and growing a business and we look for and test these skills within senior management teams as part of our due diligence process before investing.
What non-fiction book would you recommend?
'Knowledge and the Wealth of Nations' by David Warsh. The book details the emergence of “growth theory” in economics, and Paul Romer’s Nobel prize winning research into the way knowledge and intellectual property drive economic growth.
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