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Industry events / 09 June 2021

BVCA HighGrowth 2021 - Day 2 key takeaways (part 2)

BVCA HighGrowth 2021 - Day 2 key takeaways (part 2)

Across the 2 day event Crestbridge will publish a brief rundown of key takeaways from each session as the event unfolds. 

The event, which is deemed to be the UK's leading event for growth companies partnering with venture and growth capital, took place virtually for the first time and featured entrepreneurs, management teams and investors as they share their thoughts and experience on what it takes to succeed in today's environment.

Read our key takeaways below from the second part of Day 2 at BVCA HighGrowth.

What should today’s growth capital expansion look like?

Panel Moderated by Malcolm MacDougall, Partner, Stephenson Harwood

Henry Sallitt, Managing Partner, FPE Capital

  • We have done acquisitions and sold businesses without meeting management team. Have managed also to meet in people’s houses or in the park. 
  • But warns against assumption that people are on call 24 hours a day, just because they can work from home. This isn’t good for people. 
  • Access to human capital globally for small businesses makes a massive difference to them.

Daina Spedding, Investor, BGF

  • How we helped our portfolio companies during pandemic: We have people in a lot of different functions who could give advice: marketing, manufacturing, etc. 
  • Says prepared to do deal with management team, without meeting them in person. But if meet in person, can accelerate things because get more out of each hour of meeting. 
  • Invested in a lot of digital and e-commerce business that have benefited from Covid, so problem here was hiring staff without meeting them, and onboarding them, training them. 
  • Trend to e-tailing started pre-Covid, but has accelerated, though some physical retail is necessary. Digital makes it easier for niche brands that don’t want commitment of long-term retail lease to thrive. 

Alex Thomson, Partner, Growth Capital Partners

  • The sectors we were exposed to were largely resilient or even benefited from Covid, e.g., digital transformation companies. 
  • We offered support particularly on the people side, how to engage with workforces that working remotely. 
  • Benefit of more virtual world, with pandemic: can bring on talent not even in the UK, let alone your local area, can be beneficial for small businesses. 

Jan Steele from Lucid, a healthcare communications company

  • We relied on our chairman and our investors, LDC. Particularly in beginning to work on the infrastructure, understand the guidance. 
  • Was difficult to keep everyone motivated, initially. 
  • Used to do live medical exchange, in four-day conferences. Has changed to virtual. Lots of benefits. Cost of travel cut, so can invest more in R&D. Scientific exchange now happens all time, so can accelerate how we progress in these areas. 

In a snap poll:

  • 62% of investors said they would invest in a company without meeting the management team in person. 
  • 62%, the same number, say they are more efficient when they work from home. 

Funding later stage companies – equity gap emerging

Presentation by Judith Hartley, CEO, British Business Investments, British Patient Capital

Tough to find the right sort of finance to grow your business. 

  • Average deal size by round, comparing UK to US, amount of funding per deal much lower in the UK than in the US.
  • For example, £1.2m vs £1.8m in Round 1, £23.3m vs £65.7m in Round 7.
  • Opens up the risk of these companies relocating to the US. 

British Patient Capital was established in 2018 to address this equity gap. 

How do we help growth companies fulfil their potential?

  • We put extra capacity and supply into the market.
  • Look to bring in other investors that might not otherwise invest into the UK. 
  • We seek to make a commercial return, so that we can demonstrate to private sectors that this is an area they should invest in.

What we’ve done so far:

  • We’ve made £1.2bn in commitments.
  • Have 49 funds and 582 companies in our portfolio.
  • Portfolio IRR is 10.7%. 
  • Other managers have invested £5.3bn beside us. 

Our portfolio by sector:

  • 19% future of work and education.
  • 18% marketplaces and consumer.
  • 15% digital health and life sciences.
     
  • Example: Push Doctor: online consultations with doctors. Raised Series 3 funding October 2020 of £14m. 

What next?

  • Enhanced focus on digital health and life sciences. 
  • Will do more co-investments. 
  • Further emphasis on diversity and inclusion. 

Expanding beyond borders: Considerations when internationalising

Panel Moderated by Michael Labriola, Partner, Wilson Sonsini

David Blyghton, Principal, Highland Europe

  • Focuses on software and internet businesses.
  • You can scale international marketing campaign from an office in Brighton, but for high-touch digital transformation software you may need boots on the ground. 
  • Phenomenal time for software entrepreneurs, because has never been more access to global markets.
  • People know how to build relationships over Zoom. 

Mark Keeley, Partner, ECI

  • Growth-focused private equity investor. 
  • Need careful consideration and planning if expanding on new country, don’t underplay the cultural nuances. 
  • Can’t say have developed product in US, so can easily expand in US. But culturally in some ways a lot easier to expand in Europe. 

Olav Ostin, Managing Partner, TempoCap

Invests in technology late-stage. 

  • If we want to expand in Europe, need a European investor.  
  • If want to expand in US, need a US investor.
  • Investor until recently on Talentsoft, HR software company. Very successful in France, but would have been suicide going into US. Would have needed to spend $50m or $100m. Much better to concentrate on Europe, to become profitable, as has managed to do. 

Matthew Scullion, CEO, Matillion

  • Software company. More than 90% of revenue is exports, including 70% from US. Main offices in Manchester and Denver.
  • Our software can be launched without any intervention from us, or we can guide them through the process virtually.
  • US majority of world’s software market. 
  • Started trying run business like US company, from near beginning, in way treated staff, raised money, so on. 
  • Some of it about ambition. Can’t build a large business in software just in UK.
  • Our first funding round was with a UK investor. Couldn’t have got US investors without them. 
  • By Series B looking for US investors, because wanted their expertise in US market. 

Effect of pandemic:

  • I’ve hired CRO during pandemic, but have never met him, but has worked fine. 
  • The productivity is higher because not travelling. 

Acquisitive growth strategies

Panel Moderated by Sean Longsdale, Managing Director, Santander Corporate & Commercial Banking

Sam Gray, Managing Partner, Apposite Capital

  • Specialises in healthcare.
  • Will bring experts into our due diligence processes. 
  • Through experiences of what has gone wrong and right our experts can add value. 
  • Look, for example, at whether if a portfolio company makes an acquisition, the target company’s products fits with the portfolio company’s. 
  • Where can it go wrong? Remembers portfolio company that made first acquisition. Was to enter new geographical area, but set out to reform business to turn it into carbon copy of itself. Did manage to do it in end, but if want carbon copy might as well just set up from scratch. 
  • Where it goes right: Swanton Care, which takes ethos-first approach to integration. Tries to get managers to buy into ethos before integration, before actual mechanics of changing the company. 


Des Lekerman, CEO, TiG

  • Specialises in cybersecurity and data analytics. 
  • Last three years three acquisitions including, one in March. 

Why acquisition?

  • Market growing so quickly so couldn’t capture this growth fully just organically. 
  • Acquisitions gives us skill and talent. For example, recently acquired company specialising in cloud identity, ThirdSpace, which has bigger clients. 
  • How to bed in the acquired company: with ThirdSpace, have said will not make any changes first 50 days, and then from 50 to 100 days these are the changes we will make. So have been transparent with everybody. 

Jose Rodriguez, co-founder and Managing Partner of Queen’s Park Equity

  • Invests in education, health and tech services. 
  • See providing expertise as key role for us – not just money. 
  • How to make sure cultural fit is right. In our sectors, the main asset is the people. Fail if can’t keep the hearts and minds, and keep the momentum of that. 
  • Many businesses backed by competitors that have reached bigger scale through acquisition, but the business hasn’t been properly integrated so haven’t made most of the businesses’ potential. 
  • By time of exit, you want the business to be one integrated business, rather than just a collection of assets.

Follow us on LinkedIn for more key takeaways from BVCA HighGrowth 2021.

 

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