How Private Equity Really Works and How to Prepare for Investors, With John Cordrey

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The misconception of prior equity is we're all quite thick skinned and wear suits, and I'm probably not doing justice to that, but generally we're all super approachable.
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There's lots of cash in the UK.
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If you're an entrepreneur, now's a really good time to be thinking about an exit or raising funding.
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It's fascinating to lift the lid on actually how this all works.
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Yeah, well, it's not all for Wall Street, it's not people have a misconception about what private equity is, we're not all evil.
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I have the rate of respect for entrepreneurs.
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The whole mentality has changed.
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It's gone from a venture mentality with let's run hard at this, it overflies or it falls off the cliff.
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A lot of entrepreneurs are tech focused, a brilliant product, but they can't communicate, can they?
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Yeah, it's right in the world, but no one knows about it.
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It's not science, it's an art.
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People are different in person, they're different on type, is it, they're different when they've had a beer or a matcher nowadays.
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And uh, how do you forecast that there's going to be the market potential, the opportunity there when obviously we are where we are, everything's going on.
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You know, you're seeing 2,000 odd businesses a year.
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I mean, how do you keep on top of that?
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That is a good question.
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So, you can do that.
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Pleasure, thank you.
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So you're involved in the world of private equity, and you're the director of Foresight Group.
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Yes.
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So for our listeners who aren't familiar with private equity and Foresight, can you just explain a little bit more about how private equity works and Foresight?
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Yeah, sure thing.
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So Foresight Group, we're a listed business, been around since the 80s, and we are about 13 billion assets under management.
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We have two sides of the business.
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There's a large part which does infrastructure, mainly wind solar, things like that.
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And our part, the prior equity and ventures part, we do growth investment into UK and Irish SMEs, checks ranging kind of 250k up towards 40 million, sector agnostic.
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We're one of the most active funds in the UK, doing about 40 odd new investments a year.
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Wow.
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And yeah, really interesting place to work.
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Very busy in uh investing in UK businesses.
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Yes, yeah, all across the UK and varied sectors.
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We've got bacon slicing companies in Aberdeen and all sorts of kind of deep tech businesses.
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So really varied day-to-day.
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And talking more broadly then about private equity.
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I mean, you you know, some of our listeners might be familiar with with private equity and the world of investment, but what is private equity?
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How does it all work?
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Yes, yeah, well, it's not all for Wall Street.
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Or helping people de-risk on their journey.
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And sometimes people want to take money out to fund their family needs to go to private school for their children, or step back because they're in their perhaps 60s.
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Others want to raise capital to go overseas, to invest in technology and salespeople.
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Okay.
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So we help them on that journey.
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Private equity as a concept really is providing equity funding most often and support alongside.
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It's not just about the money, it's about the marriage, it's about the value you can add to that business through contacts, through learning experiences along the way, which are going to be helpful for that company to avoid mistakes, to go overseas, to do things that are going to maximize their exit value in due course.
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So it's a way a business can go about getting funding, a cash injection into their business, and if they want to take money out, get that uh capital to pull that money out of the business essentially.
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Absolutely, yeah.
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Yeah, so you've got kind of private equity, which is generally referring to people taking private money or equity to cash out uh element of their equity shares.
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So they give away some of their ordinary shares and we would come in and put the cash in, they take the cash out, do what they please with it, and we would then support them on that journey.
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Venture capital and um sort of the growth ECTs, which we can talk about tax efficiencies and stuff, but they they are typically a vehicle in which to help a business grow.
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So you would, in exchange for some equity, put the cash in the business, and that cash would be used to grow the business collectively.
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So it's a non-cash out event for the shareholders, but it's helping that business grow the shareholder value, so that in due course, hopefully they've got a bigger pie to sell.
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When you are investing in these businesses, that the focus then is on I I I can presume about a potential return.
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So you're obviously looking at that, you know, what is the potential return on this cash we're we're putting in.
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Yeah.
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Um, and you know, what the objective around that is, whether it's growth, whether it's bringing equity out.
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Exactly that, yeah.
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So you're you're typically looking as a prior equity fund, how can you make a commercial return for your backers?
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So we've got pension funds, local authorities, British Business Bank, others that also put money into private equity funds.
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The prior equity funds then act on their behalf in effect to invest that money into interest in businesses that are gonna hopefully scale, create jobs locally, skill jobs ideally, and present a return of sort of between three and four times money is is optimal than and probably the average around the higher performing funds in which we we fall.
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Um if as a fund you you candidly don't reduce those levels of return, it is quite hard to convene, it's quite hard to raise capital.
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So the funds that have been around for a long time that are actively investing, um one of the interesting things to ask them if you're an entrepreneur looking to raise funding funding is what is your track record?
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Have you delivered good returns for your investors and for the management teams?
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Because ultimately, for every pound that the management team keep in that business and they roll going forwards, that is the sort of return they would hope to achieve on the way out.
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So we come in, we invest two to ten million pounds, say the management team that stay involved would hope that their shareholding value would increase by say fourfold by the time we collectively exit.
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And that's really our job.
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It's to create more value for the entrepreneur and the management teams in three to five years.
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So we're all aligned on the same objective, then really, aren't you?
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Absolutely, yeah.
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You're a you're a shareholder, um, a lot of funds, ourselves included, have things called carry schemes, which is basically for the members of the team, the foresight team, the private equity fund, to have a small stake at a personal level within the business as well.
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So you're joining in the collective success of that business growth story.
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Who who essentially then controls the business?
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Because you know, without being educated and working within private equity, you you talk talking to executives like I have done, um you speak to people, and I think a lot of people have a misconception on how it actually works.
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And they think you know, they take private equity investment and then the private equity firm has control over that business, yeah.
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Um, and then it completely changes the dynamic, the culture of the business.
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Yeah.
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Um I mean, listening to how you're explaining it, that's obviously not the case.
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Yeah, correct.
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It's it's not.
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We're yeah, we're not there to change the business, we're there to take the best elements of the business and encourage those.
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We're there to lend uh experience, typically in how do you build value at the start?
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Yeah, we're coming in with fresh eyes to figure out where there might be um sort of opportunity to grow, proficiencies, etc.
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Um, and ultimately how can we help that team frame what it is they want to do with the business, but also look at where are you going to ultimately exit the business?
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Is that going to be a trade buyer?
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Is it going to be private equity in due course?
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And what you need to do to achieve each of those exits.
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So a trade acquirer might not care so much about certain factors.
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They might just get the team to stay involved for a couple of years and then buy it, and then buying it just because they're going to fold it into their value.
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Yeah.
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Yeah.
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Whereas a private equity buyer, um, what's called a mid-cap prior equity, we're we're lower, lower mid-cap kind of priority.
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So we're doing slightly smaller deals.
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Um a mid-cap will often buy things off us next stage along.
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They will care more about the second tier management team.
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And so hiring the management team around you, so CFOs, good chairs, good CTOs, good heads of sales is really important to that transition.
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So when we come to sell it, they want to see is there a team that are going to go again that we can back now.
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And that that really is the essence of the sort of value building.
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We're we're not changing the culture.
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Um, we don't profess to understand any sector any better than the entrepreneur ever has.
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So we we're not going to.
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But what we do know is how to go overseas, how to build sales teams, um, how to have the optimal tech stack.
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We've got a good black book, and we know people like you, and and we have a sort of talent network where we can dip in and find valuable players to the team that are gonna open even more doors.
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So it really is then about you know, you you seeing obviously there's opportunity.
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You're seeing opportunity, and it's it's you I guess there's a lot of an analysis that goes into this as well.
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Um being in the industry as long as you have, I'm sure there's a fair amount of you know intuition and you you know if you're onto the right thing here or not.
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What you're saying then is all about having the the right leadership team in place to take and propel that business to the next level.
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Um how many companies that you know you do invest in typically don't maybe have a leadership team in place?
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Have they got a good idea?
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You know, are they you know profitable?
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Yeah, I mean it's really a really mixed bag.
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So we see over 4,000 things a year in terms of businesses, which is quite incredible.
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And I assume we see most businesses in in the uh in the UK universe, although we always want to see more.
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I mean, what's what's the math on that?
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You know, the amount you and your team are seeing on a weekly basis.
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A lot.
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I reckon I see five to ten a day in terms of coming across the depth.
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That's pitches coming to you.
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That's pitches, um, and maybe we come on to sort of how you differentiate yourself in in that sort of level of volume.
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How do you how does it get to the point of you then having a business pitch to you?
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You know, I I guess you've got teams that are out there seeking deals, seeking investment, but you've I mean, have you got like um connections with I don't know, uh accountancy firms, consulting firms, and then you know, they're working with businesses and trying to get funding for them and they come to you.
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Is it from all angles?
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It's from all angles, yeah.
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Uh so WhatsApp email every angle.
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Cold email a bit cold email.
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Cold email's not that effective.
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LinkedIn's pretty good.
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Actually, you get quite a few inbounds through LinkedIn and some good.
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Business C is they're credible or not, can't you?
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Yeah, stuff like this, yeah.
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Of course, yeah, and so yeah, 4,000 things a year.
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I reckon we need to run the stats, but I I would suspect around 20 to 30 percent are direct, and then we've got a direct origination team, so they hold outreach and effect from LinkedIn and and using tools like FAME and subscribe.
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So, say have you ever thought about investment or wanting to sell?
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Do you want a coffee?
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Do you want to chat through your thinking on where you want to be in a few years' time?
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We rely quite heavily on an advisor network, so uh I think it's around seven, eight hundred corporate finance advisors, UK and Ireland wide, due diligence providers, recruiters, headhunters, networking essentially, then yeah, and chairs are really important to that as well.
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Most most chairs will have two free portfolio companies, yeah.
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And at any given time, one or two of those might be thinking of raising or exiting or having an event.
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Okay.
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And so, yeah, it's it's all angles really.
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The important bit, coming come back to your point around the staffing, the it is quite critical, like having a really good NED because the NEDs will open the doors to customers to helping them go overseas.
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They've probably been through the exit process before so they can guide them on that journey, and it's quite an intensive experience going through an exit.
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Fundraise slightly less so because you're kind of hand-holding a lot more.
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That's where a CFO is probably more important because they're probably providing a lot of due diligence content.
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But yeah, the right chair, the right CFO, obviously the right founder, uh, and and team around that is quite critical.
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It's also knowing where to look for funding, where the right advisors to speak to are as well.
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So it's knowing the ropes really, that they've been in it, you know, they know what to do.
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Yeah, and I think the misconception priority is we're all quite thick skinned and wear suits, and I'm probably not doing justice to that, but uh generally we're super approachable.
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There's lots of cash in the UK ready to be deployed.
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The funds that are around and active have lots of dry powder, and so if you're an entrepreneur, now's a really good time to be thinking about an exit or raising funding.
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Really?
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So even in you know, people talk about you know the the the UK economy, you know, doom and gloom, nothing's going on.
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Yeah.
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But you're saying the opposite, really, now is a great time.
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Bad news sells, and there's a lot of bad things going on.
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Um, but yeah, we're we're generally we've got the positive aspect of having lots of cash.
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We've we've raised really well in our VCTs, we've got around 14 or so regional buyout funds.
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The UK as a whole has quite a lot of prior equity funds active out there.
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There's British Business Bank, which was a governmental body set up, I think, by Vince Cable back in the day, and that has got kind of fresh funding, like several billion to deploy, and they've done so across a series of regional funds.
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So there's a good level of competition out there.
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If you're a prior equity fund, we are competing with one another for the best deals.
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And so if you're an entrepreneur with a good business, it is a good time to be exploring those conversations.
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And they're getting the support network around them to actually propel them forward, aren't they?
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Absolutely, yeah.
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They've got objectives, you know.
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Setting up a business uh like I've done, I I know the difference to going it alone or having you know working with people, and it's I I guess accountability at the end of the day, isn't it?
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You know, yeah, no, it can be lonely.
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Yeah, I've I had a business before, and and it is lonely when when you're on your own with a few staff and you've got no one above you, especially to kind of bounce ideas off.
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So Ned's chairs are really important for that, and investors are helpful because they see life through a slightly different lens.
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Um, CFOs for accountability and and driving with the headlights on is important.
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So, yeah, it's it's helpful having someone to marry because it's taking investments at a marriage, it's not just about the funding, it's about the person you're dealing with.
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You something goes wrong, you want to be able to trust that they're gonna understand and try and help you, not be scared to tell that you've got to trust in their judgment that when you talk about something strategic, you know, can we go and do this?
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Do you think we should do that?
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They're gonna be sportive or you know, give you good rationale as to why maybe that's not a good idea.
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And so having an investor that or a backer or a ned that that you trust and you believe can add value is almost if not much more important than the actual money itself.
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So it is actually you know the the the NED, the advisory, um, the chairs, CFOs, they I guess you you're cherry picking the right person, the right profile to that investment, aren't you?
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It's not you know that the the same person is gonna operate and deliver the similar results in the next the next business.
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They have to be the the right fit.
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Yeah, and if you can find a good NED, good chair, good CFO, you hang on to them, you you try and reuse them.
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We had a really good exit um about a year or so ago called Canon Lens, which went to BAE systems, defence business doing large UAVs, so large big drones, big drones.
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These are big drones, big machines, aren't they?
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Sort of wingspan between you and me, probably.
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Really?
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And uh Kraken business, two two chaps that we met, and they were thinking about do we raise um sort of I think heading toward 60 and considering what do we do next.
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A bit of rising tide with defense spends, which which maybe we'll come on to as a hot or not kind of sector.
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And they're embelling that, and and we sort of managed to convince them that we think we can propel you with the right people, the right sport to get in an exit quite soon.
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And so we invested growth capital, we took a very small, like a small minority stake, we helped them on that journey, and a critical part of that was bringing in a chap called Victor Chavez, who was the former CEO of Talis, big XP.
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Yeah, and he's absolutely fantastic.
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And if he's listening, he'll be blushing, maybe.
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But he's a he's a brilliant chap, the team were brilliant as well, and they just really gelled, and it gave them the confidence to go for bigger tenders that they probably didn't have before, and the expertise and support from fromigator, didn't they?
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Because they got that experience with yeah, and it and it kind of propelled them and and a really brilliant journey for job creation in in Bristol Wiltshire and and elsewhere, and we need more of those in the UK.
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But yeah, a lot of that was driven solely by the team, the team at the end of the day, how good the team is, yeah.
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Fantastic.
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I just wanted to and this is quite a you know a simple question, uh, and unpacking a bit of the mystique of private equity.
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Um when you actually invest in a business, where does the money come from?
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Have you got a you know a big account with loads of cash to go and s invest in businesses?
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How does that work?
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So there's several answers.
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So the growth funds that we have, some people call them VCTs, you might have heard them, or EIS funds, they're in effect a tax-sufficient pot of money where individuals could invest, and they traditionally got a 30% tax relief, now 20%.
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Unfortunately, it's it's been dropped down slightly, so it makes it a little bit less attractive, but still attractive nonetheless, and favorable sort of capital gains treatments and and and other things.
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And that was an initiative brought in by Vince Cable, I think it was back in the day.
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So those funds typically come from high net worths, uh, individuals that that invest directly or or through places like St.
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James's Place, etc.
00:19:04.079 --> 00:19:04.240
Okay.
00:19:04.720 --> 00:19:09.920
Those funds are pooled together and we invest on their behalf, we manage that capital.
00:19:10.160 --> 00:19:16.319
We try and find the best businesses we can that have good growth potential, hopefully to make that kind of three, four, or five times money.
00:19:16.559 --> 00:19:22.880
The private equity funds, what are sometimes called buyout funds, uh, they're usually regionally focused for us.
00:19:23.039 --> 00:19:30.640
So they're the ones that are buying stakes, they're helping people take cash off the table and de-risk their position or retire.
00:19:31.039 --> 00:19:36.400
And they are in our instance, they're they're quite often backed by local authorities.
00:19:36.640 --> 00:19:39.359
We've yeah, we've sort of rolled out on a regional basis.
00:19:39.519 --> 00:19:45.119
So we've got funds in Northwest, up to Scotland, Ireland, Northern Ireland, uh, Wales and Southwest.
00:19:47.519 --> 00:19:48.000
Exactly.
00:19:48.079 --> 00:19:53.440
And yeah, their concern is can we create jobs locally whilst getting a commercial return?
00:19:53.680 --> 00:20:01.440
Highly skilled jobs ideally, and a kind of diverse part portfolio of assets, not all one sector bears a risk.
00:20:01.519 --> 00:20:10.240
You you kind of want ideally less than 10% of your fund in any given business, and yeah, that's exactly what we do.
00:20:10.559 --> 00:20:15.119
And then we've got a couple of funds which are backed by the British Business Bank as well.
00:20:15.200 --> 00:20:17.839
Okay, and they've got multiple funds out there as well.
00:20:17.920 --> 00:20:22.880
So if your business is in a particular region, it's worth checking to see which funds are operating locally.
00:20:23.359 --> 00:20:25.599
So that's it's fascinating to hear that.
00:20:25.680 --> 00:20:42.079
I mean, I think most people probably presume that you know there's you know a high net worth individual, you know, wealthy Arab behind it or something, you know, or just a pot of cash sitting there from from you know this investment firm, but it's it's obviously more complex than that, isn't it?
00:20:42.240 --> 00:20:47.920
Yeah, you do you do get some funds that are like that, they're called deal-by-deal funds, and there's been a rise in those.
00:20:48.000 --> 00:20:51.599
Uh, some people refer to them as I think it's one pound Charlies, they're called.
00:20:52.079 --> 00:20:58.640
And there was a I think podcast actually that that was on how to basically buy a business for a pound.
00:20:58.799 --> 00:21:10.960
And so you had a proliferation of people going around trying to do weird structures to buy a business, and things like that that actually practically an unjust bad name that people see through that sort of thing.
00:21:11.039 --> 00:21:30.559
But that there are funds that are backed by um overseas ultra high net worths as well, they're going out trying to do a deal-by-deal, which is basically you find a deal that you like, you take it to your various high net worth investors and go two fancies ago, and at that point you start raising scrabbing around trying to raise the capital.
00:21:30.799 --> 00:21:42.559
And that's quite a hard thing to execute as a deal-by-deal fund because you're relying on a they like the business, b, it takes a lot of time, so you've got to rely on that business waiting around for you to do so.
00:21:42.880 --> 00:21:50.880
And then so you quite often they won't have the money to invest at that point in time, or they're away, or so it's it's quite a hard model to execute in reality.
00:21:51.119 --> 00:21:52.160
Yeah, absolutely.
00:21:52.319 --> 00:21:56.640
It is it's fascinating to lift the lid on actually how this all works.
00:21:57.119 --> 00:21:59.759
I think you know, people have mis misconceptions.
00:22:00.160 --> 00:22:04.160
Inceptions, I think one thing and it's it's completely different.
00:22:04.240 --> 00:22:07.279
Um fascinating, really is your your story, John.
00:22:07.759 --> 00:22:09.519
I mean, how how did take us back?
00:22:09.599 --> 00:22:16.720
How did you actually get to the point of being you know director for you know one of the largest um private equity firm sports sites?
00:22:16.960 --> 00:22:18.799
Yeah, a bit of an odd journey.
00:22:18.880 --> 00:22:32.559
So went to a pretty rough school in in Birmingham, so not not your usual sort of Etonian that people perceive this industry to be full of, and a bit of a nerd at uni, so that that did help, I suppose.
00:22:32.720 --> 00:22:36.319
Uh, you went to PWC Big Four, yeah, doing MA.
00:22:36.400 --> 00:22:39.359
So fairly standard route, although MA is a bit rarer, I suppose.
00:22:39.519 --> 00:22:41.920
Did ACA, so boring chartered accountant.
00:22:42.079 --> 00:22:45.920
Yeah, you're my accounting background then, so obviously you understand numbers finance.
00:22:46.480 --> 00:22:48.160
A little bit, yeah, a little bit.
00:22:48.480 --> 00:22:59.279
Um and yeah, so from there did sort of three, four years there, went to inflection, which is a sort of small, mid-cap, very high performing UK and European.
00:22:59.759 --> 00:23:04.799
So that's then where the your private equity focused career began, then essentially, isn't it?
00:23:04.960 --> 00:23:05.359
Yes, yeah.
00:23:05.440 --> 00:23:06.799
So it's mainly buy-outs there.
00:23:06.880 --> 00:23:20.240
So again, they're they're doing big tickets, helping people de-risk or ultimately sell their businesses, and then they're exactly the same as what Foresight do, helping them scale, trying to achieve three, four times their their value when they exit next time around.
00:23:20.480 --> 00:23:33.440
Uh didn't there, did a few deals there, and then between that and Foresight raised raised some cash and founded a business for second business, so been entrepreneur side as well, which is quite exciting and terrifying as you know at the same time.
00:23:33.680 --> 00:23:37.200
So you've always been active and interested in business, haven't you?
00:23:37.440 --> 00:23:38.960
Yes, yeah, yeah.
00:23:39.039 --> 00:23:47.920
It's you kind of live in brutality, it's it's yeah, you either love it or you don't, and um yeah, you have to be entrepreneurial and get up and go.
00:23:48.079 --> 00:23:54.319
And yeah, I mean, I have the greatest respect for entrepreneurs for for the management teams I meet.
00:23:54.880 --> 00:24:08.400
I think their job is much harder than mine, and to have the courage to go and start a business at your garage and not be paying yourself quite often and have a mortgage and all the other stuff probably going on.
00:24:10.000 --> 00:24:12.400
Yeah, it's you know admirable that people do it.
00:24:12.640 --> 00:24:18.079
But you you but you've done it though, you explaining you you you left inflection, then went into business on your own.
00:24:18.319 --> 00:24:21.119
Yes, yeah, a little pretty pretty successful understanding.
00:24:21.440 --> 00:24:37.839
A little SaaS business doing uh sort of finding leads for estate agencies, uh bit bit of a random business, really, but I was selling one of my houses, went into an estate agency, forgot the keys, go to the other office on the weekend, okay, fine.
00:24:38.000 --> 00:24:39.119
Went to that office.
00:24:39.359 --> 00:24:42.559
Why why are you not selling your house for our office?
00:24:42.640 --> 00:24:44.079
I was like, Well, does it really matter?
00:24:44.319 --> 00:24:46.160
Like, oh, we can offer you a better fee.
00:24:46.319 --> 00:24:48.799
I was like, Well, you're the same brand, why is it a different fee?
00:24:48.880 --> 00:24:51.519
You know, or basically more desperate for housing stock.
00:24:51.759 --> 00:24:54.799
So that's opportunistic, then you're like, well, hang on a second.
00:24:55.039 --> 00:25:01.680
Yeah, there's no completely opaque when you're selling a house as to what the actual fee could be, should be.
00:25:01.839 --> 00:25:03.759
Can you get a better better option?
00:25:03.920 --> 00:25:05.440
And it actually turns out you can.
00:25:05.599 --> 00:25:07.359
They say you can't and they keep it flat.
00:25:07.519 --> 00:25:09.200
And I think nowadays they probably do.
00:25:09.759 --> 00:25:14.160
But yeah, it was basically a dashboard where you could upload your property.
00:25:14.240 --> 00:25:22.799
A lot of APIs pulled the data, so it's kind of within 60 seconds you could upload your property, and then it was almost kind of blind beard.
00:25:23.359 --> 00:25:27.759
The subscribe and estate agents would be best for you, they can say invaluation, etc.
00:25:28.240 --> 00:25:34.880
So a little tech business scaled that for a bit, exited that, and then yeah, been at Foresight ever since.
00:25:34.960 --> 00:25:38.000
So coming up towards 11 years, quite crazy, really.
00:25:38.079 --> 00:25:41.839
So um sort of progressed through the team there, joined as an investment manager.
00:25:42.079 --> 00:25:44.240
What took you back to the private equity world?
00:25:44.480 --> 00:25:46.640
I mean, how did how did that come around?
00:25:46.960 --> 00:25:50.319
So the the there's different definitions of private equity.
00:25:50.400 --> 00:25:53.680
So you'll hear venture, which is early stage, high growth.
00:25:54.640 --> 00:25:59.200
I've got an idea, you know, maybe a small team, but I need money to get this thing off the ground.
00:25:59.359 --> 00:25:59.519
Yeah.
00:25:59.759 --> 00:26:00.400
Is that a sense of it?
00:26:00.880 --> 00:26:01.680
Exactly that, yeah.
00:26:01.759 --> 00:26:06.079
And it it's probably the highest risk thing to be investing in, but the highest potential quite often.
00:26:06.240 --> 00:26:08.720
Because you don't really have a proven business, do you?
00:26:08.960 --> 00:26:19.359
I guess a lot of these well, we went through a phase then we have loads of software companies, I guess, or you know, tech companies, where it's just an idea, it's just a concept, there's there's no proof of concept really.
00:26:19.440 --> 00:26:21.039
They're not got revenue.
00:26:21.279 --> 00:26:22.400
Yeah, exactly that.
00:26:22.480 --> 00:26:32.799
And it's it's one of the probably the hardest and perhaps underserved areas in in the UK ecosystem because it as a fund it is the biggest risk.
00:26:32.880 --> 00:26:35.839
So you know you're gonna have quite a lot of zeros potentially if you do that.
00:26:36.079 --> 00:26:39.839
But the flip side to that, I guess the the upside is huge, isn't it?
00:26:40.079 --> 00:26:40.799
The upside is big.
00:26:40.880 --> 00:26:46.880
If you can pick the right ones, and there are funds that specialise in that in the UK, it's just probably not that many of them.
00:26:47.440 --> 00:27:01.279
Yeah, and it's an exciting place to be because quite often you're helping someone whose first time it is doing so, and you're adding a lot of value, and it's quite fulfilling to do that.
00:27:01.440 --> 00:27:06.720
But equally, you're going in knowing the chances of success are quite low.
00:27:06.960 --> 00:27:16.559
You've then got kind of ECTs and growth capital, which is really where we we do ventures, but not startup, it's kind of more they've generated some revenues, they've got some rich IP.
00:27:16.880 --> 00:27:19.440
The ventures bit, you're still doing much of the same.
00:27:19.519 --> 00:27:43.680
It it probably is their first time still, but they are doing one and a half, two million type revenue, and that's really where there's quite a lot of competition in the UK for assets for good quality businesses, and then you get up to towards sort of lower mid-market prior equity, which is businesses sort of doing one to four million the profit or e bit dar as people would call it, and it's before interest tax depreciation and all types of.
00:27:43.920 --> 00:27:44.960
It's a trendy word, actually, isn't it?
00:27:45.039 --> 00:27:50.480
Well, trendy terminology, everyone's shouting out e-bit da, and most people actually know what it is.
00:27:50.720 --> 00:27:57.039
Yeah, it's it's I I mean the whole mentality has changed in our sector, I would say, over the last three, four years.
00:27:57.200 --> 00:28:12.160
It's gone from a venture mentality, which was very much a US kind of let's run hard at this, it either flies or it falls off the cliff, let's fund it, it's burning, it's losing lots of money, but it could be high growth potential, high exit potential.
00:28:12.480 --> 00:28:21.920
And what has happened is there's less appetite for that now because the music sort of stopped a little bit a few years ago in in the US, particularly.
00:28:22.079 --> 00:28:34.400
So companies less focused on growth and more focused on sustainable growth and profitability, and so that has led to some multiples dropping within various sectors.
00:28:34.640 --> 00:28:34.880
Okay.
00:28:35.119 --> 00:28:39.920
It's led to slightly less appetite from US investors and UK investors for those assets.
00:28:40.000 --> 00:29:02.880
And so you've seen this transition of UK growth companies from we're just going to burn lots of money and grow top line to impress people, to actually what impresses people is high margins, high retention, long-term contracts, quality of revenue, and profitability, or at least very good visibility as to how you're going to be profitable in due course.
00:29:02.960 --> 00:29:08.240
And that's what's attracting now more interest from people like us and Trade Aquarius.
00:29:09.599 --> 00:29:15.519
Fascinating to hear that because you just look at some examples.
00:29:15.680 --> 00:29:25.839
Um I shan't mention the name, but like you know, a brewing craft beer company, you know, valued uh several billion and then you know the collapse of that.
00:29:25.920 --> 00:29:39.039
So I I I I I guess coming back to the point you were making, then there's some sort of skepticism then, you know, if a business is very high growth, actually, you know, what what is the likelihood that this is going to continue?
00:29:39.200 --> 00:29:45.279
Obviously, you know, at some point it's gonna plateau and things are gonna tail off.
00:29:45.920 --> 00:29:48.480
Yeah, I mean they want to be in at the right in and out at the right time.
00:29:48.720 --> 00:29:50.400
Yeah, it's the right it's the right balance.
00:29:50.480 --> 00:29:57.279
So high growth's not a problem, it's it's a great thing, but it's more if you're earning lots of money in the process.
00:29:57.440 --> 00:30:01.920
So if you're hemorrhaging cash on routes and you've got to keep funding this thing.
00:30:02.559 --> 00:30:04.960
Do most of these businesses have that problem though?
00:30:05.200 --> 00:30:21.119
Because you know, it's um they've got a load of funding, and I guess having funding money for the business owner maybe a different mentality to you know that coming from revenue.
00:30:21.359 --> 00:30:21.519
Yeah.
00:30:21.759 --> 00:30:25.039
So they're like, oh, we've got a load of a big pot of cash and spend it.
00:30:25.359 --> 00:30:25.839
Yeah.
00:30:26.079 --> 00:30:33.759
Um it's not I I mean, most entrepreneurs certainly that we work with are not like that.
00:30:33.920 --> 00:30:46.240
And and you do management DD and you uncover what people are like, and you learn a lot about these people on the way in, and when you work with them, and you you get a good judgment for I think for what someone's gonna be like to work with.
00:30:46.480 --> 00:31:16.720
There's also you know a level of forward control and governance that will stop any such behaviors, but at the end of the day, it's their business, so they they look to you and you discuss what is going to be valuable on exit, and it's very rarely let's burn lots of money that will create value, it's usually let's figure out actually if we add this salesperson what the ROI is, yeah, if it works, let's hire enough one, and that's the kind of mentality you have as shareholders.
00:31:17.200 --> 00:31:27.519
I think it's actually a useful thing because what quite quite often happens as an entrepreneur, you're almost scared to grow or have a go at this big tender or hire some salespeople.
00:31:27.839 --> 00:31:39.119
Because what happens if you start losing money and you've got a mortgage to pay and you're not drawing a salary and you can't pay your staff because you've made a mistake by hiring this expensive sales guy in the US.
00:31:39.759 --> 00:31:48.720
So it provides an element of you know giving people the ability to take a bit of a risk, but but not crazy risks.
00:31:49.440 --> 00:31:51.359
It's a good thing, it unleashes growth quite often.
00:31:51.599 --> 00:32:00.960
Yeah, yeah, you you mentioned there about the the sales of these kind of businesses being you know critical, which kind of makes sense, doesn't it?
00:32:01.039 --> 00:32:07.119
Because you know, if you're a business, you need to generate revenue and that's done through through through sales.
00:32:07.440 --> 00:32:17.359
And um I can't remember exactly who it was, but you know, I I saw someone saying they said generally speaking, every single problem you've got in business can be solved through sales.
00:32:17.759 --> 00:32:18.640
Get more sales.
00:32:18.799 --> 00:32:19.200
Yeah.
00:32:19.359 --> 00:32:32.079
Um but that that leads me on to just a general uh question I wanted to put to you about if if we're looking at you know the portfolio of businesses that that come to you that you're managing as part of your your investments.
00:32:32.559 --> 00:32:42.240
I mean, are there some common uh challenges or or or things that these businesses typically need to pay attention to and work on?
00:32:42.720 --> 00:32:47.599
Obviously, there's gonna be nuances there, but yeah, is there a general theme?
00:32:47.680 --> 00:32:52.319
Is is it sales teams, is it you know, get to grips on systems and processes?
00:32:52.559 --> 00:32:53.759
Is it digitization?
00:32:54.079 --> 00:32:54.799
Yeah, definitely.
00:32:54.880 --> 00:32:57.680
There's yeah, there are a few common ones, I would say.
00:32:57.839 --> 00:33:06.720
So management information is usually quite low because you you you don't think I'm gonna invest lots of money in my systems and an FD or a system.
00:33:07.119 --> 00:33:12.079
They're still not spending money on proper systems, everything's on Excel, even paper records.
00:33:12.559 --> 00:33:15.440
Broadly, if they've got a model, um yeah, okay.
00:33:15.599 --> 00:33:34.640
Um and you'd be amazed actually of even really mature companies making one, two, three million of URDR profit, they don't have an FD, they don't have sometimes don't have monthly accounts, and yeah, they they look at the cash balance, and you know a lot of a lot of founders aren't fortunately for them, um, accountants.
00:33:34.720 --> 00:33:43.039
They're they're they're sort of people that have had a go and created a really lovely business, but their background isn't accounting, so they're not focused on that.
00:33:43.119 --> 00:33:45.759
They're just going, well, there's more cash this month, that's great.
00:33:45.920 --> 00:33:53.279
And I know roughly it's growing in the profits, and they feel they don't need to see everything else, particularly.
00:33:53.359 --> 00:33:57.599
They can see it in a month's time when uh maybe the outsource accountant does it.
00:33:57.839 --> 00:34:09.760
Um, and the early stage businesses um not dissimilar, they're a lot more concerned with cash, obviously, because usually runway is an issue for them, but they might not necessarily be able to afford the systems or an FD.
00:34:10.480 --> 00:34:19.920
And so, yeah, management information is usually uh room for improvement on most businesses that that I think prior equity firms see.
00:34:20.000 --> 00:34:28.880
And so in in simplest terms, then is that you know doing something like a monthly PL, then they can see you know exactly what is going on, where they're at.
00:34:29.360 --> 00:34:36.480
Pipeline that moves forward every month, management information for the last month, cash flow ahead, so you know kind of where you're driving to.
00:34:36.639 --> 00:34:43.840
I mean, I I know setting up a business and you know as a founder of a company, that's the last thing you think about when you've got so much going on, right?
00:34:44.239 --> 00:34:45.920
You're just thinking, how do I win work?
00:34:46.559 --> 00:34:47.840
Is there cash in the company bank?
00:34:48.320 --> 00:34:48.480
Okay.
00:34:48.639 --> 00:34:48.800
Yeah.
00:34:48.880 --> 00:34:50.079
And then you forget about the risk.
00:34:50.719 --> 00:34:53.679
It is that, and it's yeah, and that's the entrepreneurial mindset.
00:34:53.760 --> 00:34:56.480
You try and do everything all at once and worry with limits.
00:34:56.880 --> 00:34:58.400
You know this because you run your own company, don't you?
00:34:58.559 --> 00:35:01.119
Yeah, yeah, and you sit you see people and you you know you get it.
00:35:01.199 --> 00:35:03.599
You like it, no one really wants to do finance.
00:35:03.679 --> 00:35:07.440
That's not the fun bit, that's not tech, it's not sales, it's not.
00:35:07.760 --> 00:35:09.360
I think people misunderstand it though, don't they?
00:35:09.440 --> 00:35:12.880
It's just they just think it is just looking at accounts, but it's so much more involved in that.
00:35:13.199 --> 00:35:18.880
And it's incredible how much visibility you get of your business and how you can improve it, the margins pipeline.
00:35:19.039 --> 00:35:27.760
Have we got enough underpinning the forecast that you do get from a good FD or at least a good outsourced FD if if you can't afford one at that point in time?
00:35:28.000 --> 00:35:47.920
Yeah, I mean I've um you know, in some of the executive hires that we've been doing, I've been very much the the CFO of the FD is more of like a chief revenue officer as well, because they're looking at you know how can they increase margins, you know, new commercial ideas, you know, increasing average deal value, you know, lifetime value of a customer.
00:35:48.159 --> 00:35:59.679
The the other thing we see is a lot of entrepreneurs are tech focused, so they've brought a brilliant product, but they can't communicate it, can they?
00:35:59.840 --> 00:36:02.400
Yeah, they can't communicate it, and it could be the best products in the world.
00:36:03.840 --> 00:36:06.000
Best product in the world, but no one knows about it.
00:36:06.320 --> 00:36:15.199
You're almost better having a not so good product that you can sell lots of it and get yourself up, and then at least you can reinvest that into creating a good product.
00:36:15.440 --> 00:36:21.840
Um, so we do see that a lot where people focus on what they know, they're they're they're safe, they're comfortable, aren't they?
00:36:22.000 --> 00:36:27.119
And then comfortable if they're and I guess you know, generally speaking, yeah.
00:36:27.519 --> 00:36:31.280
Um don't sound out of line here, but I will cast a stereotype.
00:36:31.440 --> 00:36:40.960
A tech person is is probably more introvert, they're not naturally wanting to be out there knocking on doors, making phone calls, pitching, and they don't want to step outside of that little comfort bubble, do they?
00:36:41.199 --> 00:36:42.400
And they're both critical.
00:36:42.480 --> 00:36:48.559
You need you need both, do it depend on the business, but you you you need the tech person, you need a good good product.
00:36:48.639 --> 00:36:50.400
And you need sales, you need to sell it.
00:36:50.480 --> 00:36:58.079
So you so if you're in that situation, you kind of need to either more come to your eyes, you need to have a yeah, uh you know, someone to bounce off.
00:36:58.159 --> 00:37:00.320
I mean, if you're raising, people will see through.
00:37:00.400 --> 00:37:07.760
If you're just a sales guy or just a tech guy, they will instantly know, okay, well, we need to backfill for that, so so we've got someone to go out there.
00:37:07.840 --> 00:37:15.760
So we see that quite quite often, and it's not a bad thing, it just means you you know you need to find the right hire that fits culturally with that that business.
00:37:16.079 --> 00:37:32.159
Um, we quite often see where people have forecast big hockey sticks, and that then makes the business slightly un unbelievable in terms of what their aspirations are, which then can go to credibility of the management team.
00:37:32.320 --> 00:37:58.000
I was gonna say, does that then cast some doubt over the you know the individuals in front of you because you're thinking, well, depending on how stratospheric it is, but yeah, I mean we everyone's founded for the first time and you don't know what you don't know, but but when we're seeing our side, we're just thinking, how many of those businesses can lens and few hours accepted, have sort of gone like that?
00:37:58.159 --> 00:38:05.840
Yeah, and it also means that you're overpromising, and if you're under deliver, you know, the expectation gap's not great.
00:38:05.920 --> 00:38:19.440
You're much better going in with something you can really hang your hat on that you feel comfortable with as an entrepreneur, yeah, that you can deliver, and so you're not constantly feeling like, oh no, this is gonna be an awkward board meeting because I've missed my numbers again.
00:38:19.679 --> 00:38:22.480
Um, and you're going with a lot more credibility that way as well.
00:38:22.880 --> 00:38:29.679
That leads quite nicely onto just painting a bit of a picture because I mean you've seen thousands of entrepreneurs, businesses.
00:38:30.400 --> 00:38:56.159
Um when you when you're looking at a business, so someone's in front of you, um, I I presume you've got a bit of a checklist in things that you want to see, you hear, your due diligence, but in the business and and and the person individually, I mean, how much of the decision you make is purely on the business, the numbers, the forecasting as compared to the actual entrepreneur, the founder in front of you?
00:38:56.320 --> 00:39:02.159
I mean, do you do you ever make a decision where you know what the numbers look a bit off at the moment?
00:39:02.400 --> 00:39:06.079
Maybe the track record hasn't been great, but there's huge potential in you.
00:39:06.159 --> 00:39:07.519
I think you're definitely onto something.
00:39:07.920 --> 00:39:09.280
I mean, how much how much of that goes on?
00:39:09.519 --> 00:39:09.840
A lot.
00:39:09.920 --> 00:39:13.760
I mean, it's not uh it's not a science, it's an art to some extent.
00:39:13.840 --> 00:39:15.440
I think what what we do.
00:39:16.000 --> 00:39:21.280
And you are you're backing people at the end of the day, so you've got to get on with the people as well.
00:39:21.360 --> 00:39:25.119
So if you don't get on with the team, it doesn't really matter how good the numbers are.
00:39:25.280 --> 00:39:29.119
Um, it's a marriage, and so you've got to enjoy the ride, and they have to.
00:39:29.840 --> 00:39:33.039
And yeah, there is a bit of a checklist, I suppose.
00:39:33.119 --> 00:39:39.840
So you go in, you probably wouldn't take the meeting if it was too small, for instance, or too big, and and you can't really shape a deal anyway.
00:39:39.920 --> 00:39:46.480
And you don't really, it's hard to form a view of a management team from a one-pager or a quick Teams meeting.
00:39:46.639 --> 00:39:53.119
People are different in person, they're different on site visit, they're different when they've had a beer or you know, a matcher nowadays.
00:39:53.360 --> 00:39:56.400
And um, so oat milk.
00:39:57.039 --> 00:39:57.920
Yeah, chilate.
00:39:58.320 --> 00:40:01.760
So um that's probably a sign of not investing, isn't it?
00:40:01.920 --> 00:40:02.719
Yeah, yeah.
00:40:03.039 --> 00:40:04.639
Yeah, I don't want to get to loose.
00:40:04.800 --> 00:40:09.440
Um, but yeah, it's the team's really important, it's massively important.
00:40:09.599 --> 00:40:15.199
Sometimes you end up meeting people that have actually been there done it before, and so it might be a really early stage business.
00:40:15.360 --> 00:40:25.920
So we had one in Q4 last year, and it was a founder we'd very nearly backed before, and very unfortunately it didn't quite get there in the end.
00:40:26.159 --> 00:40:31.039
But um, he was a phenomenal entrepreneur and the chair that was involved as well.
00:40:31.280 --> 00:40:42.159
He actually went on and and took investment from an ex-colleague of mine at work, so it worked out really well as a story, really happy for them and the fund that ultimately backed them.
00:40:42.400 --> 00:40:48.320
And then he came around because the relationship was really good, you know, bad blood, and actually they sort of helped one another.
00:40:48.559 --> 00:40:54.079
And we backed him the second time round in the business called Asia Verify, and he's gone great, guns.
00:40:54.400 --> 00:40:56.239
Brilliant business, brilliant team.
00:40:56.400 --> 00:40:58.400
Um, and it was probably too small for us.
00:40:58.480 --> 00:41:01.519
It's one of the smaller ones we've done out of our VCT fund.
00:41:02.079 --> 00:41:11.440
Um, but we backed her because we like them and we like the product, and they're doing something really focused and very hard to do that's attractive as an acquisition.
00:41:11.519 --> 00:41:22.000
So sometimes you take a view on that, and the financials have fought like they've they've grown massively, and yeah, it's worked out because actually the product and the team were good.
00:41:22.719 --> 00:41:26.880
So it's a mix, you you sort of have a gut feel sometimes as well.
00:41:27.199 --> 00:41:30.719
Um, what the exit market's doing is quite important.
00:41:30.880 --> 00:41:40.960
So at the moment, a lot of defence businesses are attracting interest from us, from primes, from many other you know, prior equity funds out there.
00:41:41.199 --> 00:41:45.760
So that's that's uh a sector of interest at the moment from you know, I guess from from growth.
00:41:45.920 --> 00:41:53.039
Yeah, you know, I can tell you speaking to won't know names, but you know, businesses in in Europe, for example.
00:41:53.119 --> 00:42:05.599
I mean, I think the automotive industry is you know on the decline, and I think anyone associated in that is looking to take their their knowledge, their engineering, their manufacturing capabilities, and they're wanting to get involved in defence.
00:42:05.840 --> 00:42:08.000
That's what's going on with Germany a lot.
00:42:08.400 --> 00:42:11.360
I was at Farmborough Air Show a few weeks back, whenever it was.
00:42:11.679 --> 00:42:12.880
They're all trying to get these contracts, aren't they?
00:42:13.039 --> 00:42:14.480
Which they were big contracts.
00:42:14.800 --> 00:42:15.199
Pivoting.
00:42:15.280 --> 00:42:16.000
Yeah, pivoting.
00:42:16.239 --> 00:42:16.559
Makes sense.
00:42:16.800 --> 00:42:17.840
Yeah, gotta do it really.
00:42:18.000 --> 00:42:19.119
I think defence is hot.
00:42:19.199 --> 00:42:23.760
Uh, three, four years back, people didn't really want to touch it, reputational risk, etc.
00:42:24.239 --> 00:42:31.840
Uh, we went in quite early with Calend lens, we've done several drone companies and other defence companies, space tech as well.
00:42:32.320 --> 00:42:43.679
And we're a listed fund, so it's always a bit awkward because you're lacking British resilience tech, which is really critically important for us for the UK.
00:42:44.159 --> 00:42:48.800
Um, but also you're a listed sustainability type fund as well.
00:42:48.880 --> 00:42:55.599
So you've you've got to trade carefully, you don't want to upset people, um, and people without knowing can take it the wrong way.
00:42:55.760 --> 00:43:06.639
So um but but yeah, the tide has massively turned with Ukraine and others, people are piling in, there's people setting up um focused funds now for the sector.
00:43:06.880 --> 00:43:10.960
Um obviously the government will will eventually spend a bit more money, hopefully, on it as well.
00:43:11.280 --> 00:43:17.679
With with with the trends, and you know, you can look back through past data, and that's an indicator, isn't it?
00:43:17.840 --> 00:43:21.360
But you're I mean how many years ahead are you typically looking?
00:43:21.519 --> 00:43:22.880
Like, three years, five years ahead?
00:43:23.360 --> 00:43:27.599
Five years, so you're you're roughly thinking how do we exit this in five years?
00:43:27.920 --> 00:43:42.960
And yeah, and how how you how do you anticipate, how do you forecast that there's going to be the market potential, the opportunity there when obviously we are where we are, everything's going on, you know, you're seeing two thousand odd businesses a year.
00:43:43.039 --> 00:43:44.719
I mean, how how do you keep on top of that?
00:43:45.039 --> 00:43:46.400
That is a good question.
00:43:46.559 --> 00:43:49.920
So we do commercial due diligence quite often.
00:43:50.079 --> 00:43:52.079
So that'll be third party.
00:43:52.159 --> 00:43:54.000
Quite often we do a bit of stuff internally.
00:43:54.079 --> 00:43:59.440
We we do sort of four papers and we you know, we we have things called lunch and learn.
00:43:59.519 --> 00:44:05.039
So every And a couple of weeks we'll have a specialist come in and talk about the defence market or this quadrant of the defence market.
00:44:05.280 --> 00:44:10.800
So you've got sector specialists coming in then, so you're keeping to speed with the trends and what's hot, what's exactly that, yeah.
00:44:10.880 --> 00:44:11.119
Gotcha.
00:44:11.360 --> 00:44:15.280
And and it's again, it's gut feel, it's it's kind of thinking where you know, where's this all going?
00:44:15.360 --> 00:44:16.159
Where's AI going?
00:44:16.400 --> 00:44:17.840
Where's Space Tech going?
00:44:17.920 --> 00:44:25.360
Where's and there's ones that are going to be clear winners, obviously healthcare spend these, yeah, certainly needs to be done around healthcare systems.
00:44:25.440 --> 00:44:27.599
So healthcare is always going to be quite topical.
00:44:28.159 --> 00:44:30.719
Defence probably gonna be pretty topical.
00:44:30.800 --> 00:44:33.039
Um, and there's also a lot of activity now.
00:44:33.199 --> 00:44:44.880
So even if you buy something in defence, it might not necessarily be a five-year hold, but you might be selling it in one, two, three years because there's so many people trying to pick nice UK sovereign tech.
00:44:45.199 --> 00:44:49.440
Yeah, I got because I guess you know there's a lot of acquisitions going on in that space at the moment.
00:44:49.519 --> 00:44:57.280
Like you know, you can lend it to BAE, they're looking at let's not build up our tech, it's actually much better just to buy it.
00:44:57.599 --> 00:44:59.760
It's so fast paced, speed to market.
00:45:00.000 --> 00:45:02.400
Yeah, and Ukraine's really kind of a test bed.
00:45:03.039 --> 00:45:09.360
A lot of companies are learning from and government are learning from what's going on there, and very sad and unfortunate.
00:45:09.679 --> 00:45:18.000
Yeah, the rate of change in that that realm is is rapid, and so it's quicker to acquire quite often than develop your own thing.
00:45:18.639 --> 00:45:24.159
You're kept up to speed with a lot of you know what's going on in the world and you know, industry experts, for example.
00:45:24.320 --> 00:45:32.559
But how much when when you're looking at the deal then, how how much of that still comes down to intuition gut feeling?
00:45:32.960 --> 00:45:42.480
Does that happen, or are you you know you're looking at structuring this this deal and you're just making a decision based off of cold hard facts?
00:45:42.719 --> 00:45:48.159
This is you know an analytical decision as opposed to a gut feeling, you know.
00:45:48.639 --> 00:45:54.159
So we I mean, all proactive firms ourselves included, we work using deal teams too.
00:45:54.320 --> 00:45:59.039
So you're bouncing off someone, so you're not going rogue and going, I love this, I'm gonna throw money into it.
00:45:59.280 --> 00:46:04.480
You've got someone saying alongside me to say, Yeah, I agree or no, John.
00:46:04.559 --> 00:46:05.440
Uh are you sure?
00:46:05.519 --> 00:46:06.000
Let's let's do that.
00:46:06.159 --> 00:46:06.559
Yeah, yeah, yeah.
00:46:06.719 --> 00:46:07.760
So calm down a bit.
00:46:08.159 --> 00:46:17.920
You write, or you we have an off-letter session, so we'll kick it around with other independents to get a view, independents in internally, and then we'll do something called investment committee.
00:46:18.159 --> 00:46:29.440
So we'll the management team will come in, it's their chance to meet our team as well, because for us, especially for our growth funds, we personally invest at an individual basis, so we're fully aligned with the management team.
00:46:30.159 --> 00:46:42.880
And yeah, it's usually 45 minutes, it's it's for them to shake hands, it's a chance for them to present the business themselves to our investment committee, which is usually our CIO and and various other partners and members of the team.
00:46:43.760 --> 00:46:49.840
And that is usually our kind of green light thing that we do before due diligence starts.
00:46:50.320 --> 00:46:57.840
Then we go through DD due diligence, we do financial, commercial, ed tech, and insurance, a few other streams.
00:46:58.239 --> 00:46:59.199
And that is analytical.
00:46:59.519 --> 00:47:02.719
We're figuring out how big's the market, can we adjust pricing?
00:47:03.119 --> 00:47:05.199
What's the ROI going to be on salespeople?
00:47:05.280 --> 00:47:06.320
How do we grow it?
00:47:06.559 --> 00:47:12.239
And we're finessing, helping the team finesse the business plan accordingly to maximize value on exit.
00:47:12.400 --> 00:47:17.840
We're also looking at where's your low hanging fruit and going from there, really.
00:47:17.920 --> 00:47:19.760
And that's usually a six-week journey.
00:47:20.000 --> 00:47:24.320
So there's a huge amount of you know, background activity that goes into this, isn't it?
00:47:24.400 --> 00:47:27.519
It's not just you, it's not a dragon's den moment, is it?
00:47:27.599 --> 00:47:31.280
You know, no, no, it's not five minutes, even that's a great idea.
00:47:31.440 --> 00:47:32.320
It's usually now pitch.
00:47:32.559 --> 00:47:45.920
We have sort of uh 45 an hour in it, uh, an hour or so on usually on Teams, uh, or or we'll pop by for a coffee or a site visit, and usually that is enough to uh gauge a view of does it fit our our fun dream it?
00:47:46.079 --> 00:47:47.119
Is it a sector we like?
00:47:47.280 --> 00:47:50.400
Does the management team seem sensible in terms of their aspirations?
00:47:50.719 --> 00:47:53.519
Do you like going and talk to me you're saying about site visits?
00:47:53.760 --> 00:47:58.239
Say, for example, it's uh manufacturing firm making widgets, for example.
00:47:58.480 --> 00:48:03.840
Um, you go and walk around the factory, go and talk to Bob on the shop floor and say, you know, how are things?
00:48:03.920 --> 00:48:06.320
How yeah, no, you think you're the tax man?
00:48:06.559 --> 00:48:09.679
So you're going around the shirt and then oh god, who's this guy with glasses?
00:48:09.840 --> 00:48:11.440
No, the the site visits the best bit.
00:48:11.599 --> 00:48:12.960
Because those people are telling you goal, don't they?
00:48:13.039 --> 00:48:18.079
They'll tell you exactly well, most of the time, they they tell you the truth and what you need to hear, not what you want to do.
00:48:18.239 --> 00:48:31.199
And the management DD we sometimes do, it's more interesting to actually read what the tier below the management team think of the management team, because they're a lot more candid with their views, yeah, yeah.
00:48:31.519 --> 00:48:54.239
And so yeah, it it's intriguing because things will come out of that that you would have never realised because you're interviewing, you're paying third party provider to interview the management team, do some psychometrics, figure out cultural fit, who can we hire in the future that might fit the team because you're you're trying to keep the culture the same, you're also trying to bring out the best in those people, and so that's really what we do, DD.
00:48:54.400 --> 00:49:07.840
But the second-tier team will usually put hold no punches and be a lot more honest about what the various political dynamics are between the CFO and the CEO and the wife who's history, yeah.
00:49:07.920 --> 00:49:09.519
The wife and the husband are in the business.
00:49:11.519 --> 00:49:12.079
Yes, yeah, yeah.
00:49:12.320 --> 00:49:18.639
They're in the car park and a tear up and yeah, we see it in every yeah, not every business, but but a lot of businesses have it.
00:49:19.039 --> 00:49:23.599
They've all got political dynamics with political animals, and it's you need to know that, isn't it?
00:49:23.679 --> 00:49:30.159
You know, because I'm sure it has got on people invest in a business, and it's it's it's like an interview stage, isn't it?
00:49:30.239 --> 00:49:34.400
When you're interviewing someone like you're interviewing a company, you you only see the best, yes, yeah.
00:49:34.880 --> 00:49:46.880
You know, because and and sometimes people are playing up to that character, that persona, but when you actually then um invest in them, that's then when you start working out actually the the realm.
00:49:47.119 --> 00:49:50.639
Exactly, actually, you know, and I guess sometimes things don't stack up, do they?
00:49:50.800 --> 00:49:51.519
Fascinating.
00:49:52.000 --> 00:50:07.840
We you you touched upon AI there, which would I'd I'd love to get your take on that because I I I guess a lot of the judgment you you and your team are making on businesses is is AI gonna replace this business to be honest.
00:50:08.000 --> 00:50:09.760
Are we you know AI proof?
00:50:09.920 --> 00:50:14.000
Can we leverage AI in in companies uh that that we're investing in?
00:50:14.239 --> 00:50:23.440
Um so there's a lot there to uh to unpack, but AI in general, it's the buzzwords of of on everyone's lips.
00:50:23.679 --> 00:50:27.599
Um how do you see see things playing out in in the business landscape?
00:50:27.920 --> 00:50:39.280
At the moment we've seen a lot of businesses that just put AI at the end of their name, so it'd be like sofas online, AI and not quite that bad, but by AI.
00:50:39.440 --> 00:50:58.800
There is a yeah, there's a lot of guising of our business's AI or AI led or AI driven, and actually once you unwrap it, it's not an LLM side it's figuring out is this business actually AI or not, and there's no need for it to be I uh AI.
00:50:58.880 --> 00:51:01.679
We back manufacturers, we back all sorts of sectors.
00:51:02.000 --> 00:51:04.800
It's nothing wrong with with not being AI.
00:51:04.880 --> 00:51:11.039
And what we have seen is SaaS, especially so software as a service, which is basically subscription.
00:51:11.360 --> 00:51:13.679
You subscribe to this bit of tech software, it does something.
00:51:14.000 --> 00:51:16.719
Yeah, like Spotify, I guess, is SaaS like a subscription.
00:51:16.800 --> 00:51:28.639
Yep, and um those businesses people used to chase really hard, ourselves included, and the multiples would range two to eight or nine times of revenue available.
00:51:28.960 --> 00:51:30.639
I guess that's come down significantly now, hasn't it?
00:51:30.800 --> 00:51:32.719
Yeah, uh in some instances it's halved.
00:51:32.960 --> 00:51:38.400
Well, if you you're in that, I mean that's an example of you know that business model, is it going to be replaced?
00:51:38.639 --> 00:51:51.840
Because I guess you know, if you knew how to use AI like Claude, for example, um get a team of software engineers, you can make your own tech in the company, can't you?
00:51:52.000 --> 00:51:54.000
So you know you don't need to be subscribing to this stuff.
00:51:54.320 --> 00:51:56.320
Realize Python and spin it up, yeah.
00:51:56.400 --> 00:51:59.679
You can I mean I'm not a software guy, uh but you don't need to be anymore.
00:51:59.760 --> 00:52:01.039
I mean no, but that's the thing, isn't it?
00:52:01.199 --> 00:52:01.679
You don't need to.
00:52:01.760 --> 00:52:05.440
So all the mystique, or you know, we've got the knowledge, we've got the best software engineers.
00:52:05.679 --> 00:52:18.159
And that's like SaaS companies that are doing something that's regulatory or long-term contracts, or really is the plumbing in a business, they're safer, and that's the safe over now for funds like us.
00:52:18.320 --> 00:52:22.159
We're looking for stuff that we were before, but it hasn't changed anything.
00:52:22.400 --> 00:52:29.679
But there were businesses that just had a neat solution that they could sell because it was a neat solution, brilliant.
00:52:29.920 --> 00:52:34.239
But then AI has come along, and actually you can create a neat solution quite quickly.
00:52:34.639 --> 00:52:40.559
And do people now want to pay I don't know, 30 to 100 grand for a neat solution when they can spin it up for free?
00:52:40.800 --> 00:52:41.119
Exactly.
00:52:41.360 --> 00:52:42.000
Not so sure.
00:52:42.079 --> 00:52:48.320
And so looking at churn of SaaS businesses, like how many customers churning?
00:52:48.800 --> 00:52:50.719
Is annual recurring revenue growing?
00:52:50.800 --> 00:52:51.840
Are your margins high?
00:52:52.159 --> 00:52:54.320
What's your next product roll out?
00:52:54.480 --> 00:52:57.599
Are you able to leverage AI to make your product better?
00:52:58.159 --> 00:53:10.559
People are poking a lot harder around SaaS businesses now as to whether AI is going to make them redundant in five years' time, because that's our exit generally way of theory.
00:53:11.440 --> 00:53:11.760
Absolutely.
00:53:11.840 --> 00:53:16.960
I mean, an example that I can definitely understand would be a CRM, for example.
00:53:17.039 --> 00:53:25.280
You know, if you're a business, you have an off-the-shelf CRM, you're probably signed to you know a 12, 24-month contract, paying thousands and thousands a year for that.
00:53:25.360 --> 00:53:31.280
I reckon a lot of businesses, you know, small to medium enterprises will be thinking, let's build our own.
00:53:31.440 --> 00:53:36.000
And so the drop-off in those businesses and the churn is going to be very high.
00:53:36.719 --> 00:53:39.840
Probably more drop-off than more new or signing on, to be honest.
00:53:40.559 --> 00:53:42.480
Some end clients are slow moving.
00:53:42.559 --> 00:53:47.679
So if you're sending to large organizations, a lot of them aren't yet adopting AI.
00:53:47.760 --> 00:53:51.280
And I think people are very scared of AI and don't really know what's going to happen.
00:53:51.599 --> 00:53:54.800
But not everyone's actually adopted it that much.
00:53:54.960 --> 00:54:01.280
Like they're trying out Claude and do we use Copart or should we use ChatGPT Enterprise or and people don't know, do they?
00:54:01.679 --> 00:54:06.000
Yeah, still finding the fee, and ourselves included, we're we're you know, we're trying to do a lot more in AI.
00:54:06.079 --> 00:54:15.360
We've done lunch and learns on the topic, the team are using like lots of AI tools, and it's for me, for instance, it's drastically increased my efficiency.
00:54:15.519 --> 00:54:17.360
Um, yeah, to to go through more of the work.
00:54:17.519 --> 00:54:18.239
You can do more, can't you?
00:54:18.400 --> 00:54:19.360
So just do more.
00:54:19.760 --> 00:54:20.400
Prepare, you know.
00:54:20.480 --> 00:54:32.239
I I guess you know, if you were comparing, say two years ago, the amount of prep work, the the hours it took you in preparing for these meetings now, you know, you've got that at the click of a button, haven't you?
00:54:32.400 --> 00:54:38.719
Yeah, you can research the market very quickly, how big's the market, what's price and sensitivity in this space, who are your competitors?
00:54:38.960 --> 00:54:47.519
Very quickly, you can figure out um post meeting, actually, what what are the key exam questions for this business when I go in?
00:54:47.599 --> 00:54:48.880
How can I help them?
00:54:49.280 --> 00:54:56.880
Um, and understand you know, we we see lots of market, lots of businesses in different markets, and so it's helpful tool for that.
00:54:57.199 --> 00:55:15.360
But yeah, coming back to your question on AI businesses, people are really keen, they're they're jumping in, but you've really got to do your homework on on AI businesses as to whether under the bonnet it's real, it's defensible, because the barriers to actually create an AI business are quite low.
00:55:15.599 --> 00:55:22.000
If it's not its own language model, and so you're just leveraging a a clawed, a chat GPT, and then you're repacking the side.
00:55:22.159 --> 00:55:23.280
It's almost like a skin, yeah.
00:55:23.679 --> 00:55:28.079
Back as SaaS software, this is our AI, but it's you've got no IP, have you?
00:55:28.239 --> 00:55:31.199
You all you've done is just built an interface, an app, really.
00:55:31.440 --> 00:55:40.000
Yeah, and the multiples for those are hugely varied because I think people don't yet really know where the layer land's gonna end up.
00:55:40.239 --> 00:55:49.679
So yeah, AI, interesting, and it it's obviously a big thing, but um so it's quite high risk then, really, as an investment opportunity right now.
00:55:49.760 --> 00:55:51.119
I'd say I think so, yeah.
00:55:51.280 --> 00:55:57.199
It's it's say it's it's a thing, it's it's picking the winners when you've got real gorillas in that sector.
00:55:57.760 --> 00:56:01.920
Um anthropic and you know, yeah, all of them.
00:56:02.000 --> 00:56:10.079
So absolutely fascinating to get your take on you know what's going on in business, what's hot, what's not, how the whole world of private equity works, John.
00:56:10.239 --> 00:56:14.159
I mean, it's uh I think to many it's quite a mystical world.
00:56:14.320 --> 00:56:19.119
So uh you you've definitely explained it in in in you know certainly terms I can understand.
00:56:19.360 --> 00:56:28.480
Before we close this out, I just wanted to talk to you about really um you know, businesses right now that are maybe looking for investment.
00:56:28.800 --> 00:56:32.480
Um obviously they don't know how to go about it.
00:56:32.639 --> 00:56:37.039
Um so maybe they they're looking, wanting to uh talk to some people.
00:56:37.199 --> 00:56:42.480
Um but those are also those businesses who maybe are talking to potential investors.
00:56:43.360 --> 00:56:48.719
How how can businesses best prepare for those conversations?
00:56:48.880 --> 00:57:10.400
And you know, um are there some simple things that aren't just printed off of the chat GPT and Claude actually coming from an investment expert like yourself that businesses can do to make those meetings as beneficial as as possible and I guess increase the likelihood for them to actually get the investment that they're seeking.
00:57:10.719 --> 00:57:11.679
Yeah, definitely.
00:57:11.840 --> 00:57:20.159
So I think prepping prepping your financials and not hiding stuff, but also not going too gunko.
00:57:20.400 --> 00:57:25.360
Yeah, just be yourself and be realistic and what you think you can achieve.
00:57:25.599 --> 00:57:30.320
People want to see more than 3% growth a year, so it's gotta be a bit more exciting than that.
00:57:30.480 --> 00:57:36.079
But also you don't need to put 200% a year growth, it just becomes unbelievable.
00:57:36.320 --> 00:57:40.320
So is that that's forecast, but is I guess that's also past as well, you're looking at.
00:57:40.480 --> 00:57:45.440
Yeah, you want us you want clarity on what has been and that you know what has been.
00:57:45.840 --> 00:57:50.400
You want visibility on what is likely next year and what's underpinning that.
00:57:50.480 --> 00:57:52.079
So pipeline is quite important.
00:57:52.159 --> 00:57:55.199
So having we'll inevitably ask, like, what is your pipeline?
00:57:55.280 --> 00:57:56.880
How are you gonna get there next year?
00:57:57.119 --> 00:58:03.440
And so being able to argue that that is gonna happen is helpful for the valuation you might attain.
00:58:03.840 --> 00:58:12.000
Being prepared generally, people will ask for things quickly, and if you take five weeks to reply with your financials, not the greatest level.
00:58:12.400 --> 00:58:13.599
Something's going on there, something's a miss.
00:58:13.760 --> 00:58:24.400
If you send it two days later and go, here it all is, it's all clean and tidy, it speaks volumes about your governance and your ability to execute, and also systems you've probably already got in place.
00:58:24.880 --> 00:58:26.079
I think that goes in general though, isn't it?
00:58:26.239 --> 00:58:30.559
That speed, you know, it's it's showing that there's interest to try and get this to work, yeah.
00:58:30.639 --> 00:58:34.559
Well, you're not trying to muddle your way through through taking weeks to reply.
00:58:34.639 --> 00:58:37.440
But yeah, it's I mean that's just an a great indicator straight away, isn't it?
00:58:37.599 --> 00:58:38.320
Speed of communication.
00:58:38.559 --> 00:58:45.920
The number of decks we see, investment decks, so usually five, ten pages that don't have the forecast, don't have the historic.
00:58:46.000 --> 00:58:49.760
So it's like we've got a great business, it's super numbers, no numbers.
00:58:50.159 --> 00:58:57.679
Then you have to ask for the numbers, and and people do it as a hook because they want you to reply and get to have a call.
00:58:57.760 --> 00:58:58.960
But it's basic stuff, doesn't it?
00:58:59.119 --> 00:58:59.920
We're really busy.
00:59:00.239 --> 00:59:06.239
Everyone is really busy, and so if you haven't got numbers, I mean you have to come back and ask for them, and then you take ages to supply them.
00:59:06.320 --> 00:59:18.079
Um then they're on the whim, hope you know, yeah, kind of that they're hoping that you see promise in the business model that they've got, and there's something to it, but you you need to show that demonstrate some numbers behind that, don't you?
00:59:18.320 --> 00:59:23.360
So the stage if it's a startup, just say, and then worse case, we can point you the right direction.
00:59:23.599 --> 00:59:29.280
If we're having to go back and forth several times, um it's not ideal, it's like you're trying to hide something.
00:59:29.519 --> 00:59:37.599
So just be upfront with with your numbers, um, don't overpromise and under deliver, just do what you think's thinks right.
00:59:37.840 --> 00:59:45.039
Having probably the right FD or at least having thought about it, having a NED is quite helpful or a chair.
00:59:45.199 --> 00:59:48.239
Quite often, if you're doing your first race, you won't be there yet.
00:59:48.559 --> 00:59:51.360
Um, it's a cost, and so people put it off.
00:59:51.519 --> 00:59:54.400
But it's something we encourage when we come in.
00:59:54.480 --> 01:00:05.679
So if if we invest, we work with a team to scope out what the type five things you want in a chair, an FD, we'll go out to market, we'll speak to yourself and others, yeah, go and find that person.
01:00:06.000 --> 01:00:15.199
They'll have sort of lunch, coffees with these people to figure out who's the best cultural fit, who's gonna have the the value we want, and then they're appointed add huge value.
01:00:15.360 --> 01:00:23.360
And I think in really succinct, we we don't need to see 50 pages of what the business does, the history.
01:00:23.760 --> 01:00:38.719
We just want a succinct kind of deck or or teaser on what you've what you've done, what you do, and where you want to spend the money, having a clear idea where you're gonna spend the money and a clear idea on how much you need, plus a bit of wriggle room.
01:00:38.800 --> 01:00:40.719
You you always want a bit of a buffer.
01:00:41.280 --> 01:00:45.280
Um getting the fundraise quantum right is quite important.
01:00:45.360 --> 01:00:50.800
Like we get a lot of people that will go, I think I can raise like 50 million, something else for 50 million.
01:00:51.039 --> 01:00:56.559
Actually, there aren't many companies, funds in the UK that can write those sort of checks anyway.
01:00:56.800 --> 01:01:20.320
So you've kind of got to know who your audience is, and that comes through Chat GPT research can probably do it, but speaking to right people that that understand the landscape, who will go actually there's quite a lot funds that are doing two to ten million checks, and maybe you should size your check accordingly based on what you actually need and based on the audience you're going to be pitching this to.
01:01:20.400 --> 01:01:23.519
Because if you're raising 50 million, there's probably no point in speaking to you.
01:01:24.000 --> 01:01:27.760
If you're raising 100 grand, again, I could put you the right direction.
01:01:28.159 --> 01:01:34.159
Um, so knowing your audience and what they want to hear, and having realistic expectations.
01:01:34.719 --> 01:01:47.039
Um, people just go so-and-so's raised a gazillion pounds in the US, therefore my business is worth that, is not a credible metric on which to base your funds raise.
01:01:47.360 --> 01:01:50.559
Ultimately, something is worth what someone will pay for it.
01:01:51.039 --> 01:02:03.840
And so you've got to go in, I think, ideally kind of loosely with a number in your head, it'd be nice to attain X, but I wouldn't necessarily lead with we're raising that X valuation.
01:02:03.920 --> 01:02:06.239
I would almost let the market dictate it.
01:02:06.320 --> 01:02:23.199
You can see if you've got an advisor or a Ned, they I'm sure can steer people through through the back routes, but um having unrealistic expectations that might not be met, and then you don't get the fundraiser way, which is a difficult point for a lot of founders because you know they're so passionate, this is their baby, yeah.
01:02:23.360 --> 01:02:27.920
You know, it's the the best thing since last bread, no one can do it better than us.
01:02:28.079 --> 01:02:34.159
Yeah, um, and they look at the competition line as you were saying, someone in the US, yeah, crazy multiple, yeah.
01:02:34.400 --> 01:02:39.440
But then you know they've got that because they've got the brand value, for example, whereas you haven't done anything on marketing.
01:02:39.599 --> 01:02:45.440
Yeah, yeah, it's hard, it must be hard because you there are the odd ones, and you're like, How have they raised but I haven't raised?
01:02:45.840 --> 01:02:55.199
But there's so many different dynamics, they might know someone, their dad might know someone, someone might you might have just lucked out candidly.
01:02:55.280 --> 01:02:57.679
That there might be some IP you don't really know about.
01:02:57.840 --> 01:02:59.280
There's all sorts of things.
01:02:59.920 --> 01:03:06.159
Sometimes they do just get lucky, and they're in America, which possibly makes a difference too.
01:03:06.480 --> 01:03:10.079
But yeah, ultimately, be realistic, yeah.
01:03:10.159 --> 01:03:16.480
Don't necessarily put your neck on the block and go it's worth X and deter people from taking that first call.
01:03:16.559 --> 01:03:24.559
Because people do, they're they're put off if they think, why would I spend an hour if they've said it's worth 60 million pounds and it's doing one million or everything?
01:03:24.719 --> 01:03:25.360
Yeah, I get that.
01:03:25.599 --> 01:03:29.119
And then you lose that opportunity to pitch what could be a crack in business.
01:03:29.519 --> 01:03:43.199
I can only, you know, I've I've I've never been out there seeking investment, but I can definitely, you know, imagine for a lot of business owners, founders, it's quite a nerve-wracking and anxious time because it's a new experience for them.
01:03:43.280 --> 01:03:44.719
They probably haven't done it before.
01:03:44.960 --> 01:03:49.360
But everything you're saying is is really just quite simple things, really.
01:03:49.679 --> 01:03:57.119
It's is preparing, um, you know, having all your ducks in a row, um, knowing actually what you want, where you want to get to.
01:03:57.199 --> 01:03:57.280
Yeah.
01:03:57.440 --> 01:04:03.360
So being clear on objectives, it's as you're saying, you know, you're asking for a certain amount of investment.
01:04:03.599 --> 01:04:05.360
Um, what are you going to do with it?
01:04:05.519 --> 01:04:07.360
Nothing too complicated, really.
01:04:08.079 --> 01:04:11.199
There's nothing more time, it's really time consuming, raising money.
01:04:11.360 --> 01:04:13.360
Um US or UK.
01:04:13.519 --> 01:04:18.559
You've got to go through lots of meetings, stressful days without the benefits.
01:04:18.719 --> 01:04:19.039
Yeah.
01:04:19.280 --> 01:04:21.519
Um it's it's tiring.
01:04:21.760 --> 01:04:26.000
You an hour of time, then they ask for we ask for more info, then we have a site visit.
01:04:26.159 --> 01:04:27.920
You've got 10 people doing that.
01:04:28.000 --> 01:04:32.800
Yeah, it chooses your time, and you're trying to run a business, you're trying to be CFO, you're trying to be the CTO.
01:04:33.199 --> 01:04:34.960
Um, it's arduous.
01:04:35.119 --> 01:04:52.320
And so you A, you want to make sure you're speaking to the people that aren't just tire kickers, B, you've got to have realistic expectations because people will still have a chat, even if and and really what you want is top four, top five, go speak to them.
01:04:52.559 --> 01:04:57.280
Realistic expectations, one or two of them ideally offer early doors.
01:04:57.440 --> 01:05:02.639
You can maybe bounce them off one another, or just pick the one you like, and then get into DD.
01:05:03.280 --> 01:05:12.559
Ideally, have all your stuff kind of to hand up front, like a data room, or at least a drop box with your financials in, or the stuff people are probably obviously gonna ask for.
01:05:12.719 --> 01:05:14.800
Yeah, so anticipate you know what's to come.
01:05:16.000 --> 01:05:16.559
Yeah, yeah.
01:05:16.639 --> 01:05:24.079
But as you know, coming back to you know, a lot of the founders' mentality, you you know, that's usually stuff that's an afterthought, isn't it?
01:05:24.239 --> 01:05:25.039
Yeah, it is, yeah.
01:05:25.360 --> 01:05:32.880
So you could understand that, but yeah, it's it's um yeah, yeah, isn't so there's nothing nothing too arduous that they've got to do.
01:05:33.679 --> 01:05:36.000
And and check your do do your research on the fund.
01:05:36.320 --> 01:05:41.920
Like you you are giving a bit of your business away and got to work with these people for a number of years.
01:05:42.079 --> 01:05:46.079
Some funds have separate portfolio teams, so I'm not a fan of it.
01:05:46.239 --> 01:05:48.400
Foresight generally, we we don't do that.
01:05:48.559 --> 01:06:07.840
So you you did you find a deal, you do the deal, you live with the consequences, the glory or the you know, the the difficulties on on that journey, and you make it work and It's quite easy if you have a separate portfolio team to just do deals, throw them over the fence to the portfolio team, and they have to deal with it.
01:06:08.000 --> 01:06:17.280
And then if you're an entrepreneur and you've been through a journey through due diligence, through this you know, bonding experience while someone's tinkering under your bonnet having a look, yeah.
01:06:17.440 --> 01:06:24.239
And then you're passed to some Joe blogs you might not like, then you're stuck with them for five years.
01:06:24.480 --> 01:06:26.239
Um, so you've got to do your research.
01:06:26.320 --> 01:06:27.199
Does that be true?
01:06:27.440 --> 01:06:28.719
Who am I dealing with at that fund?
01:06:28.880 --> 01:06:29.199
Yeah, yeah.
01:06:29.519 --> 01:06:31.280
Um, are they gonna transition?
01:06:31.440 --> 01:06:32.400
Are they tied in?
01:06:32.559 --> 01:06:33.679
What's our track record?
01:06:33.840 --> 01:06:35.519
Have they done stuff in my sector?
01:06:35.760 --> 01:06:38.559
Do I like them over a beer or a matcher?
01:06:38.960 --> 01:06:42.000
Um, what what yeah, what value can they bring?
01:06:42.159 --> 01:06:44.559
And um, are they gonna be up front with me?
01:06:44.719 --> 01:06:46.719
Are they doing the decision making early on?
01:06:46.880 --> 01:06:59.440
A lot of funds um will do all the due diligence, all the dating, and get to the end six to nine weeks later, and go, actually, we've just done our investment committee.
01:06:59.679 --> 01:07:02.559
Turns out uh CIO doesn't like the sector.
01:07:02.719 --> 01:07:03.039
Sorry.
01:07:03.840 --> 01:07:04.639
Here's the bill.
01:07:04.800 --> 01:07:05.840
No, bye-bye.
01:07:05.920 --> 01:07:09.760
Uh and you're an entrepreneur that's been through that, and you've got to pick up the bill.
01:07:09.920 --> 01:07:10.239
Really?
01:07:10.639 --> 01:07:14.880
But worse, you've bill aside, you've been through an emotional roller coaster.
01:07:15.119 --> 01:07:15.760
Well, absolutely, yeah.
01:07:16.320 --> 01:07:20.880
So you want to pick a fund who's doing that investment committee up front, the decision making up front.
01:07:20.960 --> 01:07:23.440
We do, I'm sure there's others, other funds are available.
01:07:23.599 --> 01:07:29.519
Um, and uh yeah, so so it's always thinking those things through as well.
01:07:29.679 --> 01:07:33.760
Yeah, it's just all this, you know, foresight.
01:07:34.400 --> 01:07:35.599
Yeah, isn't it?
01:07:35.840 --> 01:07:38.719
Yeah, it's been an absolute pleasure to sit down with with you, John.
01:07:38.880 --> 01:07:46.400
Just before we finish up things, if um you know there's a business out there uh looking for investment, um, how can someone get in touch with you?
01:07:46.559 --> 01:07:52.800
Yeah, um I'm on LinkedIn and I don't know if we can put like a LinkedIn or something.
01:07:53.599 --> 01:07:55.440
It's like BBC radio one, I don't know.
01:07:55.519 --> 01:08:01.119
But um yeah, a green screen and we'll definitely contact me or a member of my team.
01:08:01.280 --> 01:08:06.960
Um I help look after direct origination as one of my hats in the UK team.
01:08:07.119 --> 01:08:13.760
So I welcome approaches, always happy to have a coffee as as on my team with people to help them on the journey.
01:08:13.920 --> 01:08:17.920
Whether the right fit, we might not be, but we know pretty much everyone on the market that might be.
01:08:18.319 --> 01:08:22.079
And most of our funds are evergreen, so we're there forever, hopefully.
01:08:22.159 --> 01:08:32.159
So it might not be now, it might be in a year, it might have been two years, doors always gonna be ajar, and um equally, um, like we we're working with you and think you're fantastic.
01:08:32.560 --> 01:08:40.000
Find some really good FDs, some really good um chair candidates, and they are critical components to making any business a success.
01:08:40.319 --> 01:08:45.199
Absolutely, you you said it's the the the the team around the business, isn't it, that that makes it a success.
01:08:45.359 --> 01:08:45.520
Yeah.
01:08:46.159 --> 01:08:52.800
If there's a you know a a founder or business out there who's who's looking for investment, you know, um you welcome a chat with them.
01:08:53.039 --> 01:09:06.880
Yeah, yeah, especially if you're half a mil million revenue plus, bigger the better, or you're a million quid plus of Uber Dow profitability and you're thinking about taking some cash off the table and maybe even retiring or or uh just de-risking a bit.
01:09:07.119 --> 01:09:07.359
Brilliant.
01:09:07.439 --> 01:09:08.239
That's our sweet spot.
01:09:08.399 --> 01:09:08.560
Brilliant.
01:09:08.720 --> 01:09:09.600
Well, John, thanks again.
01:09:09.680 --> 01:09:11.439
It's been an absolute pleasure, it's been fascinating.
01:09:11.600 --> 01:09:14.319
I've learned a lot, I'm sure a lot of our listeners have too.
01:09:14.960 --> 01:09:15.600
Um yeah, thank you.
01:09:15.840 --> 01:09:16.560
Really enjoyed this one.
01:09:16.880 --> 01:09:17.600
Pleasure