FUNDING THE FUTURE SUMMER 2014 JOURNAL Silicon Britain Could every region soon be home to a thriving tech cluster?

Taking up the mantle Putting a price on bitcoin No holding back New BVCA chairman Tim Farazmand Are investors willing to take a gamble Why Germany’s economy has continued reveals his plans for the year ahead on a mysterious virtual currency? to grow amid the eurozone crisis Introduction Contents The rise of the UK tech cluster, British investors’ lukewarm response to bitcoin-related ventures and Germany’s economy set the agenda for this issue

The UK technology industry is one of published earlier this year by the BVCA, the country’s shining lights. Be it biotech which showcases this country’s vast or cleantech, hardware or software, array of talent across all technological Britain is undoubtedly a legitimate player sectors. When flicking through the on the world stage. report and our cover story, it is clear But much of the focus – from that the UK is a nation of enterprise and 20 politicians, officials and the media entrepreneurialism, and one in which – often centres on London. This is perhaps venture capital and private equity have an The story of inevitable given its cultural, economic important role to play. UK“ innovation and political dominance, yet focusing on Our members invest in ventures that the capital often means the work being will be central to Britain’s ability to 26 involves more done across the country is overlooked or compete and lead in the new economy. downplayed. While London and the Tech High-growth businesses, backed by than just the City initiative continue to do outstanding experienced investors, can help Britain things, the story of UK innovation involves to achieve the scientific and technological capital more than just the capital. innovation that is crucial to our position ” The BVCA will be campaigning in the global economy. about this issue in the run-up to next One innovation taking the world by year’s general election. Rebalancing the storm, which the British cannot take economy is not just about growing sectors, credit for, is the rise of bitcoin. Last but also regions, to ensure stronger, more year saw a number of venture capital sustainable economic growth and an investments in bitcoin-related start-ups economy that is better placed to withstand in the US, but so far there has been little financial shocks. interest in Britain. Our piece starting on Our cover story (page 20) is very page 14 looks at why and whether things much in this vein, looking at the string may change. of technology clusters throughout the Elsewhere, we look at Germany 14 UK. Following on from Tech Country, (page 26), which, like Britain, is another a substantial piece of research we European economic powerhouse that is undertook last year, the article finds that home to some interesting companies and News Crunching European Creative spirit entrepreneurialism and innovation are tech clusters. The tech industry in Berlin 04 Stories on the regional 18 the numbers 26 powerhouse 38 How leading animation, thriving across the land, from the hi-tech is particularly strong to the point where BVCA Management Team Research showing that most With a strong economy, solid TV, films and music companies hub in Cambridge and life sciences in it is locked in a battle with London for Awards, banking union and the Q1 2014 deals in the UK were trade links and robust industries, have turned the UK into a hotbed Manchester, to Bristol’s expertise in the crown of Europe’s leading tech hub. European fund rules backed by venture capital and Germany is one of Europe’s most of creativity semi-conductors and the oil and gas focus But unlike World Cup 2014, this is one private equity firms attractive places to invest of Aberdeen. particular contest I expect us to win. Taking centre stage Guest columnist The rise of UK tech clusters was also 10 New BVCA chairman Tech nation Missing the 42 Celia Moore from evident in Britain’s Hot Talent, a book Tim Hames, Director General Tim Farazmand talks about 20 Silicon Roundabout may 30 vital step London Business School on business, private equity and his grab the headlines, but the UK is How failing to implement making ethical investments when love of rock music home to many tech clusters that business methodology properly under the influence of money deserve attention can affect your business Editor Rob Morris Content Director Janice Warman Creative Director Ben Barrett Reserve your copy of the BVCA Journal. Art Director David Donaghy Designer Dean Buckley Picture Editor Johanna Ward To guarantee that you receive your copy Going for broke Publisher Georgina Beach Production Director John Faulkner of the next edition, please email Mia Iwama 14 Can British investors get Laying roots Big appetite Hastings at [email protected] behind bitcoin-related ventures Guernsey is fast David Salkeld, CEO Managing Director Claire Oldfield CEO Martin MacConnol To advertise in the magazine, please contact 25 33 BVCA Journal is published on behalf of the BVCA by Wardour, 5th Floor, Drury House, Peter Sandberg on +44 (0)20 7420 1820 or when so little is known about the becoming a top private equity of food producer Symington’s, 34–43 Russell Street, London WC2B 5HA Tel +44 (0)20 7010 0999 www.wardour.co.uk at [email protected] virtual currency? David Turner hub, attracting some of the is still hungry for growth after

ILLUSTRATION: PETER CROWTHER ASSOCS speaks to industry insiders industry’s big players years of steady expansion

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News ELTIF progress good for private equity

Banking union Progress on the European Long-term (AIFMD) if they are to become Investment Funds (ELTIF) regulation authorised under the ELTIF regulation. continues with encouraging prospects Under the AIFMD, it will only be takes step forward for the private equity and venture capital industry. Long-term investment is a popular Patient capital was a remedy Taxpayers in the EU will no longer topic in Brussels, with the provision for the financial sector’s short- have to bail out struggling banks after of ‘patient’ capital a remedy for the a plan to create a common system for financial sector’s short-term speculative term speculative behaviour handling banking crises was approved. behaviour prior to the crash. Members In March, the European Parliament of both the European Parliament and before the economic crash agreed to introduce the Single Council of Ministers are keen to make Resolution Mechanism, a eurozone the voluntary regime as attractive as possible to market cross-border to system to shut failing banks, and a possible for would-be fund managers. professional, non-retail investors. €55 billion shared fund to cover its Prospective managers must adhere The European Parliament side costs, paid for by the banks rather than fully to the terms of the Alternative has proposed increased flexibility by taxpayers in Europe. Investment Fund Managers Directive surrounding how and when assets can The fund will be used to shore up from a member state with a depressed be disposed of, as well as the possibility European banks that hit hard times, banking system. In March 2013, Cyprus that the ELTIF itself can be structured as many did following the onset of the was plunged into crisis when the EU as a partnership. Although the Council global economic downturn in 2008. But revealed that anyone with more than of Ministers’ position is not as clear, some critics claim that €55 billion is not €100,000 in a Cypriot account could lose the broad direction of debate suggests enough to protect banks from the losses up to 40% of their savings to finance it is possible to find a middle ground. that the sector has seen in recent years. a bank bailout. The news led to mass With the European Parliament elections Others say that the final decision on panic, with thousands of people in taking place in May, more talks were how to deal with a bank in trouble could Cyprus scambling to withdraw cash expected to be scheduled for this involve more than 100 decision makers, from their bank accounts. autumn at the earliest. which, in their view, is too many to Michel Barnier, European Some investors and industry insiders reach a consensus quickly. Commissioner for the internal market hope that the talks will eventually lead Some also believe that the system and services, said that the common to a new fund vehicle that will facilitate lacks a robust EU-wide deposit system is “not a perfect construction”, the role already played by private equity guarantee scheme. Without it, there is but one that was won through the “spirit in providing long-term finance to the nothing to stop a mass exodus of funds of compromise”. real economy.

News in brief

Colombia calling respective countries. The present in Bogotá, and may Tax relief for The tax relief is the first of Venture Capital Trusts. While the £5 million that the BVCA for British investors BVCA, in collaboration with the help to cover the cost of flights social investments its kind, promising to catapult likely to encourage investors has been pushing for in its Colombian capital Bogotá British Embassy, represented and/or accommodation for Social investment in the UK has social impact investment into to commit money to social consultation response. will host the second annual the UK industry at the 2013 those interested in exploring been given a significant boost the mainstream and have a enterprises, the overall The Government aims to Colombia Start-up and Investor summit and hopes to be investment opportunities in with the launch of the Social real positive effect on social investment limit a social introduce a larger scheme with Summit this October. involved in this year’s event. Latin America. Investment Tax Relief in Budget enterprises across the UK. enterprise can raise has been a higher investment limit and The event brings together Organisers are keen to For more information, 2014 and publication of the The rate is set at 30%, set at £290,000 over three will seek EU state aid approval stakeholders who aim to see UK practitioners from the contact Simon Burns at ‘Social investment roadmap’ aligning it with the Enterprise years. This figure to help make this happen.

foster start-up activity in their venture capital community [email protected] PHOTOGRAPHY: ISTOCK by HM Treasury. Investment Scheme and is significantly below Currently, investors can invest

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Merlin casts its spell MedCity to boost on BVCA judges UK life sciences industry

Nick Varney, chief of tourist attraction The regional winners go London Mayor Boris Johnson has that ambition, ensuring London and operator Merlin Entertainments, has launched MedCity to transform the South the South East becomes the leading been named CEO of the Year in the through to the national East of England into one of the world’s top global hub for development of novel South West by the BVCA. life sciences hubs. therapeutics, devices and diagnostics The Poole-based business, which finals in London in June MedCity aims to establish a world- to address medical need.” listed on the London Stock Exchange leading centre for research, development Funded by the Greater London last November, won three prizes in defibrillator technology HeartSine and manufacturing in a region with a Authority and the Higher Education this year’s BVCA Management Team won two business accolades. The firm, strong life sciences sector that accounts Funding Council, MedCity Limited will Awards. It won Exit Management which is backed by venture capital for some 700,000 employees. oversee the project with an advisory Team of the Year for its IPO, and the houses ACT Venture Capital and The hub aims at collaboration board which includes Kate Bingham, Community & Environmental Action Enterprise Equity, was named mid- between academia, business and the managing partner at SV Life Sciences, Award for its social responsibility sized company of the year. investment community. It is being and Hermann Hauser, co-founder of policies. Merlin was one of six winners The company, which exports to 44 launched by a partnership involving Amadeus Capital Partners. in the South West final of the awards. countries and has operating systems UCLPartners, King’s Health In the Northern Ireland regional in more than 29 languages, picked up Partners, Imperial College awards, Belfast-based innovator of a second award in recognition of its Academic Health Science activity in international markets. It Centre, University of Oxford, was one of five winners in the Northern University of Cambridge and Ireland final of the awards. the Greater London Authority. Elsewhere, John Innes, the former “Our challenge is to chief of Amor Group, was named promote that capability CEO of the Year for Scotland. It was and secure the industrial one of two prizes picked up by the engagement and financial Renfrewshire-based firm, which support to translate science provides IT services to the energy, to benefit UK health and transport and public services sectors. wealth,” said Professor Sir The regional winners go through to John Tooke, UCLPartners, the national finals, the results of which academic director. will be revealed at a ceremony in “Building on a history London on 18 June. of increasing collaboration between the academic health For a full list of the regional winners, science centres, MedCity please turn to page 8 provides the vehicle to realise

up to £1 million annually in a Social enterprises are firms IORP should protect In March, the European requirements to allocations accepted that this approach portfolio of social enterprises. that set up to help British investors, BVCA says Commission launched made by pension funds. would be ill-advised. The tax relief applies to people and communities. The latest Institutions for its revised Institutions for Given that pension funds The BVCA and European individual investors who Some of the country's most Occupational Retirement Occupational Retirement tend to allocate to the private Venture Capital Association, invest in new shares or new well-known ventures include Provision Directive should Provision Directive (IORP II). equity and venture capital both of which welcomed the qualifying debt investments Divine Chocolate, which sells help to support pension The updated directive has industry, such action could commission’s decision, said in social enterprises. Indirect fairtrade confectionery, the fund investment and offer been long in the making, have had a chilling effect on that the IORP offered investor investments via a nominee Co-op, the Eden Project and investor protection in Europe, with ongoing debate about Europe’s investment activity. protection and supported

also qualify. The Big Issue. according to the BVCA. PHOTOGRAPHY: ISTOCK the merits of applying capital The Commission has since pension fund investment.

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South West BVCA Management Team Awards: • Large Buyout Private Equity-backed Management Team of the Year: • CEO of the Year: New Look, Permira Nick Varney, Merlin • Mid Market Private Equity-backed Management Team of the Year: Aero Stanrew, Entertainments, Regional winners WestBridge Capital Blackstone and CVC • Venture Capital-backed Management Team of the Year: Bullitt, Business Growth Fund Capital Partners The regional winners of the BVCA backed by private equity and venture • International Impact Management Team of the Year: A-Gas International, LDC Management Team Awards 2014 were capital, are nominated by BVCA members • Exit Management Team of the Year: Merlin Entertainments, Blackstone and named in May, following a rigorous and assessed by the judges. The winners CVC Capital Partners assessment process. will now go through to the finals in June. • Community & Environmental Action Award: Merlin Entertainments, Blackstone and Entrants to the awards, which honour Here is the full list of companies that CVC Capital Partners the management teams of UK firms won the regional awards. • Best for Innovation: Atlas Genetics, YFM Equity Partners Wales

Regional winners • Mid Market Private Equity-backed Management Team of the Year: Penn • CEO of the Year: Pharmaceuticals, LDC Richard Yarwood, Scotland • Venture Capital-backed Management Team of the Year: Wholebake, Finance Wales Penn Pharmaceuticals, • Mid Market Private Equity-backed Management Team of the Year: ICR, Gresham • CEO of the Year: • International Impact Management Team of the Year: Silverwing, NVM Private Equity LDC Private Equity John Innes, Amor • Exit Management Team of the Year: IG Doors, NVM Private Equity • Venture Capital-backed Management Team of the Year: Deep Casing Tools, Maven Group, Growth • Community & Environmental Action Award: Penn Pharmaceuticals, LDC Capital Partners Capital Partners • Best for Innovation: ADC Biotechnology, Finance Wales • International Impact Management Team of the Year: FanDuel, Pentech Ventures South East • Exit Management Team of the Year: Amor Group, Growth Capital Partners • Community & Environmental Action Award: Skyscanner, SEP • Large Buyout Private Equity-backed Management Team of the Year: • CEO of the Year: • Best for Innovation: Cyberhawk, SEP Vue Entertainment, Doughty Hanson & Co Rosaleen Blair, • Mid Market Private Equity-backed Management Team of the Year: Alexander Mann Midlands Graze, The Carlyle Group, DFJ Esprit, Octopus Investments Solutions, Graphite • Large Buyout Private Equity-backed Management Team of the Year: Poundland, • CEO of the Year: • Venture Capital-backed Management Team of the Year: Anesco, SEP Capital Warburg Pincus Fergus Brownlee, • International Impact Management Team of the Year: Aspen Pumps, Inflexion • Mid Market Private Equity-backed Management Team of the Year: Kee Safety, Cambridge Education • Exit Management Team of the Year: Alexander Mann Solutions, Graphite Capital Dunedin Group, Palamon • Best for Innovation: Nutmeg, Pentech Ventures • Venture Capital-backed Management Team of the Year: Mirada Medical, Albion Capital Partners and Ventures Bridgepoint North East • International Impact Management Team of the Year: DisplayLink, DFJ Esprit • Large Buyout Private Equity-backed Management Team of the Year: Allied Glass, • CEO of the Year: • Exit Management Team of the Year: Cambridge Education Group, Palamon Capital Equistone Partners Europe Mark Roberts, CSC Partners (sold to Bridgepoint in December 2013) • Mid Market Private Equity-backed Management Team of the Year: TSC Foods, Key World, ISIS Equity • Community & Environmental Action Award: Independent Community Care Capital Partners Partners Management, ISIS Equity Partners • Venture Capital-backed Management Team of the Year: Gear4Music, Key Capital • Best for Innovation: Endomagnetics, New Wave Ventures Partners • International Impact Management Team of the Year: Nomad Digital, Amadeus Capital Northern Ireland Partners • Large Buyout Private Equity-backed Management Team of the Year: Phoenix • CEO of the Year: • Exit Management Team of the Year: Trustmarque, LDC (sold to Dunedin in June 2013) Natural Gas, Terra Firmas Eleanor McEvoy, • Best for Innovation: Symingtons, ICG • Mid Market Private Equity-backed Management Team of the Year: HeartSine, ACT Budget Energy, Ventures and Enterprise Equity WhiteRock Capital North West • Venture Capital-backed Management Team of the Year: Vita Liberata, WhiteRock Partners • Large Buyout Private Equity-backed Management Team of the Year: Innovia Group, • CEO of the Year: Capital Partners Arle Capital Partners Ian Kelly, Matrix • International Impact Management Team of the Year: HeartSine, ACT Ventures and • Mid Market Private Equity-backed Management Team of the Year: Metronet (UK), LDC Energy Services, LDC Enterprise Equity • Venture Capital-backed Management Team of the Year: Better Bathrooms, Business • Exit Management Team of the Year: Phoenix Natural Gas, Terra Firmas Growth Fund • Community & Environmental Action Award: Budget Energy, WhiteRock Capital • International Impact Management Team of the Year: Innovia Group, Partners Arle Capital Partners • Best for Innovation: Intelesens, Clarendon Fund Managers and Enterprise Equity • Exit Management Team of the Year: Matrix Energy Services, LDC • Best for Innovation: ChargePoint Technology, Enterprise Ventures

8 BVCAJOURNAL BVCAJOURNAL 9 INTERVIEW Taking centre stage After spending 20 years in private equity, self-confessed punk rock fan and new BVCA chairman Tim Farazmand is now one of the industry’s headline acts. Janice Warman reports

HERE are a few things you need to know about Tim Farazmand. He’s a massive fan of punk rock band Stiff Little Fingers, football club Aston Villa and his wife Jackie’s garden design business. He goes As an industry, we to every football World Cup (Brazil’s up next) and has only one regret on the day of “ our interview: that he’s going to miss his need to make people favourite band’s gig at The Forum. But then being one of life’s enthusiasts is, in all likelihood, a prerequisite for aware of what we do working in venture capital. Like many Taccomplished people, he attributes success partly to luck – though it’s a theory some and how we do it might quibble about after hearing his story. ” After university, he joined IBM as a systems engineer and later became a selling skills to handle increased industry Farazmand was with 3i for seven years, Joining RBPE was an exciting time for salesman. But he wanted to progress more competition. “Not surprisingly, they moving to London in 1990 as investment Farazmand, who spent eight years with quickly than the company saw fit – “like looked to some of the big blue-chip firms,” director. By 1994, he had left the firm to the company. He left the business in 2002 a lot of people in their twenties who had Farazmand says. set up a private equity office in London for when then chief executive Fred Goodwin overinflated opinions of their own ability Despite having a 2.1 in economics from Royal Bank Private Equity (RBPE), along decided he wanted RBS to move out of and were full of ambition,” he says wryly the University of Cambridge, Farazmand with a new colleague, Hamish Mackenzie. private equity. – so when he saw a job advert for private admits that he knew little about balance A year earlier, Royal Bank of Scotland “After leaving RBPE, I joined a small equity firm 3i in The Sunday Times he sheets or P&L when he joined 3i. “They had sold its investment banking arm, financial services fund for two-and-a-half jumped at it. “I didn’t know what venture were able to respray me with the Charterhouse, but the Scottish office of years,” he says, “but I wanted to get back capital or private equity was, I have to necessary financial savviness, for want of Charterhouse Development Capital stayed into mainstream mid-market private confess, but the job looked fascinating.” a better word, and off we went,” he says. within the bank and was rebranded RBPE. equity, which led me to LDC in 2005.” So why was he lucky? In the 1980s, “I was very lucky that there was a moment The company had offices in Edinburgh For this next move, Farazmand was 3i was largely populated by accountants in time when they were looking for people and Glasgow, before Farazmand joined to approached by a number of mid-market

and needed to bring in people who had with those sorts of skills.” SURBEY CHARLIE PHOTOGRAPHY: launch its London operation. funds. So why go with LDC, where he still

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works today? “The key reason is that I Continuing to work closely with the looking to invest. The second involves bought into its core values and core focus, European Venture Capital Association corporates that are setting up their own which is very much about being the UK (EVCA) is also on Farazmand’s agenda. venture capital subsidiaries, and the regional private equity investor. We have “While it’s key that the BVCA stays close to third is from new entrepreneurs who offices from Aberdeen to Bristol and really what’s happening within the UK, it’s also are focusing on the social, as well as the pride ourselves on having connectivity critical, with the amount of legislation financial, impact of their work. with the local business community in and regulatory control coming from Indeed, the announcement in the those conurbations.” Brussels, that we work with the EVCA and latest Budget of social investment tax The company’s regional focus helps retain close ties with European venture relief at 30% to encourage earlier stage it to understand the dynamics of local capital firms.” investment and capital coming into economies. “Critically, it enables us to The run-up to the next general election the sector was a positive development, get an earlier warning of opportunities will be important in terms of ensuring that Farazmand says, and shows that BVCA is than other non-regional competitors. venture capital and the value it can bring an effective lobbying organisation. LDC focuses on backing incumbent to British businesses is a priority for those For anyone who thinks venture capital management teams, so our bread writing the party manifestos. Farazmand is largely about companies that make and butter is management buyouts, believes simplifying tax is vital to the things no one has ever heard of, one backing incumbent teams and working continued recovery, and says raising of Farazmand’s favourite deals ties in closely with them to effect a change awareness of the positive contribution that with his passion for music. In 2012, LDC in ownership.” private equity and venture capital make to backed a management buyout of Mama LDC is sector-agnostic, says the economy is crucial. Group, the live music arm of HMV, which Farazmand, and has more than 80 “If people have been critical of us owns some of his favourite music venues investments spread across various sectors. historically, it’s because there’s been and festivals. “Darryl Eales and, until recently, Paddy a view that as an industry we’ve been “I needed the investment team Sellers have really provided a strong too secretive; if you are secretive about around me to ensure they kept a level platform for those of us on the investment something, people will wonder why. As an of objectivity in that deal,” Farazmand side to get on and flourish while managing industry, we understand that we need to says. “The Jazz Café, which we own, is our single investor, which is the bank make people aware of what we do and how (LDC’s parent, Lloyds Banking Group). So we do it, and the positive contribution we the dynamic has worked well and we’ve make to the UK.” The key for private equity and delivered some substantial profits back to “ the bank in the past 10 years.” Changing perceptions venture capital to be sustainable Those profits include more than According to Farazmand, there is a need in the UK is to deliver returns £500 million in capital gains over the last to counter the widely held view that five years, with £1.5 billion invested, 86 private equity firms swoop in to buy up back to your investors transactions and 63 exits. Plans include companies and then sell off the assets £2 billion worth of investment over the at a profit. ” next four years. “There are some good statistics about my favourite venue in London, so I was director general. He will also support the number of jobs and apprenticeships completely sold on the opportunity before In the hot seat the executive’s work in meeting key we’ve created – 80–90% of the capital we got into due diligence.” Farazmand’s new role as chairman of the policymakers and politicians. “I’m deployed by private equity is outside the It turned out to be a good deal, though. BVCA satisfies his desire to give something aware that I’m here for a year and gone M25, so it is very much about investing Mama Group owns, among other music back to the industry that he loves. Prior to tomorrow, and therefore the public face across the UK and helping regenerate festivals, The Great Escape, Lovebox this position, he joined the organisation’s should be the executive of the BVCA,” he some economies in areas that have and the Global Gathering, and in 2011 technical and legal committee in 1990 and says. “Tim Hames in particular needs to suffered more in the downturn. launched the Wilderness Festival in has sat on the member services committee be the person everybody recognises as “The key for private equity and venture Cornbury Deer Park, Oxfordshire, which and chaired the citizenship committee supplying leadership for the organisation.” capital to be sustainable in the UK is to gained some good media coverage when since 2012. Farazmand’s strategy for raising the deliver returns back to your investors. the new Governor of the Bank of England, In 2013, he was persuaded to take on BVCA’s profile is to continue the good work Not everyone will be successful in our Mark Carney, chose to visit last year. what is essentially a three-year role that of his predecessors and partner with the industry, but new entrants will emerge, Following in Carney’s footsteps, involves working a year as vice-chairman, executive team to keep developing the so we’re in a relatively healthy state.” Farazmand and his wife will be heading a year as chairman and a further year organisation. “The ability of the executive With three new waves of capital going to Oxfordshire this August for the supporting his successor. is translated into fantastic connectivity mostly into the venture capital end of Wilderness Festival after missing out on The chairmanship will involve with policymakers and politicians across the industry, there are opportunities the Stiff Little Fingers gig. To everyone in overseeing the BVCA council, attending the political spectrum. They are respected for start-ups and small businesses. The the crowd, he will be just another music regional dinners, breakfast meetings, by HMRC and other government bodies first wave, Farazmand says, comes from fan, but the new chairman of BVCA is one seminars and conferences, and that we need to work with to promote entrepreneurs with substantial wealth of the headline acts in the world of British working closely with Tim Hames, the British business.” and a high appetite for risk who are venture capital and private equity.

12 BVCAJOURNAL BVCAJOURNAL 13 VIRTUAL CURRENCY Going for broke Bitcoin remains a mystery to most, but are British investors with an eye for a deal willing to take a gamble on a virtual currency? David Turner reports

When outed in March as the ‘founder’ such as bitcoin exchanges and systems of virtual currency bitcoin, Dorian for payment and storage. Nakamoto’s response could not have Bitcoin is an international currency, been more emphatic. The 64-year-old created – according to the rules set out Japanese-American, a model train by its unknown originator or originators enthusiast who lives on the outskirts – by a complex process of virtual of Los Angeles, insisted he had never ‘mining’ involving huge amounts of heard of bitcoin until a few weeks computer power to operate the bitcoin before US magazine Newsweek linked system, rather than by the printing him to the currency. presses that central governments use Some two months have passed since to produce paper money. Nakamoto denied any involvement in Users send and receive bitcoins, bitcoin, with the founder’s identity still which are used to buy goods and unknown. Nevertheless, the mystery services, via computers and mobile surrounding the five-year-old currency phones. It is accepted by a small but and confusion over how it works growing number of online companies, have not stopped some investors from such as overstock.com, the US online exploring bitcoin-related opportunities. general retailer, which recently From the man on the street to expanded into the UK, and the dating government officials, few people site OKCupid. Its use in bricks-and- understand how investors using bitcoin mortar outlets is more restricted, can make money. The upshot is that although a few cafes in Shoreditch, savvy businessmen and women could home of the Silicon Roundabout high- potentially invest anonymously without tech cluster, accept it. Although no one appearing on HMRC’s radar. But there is knows for sure who created the system, a drawback: this anonymity is harming it is policed by the Bitcoin Foundation. bitcoin’s image as a currency that the average person can trust. Money to be made Relying on something more positive If bitcoin suddenly takes off, investors than anonymity, such as its efficiency as are still at a sufficiently early stage to a payment system, could help bitcoin to make excellent returns by getting in grow into a viable currency in the long on the ground floor of development. term. If it can do this, there is plenty of “We are, with digital currencies, where opportunity for British venture capital the internet was in the mid-1990s,” and private equity firms to make good says Tom Robinson, director of the UK returns from bitcoin infrastructure, Digital Currency Association and

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because bitcoins are sent from and to bitcoin addresses (virtual postboxes) Passion for bitcoin that are held anonymously. “A lot of the appeal of bitcoin has Passion Capital, the early-stage venture on a daily basis, says Glaenzer, although as I’d prefer to give my money to a been tied to anonymity,” says Hamish capital firm based in London, is one of he is reluctant to elaborate on the British-based bank,” he says, citing the Thomas, director in financial services the few British investors to have backed exchange’s trading volumes. protection offered to investors by the at EY, the professional services firm, a bitcoin venture. The firm has invested Despite bitcoin’s online origins, British legal system. in London. “However, one could argue in Coinfloor, billed by partner Stefan Glaenzer regards the physical location But why put money in a bitcoin that anonymity is incompatible with Glaenzer as the first UK-based bitcoin of Coinfloor as a key selling point venture at all? Glaenzer believes that regulatory trends such as ‘know your exchange for a British client base. that distinguishes it from many other bitcoin usage will increase in time, customer’ rules” – the increasing The company’s six-person staff, competing virtual exchanges around the pointing to the sudden growth of what requirement for banks around the world which includes founders Mark Lamb world. “We want to give our customers he calls a “bitcoin ecosystem”. He adds to establish exactly who their customers and Amadeo Pellice, runs the sterling- the best possible security. I’d feel much that the world has seen “not just five but are in order to crack down on money denominated exchange in the City of more secure putting my money in a 50 or 100 companies formed in the past laundering and terrorist financing. This London. Opened to the public in March UK-based exchange than in one based six to 12 months around this new piece chimes with the view of other bitcoin this year, Coinfloor sees bitcoin trading in an eastern European country – just of technology”. watchers that anonymity cannot be relied on as a competitive advantage.

What’s in it for me? in minutes. He notes that, in the UK, bankruptcy after losing 750,000 of Huge amounts of computer power are needed to power the bitcoin system If a lack of anonymity kills their banking costs for transferring money its customers’ bitcoins. MtGox said competitive advantage, why should are often relatively low too, reducing there was a “high probability” that the investors consider backing bitcoin- bitcoin’s appeal as a low-cost operator. bitcoins had been stolen through a bug founder of Elliptic, which provides related ventures? The most frequently Convenience and cost savings matter in its systems. In April 2014, China’s services related to bitcoin and other espoused virtue is its efficiency and little if bitcoin cannot hold its value. central bank reportedly ordered the virtual currencies. He adds that we do cost-effectiveness as a method of If a merchant does not know how much country’s commercial banks and not yet have pretty interfaces to make payment on the web. a bitcoin is likely to be worth, it will payment companies to close all bitcoin using digital currencies easy for the “Virtual currencies can make the be reluctant to accept payment in the trading accounts within two weeks. The average person, although this will bank payment process instant by currency. Bitcoin rose 5,580% against currency offers an easy way of evading change in time. using the power of cryptography and the US dollar in 2013, but the price has bans on the export of money. Chinese However, until bitcoin can prove that the internet,” Robinson says. Digital fluctuated since, and rises and falls people who buy bitcoin with yuan and it at least has the potential for long- currencies are also, he notes, agents more than the price of conventional sell it into other currencies can almost term viability, most British investors of “disintermediation” that cut out the currencies. In April 2014, one bitcoin untraceably evade capital controls. are likely to stay away from it. Venture associated fees that banks and credit was worth US$397, down from a peak Given the uncertainty surrounding card providers charge consumers and above US$1,200 in November 2013. bitcoin, do experts believe it will merchants. Transfer fees for bitcoins This price volatility partly reflects survive and prosper in the future? I haven’t sold my are low compared with some bank fees. the uncertainty about bitcoin’s basic Asked specifically about its future in “ The sender submits a suggested charge security, including whether it can be Britain and the rest of Europe, Thomas house and put all the and sees if anyone is willing to organise stored safely, and whether governments says: “I would not see a meteoric rise US$1,200 money in bitcoins the transfer in return. will permit it or crack down on its use. in its usage. We will see balanced, The value of one bitcoin The advantages of using bitcoin are, In March 2014, MtGox, once the world’s steady growth, largely in low-value in November 2013 ” however, less evident in Britain and dominant bitcoin exchange, filed for online payments.” capital firms contacted for this article Europe than in the US, say analysts. Newton is more reticent about expressed a lack of interest in the “One of the major reasons why people forecasting the most likely outcome. bitcoin phenomenon. say bitcoin is a wonderful new invention However, he sounds a note of caution by The appeal of anonymity for the is the immediacy of payment,” says revealing: “I haven’t sold my house and 750,000 bitcoin is, at times, far from squeaky Alistair Newton, research vice- put all the money in bitcoins.” The number of customers’ clean. The value of the currency on president for banking and investment Similarly, most British venture bitcoins that MtGox lost many bitcoin exchanges that exist services at Gartner, the IT research and PHOTOGRAPHY: ISTOCK capital and private equity firms are around the world – which can be used advisory company, in London. reluctant to take a punt on a mysterious to buy and sell the currency – took a “However, payment systems in the virtual currency that has suffered some dive in October 2013 after the closure of US, where there is much interest in setbacks in recent months. And the notorious Silk Road secret website, bitcoins, are not as advanced as in who can blame them when even 5,580% used for selling drugs and other illegal Europe.” He indicates that in the UK, bitcoin’s founder wants nothing, The bitcoin rose this much activities. Bitcoin was the site’s only for example, bank-to-bank electronic publicly at least, to do with the permitted currency, deemed suitable payments can sometimes be made virtual currency? against the US dollar in 2013

16 BVCAJOURNAL BVCAJOURNAL 17 EY global IPO trends for VOLUME OF DEALS VALUE OF DEALS this year’s opening quarter £2.74bn London Main Market Most British IPOs in Q1 2014 capital-backed – accounting More deals were expected were driven by venture capital for 67% (£262 billion) of the this year, with private equity and private equity firms, an EY combined proceeds. exits via IPOs being driven by report has revealed. The report also said that necessity and opportunity, £1.19bn Alternative Investment Market The EY Global IPO Trends a “significant number of UK according to EY. report found that, of the deals companies” had been under Retail companies accounted London Main Market Alternative Investment Market completed up to March, 42% private equity ownership for for eight of the London Stock 8 deals 16 deals were private equity or venture more than four years. Exchange listings in Q1 2014.

TOP THREE IPOs IPO PRICING AND FINANCIAL SPONSORS BY CAPITAL RAISED PERFORMANCE DRIVE UK IPO MARKET

Lenta Ltd London Alternative Main Market Investment Market £567m (A hypermarkets AO World plc Pets at Home Group plc chain in Russia) £484m £487m 42% (A British online retailer) (A British pet foods and products retailer) 7.3% 18.3% the average the average first-day return first-day return PE and VCs accounted for 42% of UK IPOs (10 deals) 3.7% 6.1% offer price increase in offer price increase in year to 24 March 2014 year to 24 March 2014 67%

KEY TRENDS VALUE OF RETAIL DEALS £969m £155m median post-IPO median post-IPO Of proceeds came from market cap market cap VC and PE-backed deals

33% 62% £237.18m Retail was the most Retail also accounted active sector, accounting for 62% of funds raised £2.44bn The value of healthcare deals for a third of IPOs in Q1 in the same period Alternative investment market

18 BVCAJOURNAL BVCAJOURNAL 19 SILICON BRITAIN

predominantly social media and ecommerce). Full of hustle and youthful The contribution ambition, blue-chip campuses for the that“ clusters make likes of Google and government-backed financial muscle, Tech City attracts to the economy more attention than other established, successful and lucrative clusters. is significant From oil and gas in Aberdeen to ” silicon chips in Cambridge, bio- engineering in Manchester and cluster within the larger Midlands Formula 1 in the Midlands, world- automotive zone. beating technologies abound in the The park turned over nearly UK. But with dozens of clusters that are £50 million last year, much of which home to multimillion-pound industries, came from overseas investors. Terry cutting-edge research and development, Spall, MIRA’s commercial director, and thousands of highly skilled workers, explains that the cluster appeals to why don’t we hear more about them? international businesses conducting Julian Viggars, head of technology R&D in Europe because consolidated ventures at Manchester-based infrastructure is a low-risk proposition. Enterprise Ventures, explains the “They don’t need to put a lot of capital problem. “I spent 15 years as an investor in – the tools are here and they can use in London and assumed nothing in them any day of the week,” he says. tech happened north of Watford,” he “The contribution that clusters make says. “The issue is over the definition to the economy is significant, and, going of technology clusters, because it isn’t forward, it is going to be more so,” about digital and ecommerce.” Spall says, adding that the automotive Perception is also an issue, according sector contributed £60 billion to the UK to Viggars. “There is clearly much economy last year. Such figures attract more weight of capital in London; the government interest, but while public investment scene is different,” he says, funding can accelerate further growth, “but I don’t necessarily think the quality skills must underpin any cluster. “The of investment is.” He cites Rotherham- Midlands cluster has a huge amount based Xeros, which develops technology of expertise in the automotive sector,” for new commercial and domestic Spall says. “If you’re going to force the laundry businesses, as an example growth of a cluster, it needs to be in the of what companies in traditional right location to start with.” The Government has invested engineering clusters outside London In the North West, the University heavily in east London’s Tech City, can achieve. The company was recently of Manchester has partnered with the a small digital community wedged listed on AIM with an £80 million Government, the City of Manchester and between Shoreditch and the Old Street market cap. the Engineering and Physical Sciences Roundabout. In 2012, after pledging to Research Council to set up the National commit £50 million to the development, Far and wide Graphene Institute on campus. The Tech prime minister David Cameron spoke The latest Barclays and Business institute employs about 100 academic of his “commitment to help Tech City Growth Fund (BGF) Entrepreneurs researchers and houses state-of-the- become one of the world’s leading £50m Index report considers at least a quarter art facilities. In September, one of the technology clusters”. But, in looking to of government money of businesses in the Midlands as high- world’s leading CVD manufacturers create the UK’s answer to Silicon Valley, will be spent on Tech City growth, up more than 50% compared of graphene, Bluestone Global have we missed the native clusters with March 2013. MIRA, an automotive Technologies, announced its European nation under our noses? technology park headquartered near headquarters would be in the city. Silicon Roundabout may be hogging the Tech City, the industry’s most Nuneaton in Warwickshire, is one Clive Rowland, CEO of UMI3, the limelight, but the several tech clusters that hyped UK cluster, is an agglomeration of those growing businesses. The University of Manchester’s ‘innovation of connected suppliers, competitors £80m company’s high-security campus offers company’, says that to have a significant have emerged beyond London deserve and facilitators that concentrate on a Xeros’s market cap when about 30 tenants access to test tracks market impact, graphene makers need attention. Chris Erasmus reports specific sector or niche (in this case, recently listed on AIM and laboratories, operating as a micro- to work in clustered environments

20 BVCAJOURNAL BVCAJOURNAL 21 SILICON BRITAIN

Venture capital and private equity Cardiff Start’s core remit is to draw Bond firmly believes, though, larger investors into the area – no easy that private funding is where the “flow to world-class opportunities feat, given that businesses seeking an real success stories will come from, investment above £100,000 have to wherever the cluster. He admits that wherever they are travel to London or, often, California. attracting serious overseas investment ” Many of the area’s investments are when located outside London is a big with the right facilities to spread the capped at £50,000, but Milburn says challenge. But Bond says that being load of development. “Without the that the low entry points often spark outside the capital has not stopped scale and knowledge of a cluster, it is more productive relationships between Brightpearl, a cloud-based software too difficult for investors and others to investors and businesses. Milburn developer in Bristol, and Swindon- invest their time and hope for winners believes that regions with limited access based Ubiquisys, which creates small among a small pool. The challenge of to early-stage capital – compared with cells to improve mobile phone network taking an entirely new material to the east London – value it more highly, with connectivity, from expanding rapidly. marketplace in a variety of applications backers investing more of their time Ubiquisys was sold to Cisco in 2013 is such a massive job.” and skills in start-ups that “consider for US$310 million, while Brightpearl the route to profitability as their core has raised US$14.5 million in funding Brightpearl has secured US$14.5 million in funding since May 2011 Location, location, location function, rather than an acquisition”. since May 2011. “Venture capital and Wales was the only area to show a Smaller clusters such as Cardiff Start private equity flows to world-class The UK’s younger clusters demand greater percentage of growth than benefit from an abundance of local opportunities wherever they are,” sustained private investment, bold the Midlands, according to early-stage investors. Simon Bond, the he says. “We see investors hunting strategies and greater publicity to the Barclays and BGF report. innovation director of SETsquared, an in the rich seams of the west of encourage investors to consider backing Stephen Milburn, founder of app enterprise partnership involving the England, because of the quality of the companies. But while the likes of SEIS developer TradeBox Media and universities of Bath, Bristol, Exeter, opportunity, not the geography.” help start-ups to get off the ground, co-founder of the network Cardiff Southampton and Surrey, says: “With many clusters are host to businesses Start, is involved in the promotion angel investors, there is an important Areas for improvement struggling to push higher. of Cardiff’s burgeoning digital geographic and local element.” Government support for start-ups Viggars says: “There is a lot of public technology cluster. He adds that enterprise investment will be vital to sustain the businesses sector-type investment for businesses “The region has a healthy mix of intiatives such as regional growth funds that hold clusters together. The Seed in the UK, but once you get past the first private and public funding,” Milburn have sparked “phenomenal growth” in Enterprise Investment Scheme (SEIS), £500,000 invested, there is a bit of a says. “We want to see the average local angel investment, with backers introduced by the chancellor, George gap. Very few traditional venture capital investment increase and the reliance wanting to be close to the companies Osborne, in 2011, is a step in the right firms will play there. on public investment to decrease.” they support. direction. It offers great tax benefits “There’s a growing call to project the to individuals investing in new effect that SEIS has had on the angel companies, while business owners can market onto the corporate market,” take up to £150,000 of seed funding Bond adds. Offering tax incentives to Smart Antenna Technologies without sacrificing a controlling stake. make corporate investment in British However, funding alone is not enough start-ups more attractive could help, Rick Hillum lived for many years in the Management, a fund management kind of people and skills in the areas we to support regional clusters. Tech provided it is “structured in a way that corridor between Bath and Bristol – a company that provided it with a second need,” he says. SAT is opening an office Country, the recent BVCA report on benefits British companies”. well-established cluster for his career round of investment at the end of 2013. in Bath to combat the problem. clusters outside London, identified the Another bold change Bond proposes in silicon devices. “The reason I moved The business has a strong While Hillum has not encountered areas where clusters will succeed or is for founders and employees with there was because of the amount of proposition to produce more effective significant difficulty in sourcing backers fail: funding, access to skills, transport shares to receive the same financial good work that was coming out of the antennae for the corporate market, and for SAT, he knows that some investors and infrastructure, local and national benefits as external investors that use two universities there,” he says. future rounds will likely look towards have a parochial perspective. “There regulation, industrial policy and the SEIS scheme. “That way, they get His latest venture, the mobile handset manufacturers. For now, persists in some places a mindset that I regional culture. a similar tax incentive to drive them handset antenna developer Smart though, Hillum’s concerns are more encountered in the past,” he says. Much of the work to strengthen these towards a common goal of growth, and Antenna Technologies (SAT), was spun geographic than financial. “I remember one large venture capital areas is under way, from investment in not be penalised on the exit,” he says. out of Birmingham University. Formed “While it’s been surprisingly easy to firm saying that if the business was more fast broadband around the country to “The risk and reward profile for early on the back of a local university fund, get investment, it hasn’t been easy to than an hour away from London, they the creation or provision of office space employees is much more attractive, and SAT was supported by Mercia Fund get staff, because we don’t have the weren’t interested.” for new start-ups, or networking hubs that would drive the market in start-ups

ILLUSTRATION: PETER CROWTHER ASSOCS for burgeoning industries. harder and faster.”

22 BVCAJOURNAL BVCAJOURNAL 23 SPONSOR’S ARTICLE If you want a more enterprising approach Laying roots Fiona Le Poidevin, chief executive of Guernsey Finance, on why the to fund business, Channel Island is home to many established private equity businesses As a jurisdiction, Guernsey has become there’s one place synonymous with private equity. There are about 850 investment funds used for cross-border distribution around the you should look... world. The island is also home to a wealth of expertise and infrastructure that handles the structure, management and administration of private equity funds. Apax, BC Partners, Mid-Europa, Permira and Terra Firma are some of the private equity firms that have established For those with a growing non-European operations in Guernsey, which is a focus, it will be possible to place this testament to the infrastructure available business in parallel or feeder structures here. In addition, Ashmore, Better Capital, for which AIFMD compliance and the Cinven, Coller Capital, HarbourVest, associated costs would not be required. Neuberger Berman and Pantheon utilise Commercial decisions should dictate the Guernsey investment structures. most suitable approach. Investors and promoters are reassured Full passporting for non-EU alternative by the position Guernsey has taken investment fund managers is expected over the Alternative Investment Fund from July 2015. If it comes in, managers Managers Directive (AIFMD). Guernsey will be able to market on a pan-European is not in the EU (or wider EEA) and basis with a single authorisation. here. therefore, as a third country, is not Guernsey’s funds sector has enjoyed required to implement the AIFMD. considerable growth in recent years, with However, a large proportion of our funds total net asset value worth £266 billion business relates to Europe, while we also in late 2013. In the same period, the net have a substantial amount of business that asset value of private equity funds under originates from outside Europe. management and administration was As such, the island has put in place more than £86 billion – up 6.2% over the a dual regulatory regime, making it course of the year. possible to continue to distribute funds Growth is aided by the ability of into both European and non-European Guernsey entities to access a range of Guernsey offers the experience, the infrastructure and the intellectual countries. Meanwhile, the existing regime international stock exchanges in, among capital to deliver innnovative fund solutions for any market, in any asset remains for investors and managers who other places, London, Ireland, Australia, class. We combine a breadth and depth in management, administration, do not require an AIFMD fund, such as Toronto, Frankfurt, Hong Kong and the custody and structural innovation that is second to none, with a wide those using National Private Placement Channel Islands. In December 2013, (NPP) regimes or marketing to non-EU Guernsey had more entities (115) listed non-executive director resource, as well as a first class, well regulated investors. There is also an opt-in regime, on the London Stock Exchange than any professional infrastructure. which is fully AIFMD compliant. other jurisdiction globally. Guernsey managers who want to access Guernsey has emerged as a leading Make Guernsey your first port of call. Europe continue to use NPP regimes, centre for private equity, and, with its which are expected to remain until 2018. thirst for innovation and adherence to Using NPP will likely be favoured over high standards, there is confidence that it Telephone: +44 (0) 1481 720071 Email: [email protected] AIFMD, which has stricter requirements. will remain the premier European centre The island still has an existing base of for such activity. clients for whom Europe is an important BANKING • FUNDS • INSURANCE • PRIVATE WEALTH market, and the opt-in equivalent regime, For more information, contact Guernsey which has been in place since January Finance on +44 (0)1481 720071 or at 2014, will be appropriate for such funds. [email protected] guernseyfinance.com PHOTOGRAPHY: ISTOCK

BVCAJOURNAL 25

Funds ad - here.indd 1 4/14/2014 3:32:36 PM FOREIGN AFFAIRS

European powerhouse Germany’s strong economy, solid trade links and robust industries make it one of Europe’s most appealing nations to foreign investors. By Kate Jenkinson

Germany has become a top destination with the German Private Equity and for entrepreneurs, venture capital firms Venture Capital Association (BVK) – and business professionals at a time when should further raise the nation’s appeal to other eurozone countries are struggling foreign investors. The barometer, which to recover from the debt crisis. is based on BVK members’ views about With a population of 80.5 million private equity in Germany, rose to a two- people, Germany has the largest year high in the closing quarter of 2013. consumer market in the European Union, The growth is indicative of the general creating big opportunities for investors. positivity surrounding the nation’s private The country boasts a robust economy, equity industry, as a recent study shows. which is set to grow 1.8% this year, a In the latest Private Equity Forecast, solid manufacturing industry and strong sector representatives generally foreign trade links that contribute to the responded positively to questions about nation’s economic growth. fundraisings, investments and The country is “famous for well- the disposal of investments for engineered, innovative products” says this year. Considerably more REASONS Michael Pfeiffer, chief executive of than half of all companies TO INVEST IN Germany Trade & Invest, the foreign expect investments to rise GERMANY: trade and investment promotion agency, either slightly or considerably based in Berlin and Cologne. “We offer this year. Another third • Stable economy products at competitive costs – which believes that their own • Leading financial force doesn’t mean we’re the cheapest. It’s a investments will be on par • Innovation and change combination of efficiency and innovation; with those they made in 2013. • German investment grants that’s what makes Germany interesting Investment companies are • Tax benefits for foreign investors.” more positive than venture • Professional workforce The latest German Private Equity capital companies when it • Developed infrastructure Barometer – produced by the German comes to growth financing • Equal benefits for local and

PHOTOGRAPHY: ISTOCK development bank KfW in partnership and buyouts. overseas investors Fernsehturm, Berlin’s iconic TV tower

26 BVCAJOURNAL BVCAJOURNAL 27 FOREIGN AFFAIRS

Venture capital firms are helping and openness between the investor to focus on running and growing In rude health to capitalise the business models of and the entrepreneur is indispensable. their ventures. Germany-based start-up companies. Medium-sized companies are often To address such concerns, the 1,300 Talk of Germany’s economy economy is recovering in the rest of According to BVK 2013 statistics, sceptical about private equity investors, Government has announced several German companies were driving gross domestic product the euro area, which is Germany’s industrial products, IT, media, consumer particularly foreign ones, so there has measures that will foster and strengthen backed by private equity up by 1.9% in 2014 and 2% in most important market.” goods, retail and the life sciences sectors to be mutual trust and respect between the climate of growth for young firms in 2013 2015 will, no doubt, be of great The report said that German were on the radar of private equity both parties for deals to progress. companies and the implementation interest to investors. In their joint employment would improve, and venture capital investors. These The benefits of buying into one of of new innovative technologies. “We annual spring economy forecast, provided the rise in GDP met sectors account for more than 70% of all Europe’s strongest economies are welcome that the new government Germany’s four leading economic expectation. The number of people investments made in Germany last year. clear. But there is one drawback that has taken first steps to improve research think tanks – DIW, Ifo, unemployed would drop to 6.7% “Germany is clearly in the focus investors should be aware of: namely, the the framework for venture capital 1.7% IWH and RWI – said growth on average in 2014 from the current of domestic and international buyout operational and bureaucratic obstacles investments in Germany,” Hinrichs says. expected annual GDP would be fuelled by robust level of 7.1%. firms,” says Ulrike Hinrichs, managing that small businesses and venture capital Whether those measures have the growth in 2014 and 2015 domestic demand. Last year, the recession limited director of the BVK. “The German firms face. Accessing funds and securing desired effect remains to be seen. But Responding to claims that economic growth in Germany to Mittelstand companies, with their visas for skilled foreign workers are whatever happens, Germany’s position German exports to nations beyond just 0.4%. But in contrast to most specialised products, are often true tricky, while red tape and bureaucracy as Europe’s economic powerhouse Europe would remain subdued other eurozone countries, the ‘hidden champions’ and global market make it difficult for entrepreneurs appears rock solid. in 2014, the think tanks said: nation’s employment figures and leaders. When it comes to issues such “Although demand from emerging state finances remained stable, the as succession, private equity firms are economies is now less lively, the report said. esteemed partners for German small and medium-sized enterprises (SMEs), many of which are still family-owned.”

Those surveyed are also confident Backing German business about the successful disposal of In 2013, venture capital and private investments. Every second company equity firms financed almost 1,300 expects to see a rise in the number of companies in Germany. “We expect company disposals, and 40% believe private equity to gain importance the level will be similar to that seen in in financing German companies,” 2013. Venture capital companies have Hinrichs says. “Start-ups, young particularly high hopes; almost two- companies and SMEs are hungry for thirds predict more disposals. funds and their appetite will give the private equity market new impetus. The future looks bright International investors will continue

As for Germany’s economy, investors have to play an important role because s Organic light-emitting diode every reason to be upbeat. According to Germany’s positive economic growth technology developed by Novaled EY’s Eurozone Forecast 2013, growth is and technological strength make it very expected to accelerate throughout 2014 in attractive for them.” Germany, as low unemployment, strong For investments in Mittelstand Best buyouts wage growth and a revival of the housing firms, which are often family-owned sector benefit consumer demand. GDP is companies, co-operation based on trust The German market saw some impressive diseases, has grown after securing finance expected to increase annually by 1.7% in deals in 2013, such as Novaled’s €260 from venture capital firms such as LSP. 2014 and 2015. million sale to Samsung subsidiary Cheil Other venture-financed-companies that That Germany is reporting strong Industries. Since securing finance from were sold in big deals last year include growth when other European nations Mittelstand eCAPITAL in 2009, Novaled has developed JouleX, a software business that helps are still struggling is testament to the “ into a leading provider of organic light- to clients monitor power usage; content country’s solid economic foundations companies are emitting diode (OLED) technology. management software company Saperion; and industries. Its performance has In another successful deal, Vectura online tyre dealer Tirendo; and Trivago, attracted interest from domestic and often true ‘hidden Group bought pharmaceutical company a hotel price comparison website. They foreign investors, with the country’s champions’ and global Activaero for €130 million. The business, were sold to Cisco, Lexmark, Delticom and venture capital hub, Berlin, particularly which specialises in treating respiratory Expedia respectively. appealing, according to the BVK. market leaders ” ILLUSTRATION: INGO MAURER ‘FLYING FUTURE WITH 01’ NOVALED OLED

28 BVCAJOURNAL BVCAJOURNAL 29 SPONSOR’S ARTICLE CPD Accredited 29 learning hours Missing the vital step Failing to apply business methodology properly can have a detrimental effect on an organisation, according to Newton Europe’s Christian Hansen BVCA Foundation Course transformation. When dealing with processes, focus should be on specific 3-7 November 2014 areas or sub-processes that drive the biggest losses in the organisation. Tactical and interim changes can also be prioritised and carried out, delivering value quickly before any full end-to-end process transformation is designed and implemented. Taking this approach delivers savings earlier, gives the team When improving an organisation’s and organisation a boost and shows that operations, both internal teams and improvement is possible. external improvement consultants will Furthermore, thanks to taking that use techniques and methodologies such as key first step, each process change can Lean, Six Sigma and business process re- be linked directly to a measured loss, engineering (BPR). These methodologies and therefore the expected impact can are tried and tested and have delivered be clearly measured and defined. From successful results across various sectors. there, the appropriate changes to resource But the results can vary from application levels and organisation can be made. to application; some offer less than Sometimes, the changes you expect expected results and take more time and fail to materialise. When that happens, cost to implement. So what’s the problem? it is generally easy to identify the source Organisations and individuals of the problem and fix it. Issues can tasked with improvement often fail to be addressed, or further processes understand, measure and objectively implemented, without the failed quantify (in monetary terms) the causes of improvement being lost. waste, lost productivity and poor service. Quantifying losses and opportunities in Some mistakenly prioritise these flaws a real-world environment and tying them Our flagship Foundation Course provides a comprehensive overview of over the processes that drive those losses. back to specific processes is not easy. It private equity and venture capital, from evaluation of potential investments “Genuinely the best Tools and methodologies within Lean involves using historical data analysis course I have ever been and deal structuring to exits. and BPR can drive improvement and and shop-floor studies. Data is often on. The presenters were value if applied in the appropriate places, incomplete, inconsistent or non-existent, This four and a half day residential programme provides exceptional excellent, it was well run time and manner. Unfortunately, many so getting a sense of the situation from the and attendees were of networking opportunities, including dinners and drinks receptions. The organisations apply them in a rigid, blind information available requires creative an exceptional standard. and indiscriminate fashion without taking methods. Estimation and triangulation programme is taught by a leading industry trainer and ex-private equity I will be recommending the vital first step. This is comparable techniques, modelling and statistical practitioner and includes a faculty of senior industry professionals. The to my colleagues.” to a cook rigidly following the recipe in analysis help to create a clearer picture course content features materials drawn from real case studies and allows a cookbook without understanding the and provide confidence in the numbers. – Daniel Nathan, Santander principles of cooking or flavours, or even Doing this well adds significant insight, for a practical, intensive exploration of each topic. having the right ingredients. resulting in more focused improvement Once you have rigorously quantified activity, more successful selection and Target Audience: Price: and prioritised opportunities, using use of improvement tools, and, ultimately, the optimal mix of tools is not enough; higher returns. But it requires experience, This course is designed for junior investment professionals BVCA Member Price: you need to tailor them for the specific skill and thought – you can’t blindly apply and those wanting to gain a practical understanding of £3,595.00 + VAT problem or opportunity to deliver the a methodology like a recipe. private equity deals. Participants should have at least six Non-Member Price: most value for the least time and cost. This can include anything from tactical Christian Hansen is business manager months’ private equity experience to benefit from this course. £4,673.50 + VAT quick fixes and process steps, to full at operational improvement specialist Please note the course fee covers accommodation and meals for the week. end-to-end process re-engineering and Newton Europe PHOTOGRAPHY: ISTOCK For training booking enquiries: E: [email protected] T: +44 (0) 20 7420 1800 30 BVCAJOURNAL www.bvca.co.uk/training

Foundation Ad (SJ).indd 2 22/05/2014 10:34:24 BVCA-Advert-for_Impetus-Final_edit.pdf 1 30/04/2014 15:10

13 September 2014 9am - 1pm IN PROFILE

The Olympic Rowing Venue at Dorney Lake, Windsor The FT Triathlon, in support of Impetus – The Private Equity Foundation, is the first-ever triathlon for the private equity, venture capital and associated industries. Sign Up With both individual and team races, it promises to feed your competitive spirit with plenty of inter-office rivalry and inter-industry competition. impetus-pef.org.uk/triathlon Impetus – The Private Equity Foundation (Impetus-PEF) is committed to transforming the lives of children and young people from disadvantaged backgrounds by ensuring they get the support they need to succeed in education, find and keep jobs and Races achieve their potential.

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M Marlborough Partners

Y Advanced Sprint Triathlon (for sub 1 hour 15 min entrants): CM 750m Swim, 21.2km Bike, 5km Run

MY PwC Relay CY Sprint Triathlon:

CMY 750m Swim, 21.2km Bike, 5km Run

K

The coveted Transforming Lives Cup will be awarded to the individual or team who raises the most for Impetus-PEF. Representatives from Wiggle, BVCA, CVC, Impetus-PEF, Human Race and the FT at launch Big appetite David Salkeld, CEO of food producer and BVCA Management There are a range of races to suit all abilities, including team relays and Team Awards 2012 winner Symington’s, on the company’s bid even children’s races and other family-friendly activities to ensure everyone David Salkeld, CEO of Symington’s to take a larger bite out of the global market can join in the fun.

Registration costs £99, and includes race entry, t-shirt, post-race BBQ and race medal, along with free parking and other perks on race day. Who are your main customers? Are your customers UK-based or Q Q located around the world? In addition, participants are asked to donate or raise a minimum sponsorship We sell own-label and branded We export to about 35 countries, of £400, which will go towards Impetus-PEF’s vital work transforming the lives A goods such as Ragu, Aunt Bessie’s A including Australia. Last year, of disadvantaged children and young people in the UK. and Chicken Tonight to all retailers, we set up Symington’s Australia PTY whether they happen to be Marks & to relaunch the Chicken Tonight and Spencer or a chain of pound stores. We Ragu brands for the consumers in the Join early-bird teams from Apax Partners, BC Partners, Blackstone Group, Calculus, Coller Capital, CVC Capital Partners, HgCapital, ISIS Equity Partners, KKR, Warburg Pincus, have 1,250 product lines in 23 different Antipodean market. The Australian Marlborough Partners, Mergermarket, PwC, and Ropes & Gray. categories, but no one of them accounts venture is alive and well and making for more than 1.5% of the total business. fantastic progress in Melbourne.

BVCAJOURNAL 33 IN PROFILE

Which markets contribute Symington’s) and we found that the was £47 million when we bought it and Q most to your business? company’s categories were primarily We’re looking at now it’s £230 million. The UK accounts for about branded and capable of adding value to “entering more markets A 80%, while the rest of the world the business, so we put a plan together How have you turned the business makes up 20% of our business. We in the summer of 2007, talked to a and launching new Q into what it is today? sell products to South Africa, Canada, number of people and went ahead with We had a business plan, we knew Eastern Europe and Scandinavia, and the deal. brands this year A the categories we wanted to go we’re a key challenger to global food ” into, we’ve built strong relationships companies such as Heinz, Nestlé, Mars What was your immediate with the consumer and have a great and Unilever. Q objective when you bought We now have eight units at the same site insight into the market. We kept costs the business? and about 800 staff in total, two factories low and sold products and brands that How, in your view, is the UK Andy and his partner, Tim in Bradford and one in Barnsley, and consumers love to our customers, Q food industry performing? A Robertshaw, had bought Brand a warehouse in Leeds that we bought driving growth in the business. The market dynamics in the Partnership in 2000 and led the when the previous owner went bust. A UK are unprecedented. For the takeover of Symington’s two years The company recently achieved sales Which categories did you focus on past 30 years, the big players in the later. When buying Symington’s, they and earning growth for the 22nd Q to drive the company’s growth? market have enjoyed sales and volumes acquired Ainsley Harriott’s brand of consecutive year, seven of which we’ll We focused on soup, rice, pasta, growth, although both have dropped dried foods, which was quite successful. take credit for. The business’s turnover A couscous and home baking products. in recent years. You have growth at But Andy and Tim weren’t sure how to both ends of the market, from budget protect the value, because they hadn’t retailers such as ALDI and Lidl up to worked with brands before. Henrik and a company like Waitrose. Consumers I had run three of the top 50 brands in are changing and the global financial the UK. When I was CEO of Arla Foods, SYMINGTON’S crisis has put pressure on households, I bought Anchor Milk from New Zealand leading to savvier shoppers. I’m the Milk in 2000 and relaunched it in the IN NUMBERS same; I’ll use my 12p off a litre of fuel UK. I also launched Lurpak spreadable, at Sainsbury’s voucher and look after in 1994, and branded Cravendale Milk 1827 the pennies, which is how consumers when everyone told us that we couldn’t When William Symington founded are today. brand milk. When I bought Symington’s, the company it was 30% branded and 70% own-label How did the management buyout – today, it’s the other way round. £270 million Q (MBO) that you carried out in The company’s turnover in 2014 2007 come about? What was your strategy when – a substantial increase from I was at an event near York and Q you bought the company? £47 million in 2007 A this guy, Andy Micklethwaite, The aim was to grow the business tapped me on the shoulder and said, A and add value to each category, 700 ‘You must be David Salkeld. I think while keeping costs low. We don’t have The number of jobs created since you’d be a good buyer a pension scheme, let alone a pension the management buyout seven and leader of our deficit, and all our offices are in factories years ago business.’ He told me and warehouses, so we don’t have glass about Symington’s and atriums like some of our competitors. 20 tonnes mentioned that I knew I don’t even have a PA; my receptionist Symington’s production facility in his son, Danny, who handles everything for me, and I share Leeds produces, on average, this was brand manager my office with the finance director. amount of noodles each day for Lurpak. I rang my pal Henrik How big was the company when £2 Pade (now business Q you bought it? The average cost that consumers development We had 260 people and six units pay for Symington’s range of manager at A on one industrial estate in Leeds. convenience foods and sauces

34 BVCAJOURNAL BVCAJOURNAL 35 INVOICE FINANCE // STOCK // P&M // TRADE // PROPERTY

Chinese supplier, but saw the prices The global financial and thought, ‘Bloody hell, we need to “crisis has put pressure do something about this’. We went to £15m China, bought a production facility and The cost of building a on households, leading decided last year to move everything noodle factory in Leeds You build the business. to Leeds, as it was taking 10 weeks to to savvier shoppers get noodles transported from there to ” here. We now have a £15 million, 72,000 We’ll build the confi dence. sq ft facility that produces about 15–20 Everyone’s leading busy lives and people tonnes of noodles a day. 22 e fl exibility and expertise of an independent, together with the strength want great-tasting convenience food consecutive years in which that is ready in 10–15 minutes for £2, Q What is the strategy going forward the company has reported and extended product range of its parent, Bank Leumi (UK) plc, which is what we offer. To work out for you and ICG? sales and earnings growth make a winning combination. Specialising in structured ABL facilities which categories we’d go for, we carried A We’re looking at entering more out research, talked to consumers and international markets and up to £25m with exceptional levels of client service. walked supermarket aisles. Our products launching new brands this year, cost £1 to £2, and with the development including Kingsmill, Thorntons, in ingredients and recipes, you can get Diet Chef and Robinsons. We’re also fantastic tasting food from a packet or jar investing more in our factories and in for that price. new product development.

Hermes financed the MBO in What has been your biggest Q 2007 and was later taken over Q achievement since buying by Bridgepoint, so how have they the business? contributed to your growth? A Creating nearly 700 jobs in the A Bridgepoint doesn’t generally heart of Leeds is the biggest one. invest in food manufacturers, so We’re in the centre of the city and Automotive components £35m turnover steel importer we thought about the best investment to provide that many jobs in seven manufacturer required fl exible required fl exible funding opportunity and that led to an MBO, years is quite an achievement. Most funding to support fast growth to support growth involving ICG, two years ago. We met governments would pay a fortune for a number of people at ICG, liked them, that level of job creation. Leumi ABL provided Leumi ABL provided thought we could work with them and did the deal. We own 51% of the Looking back, £7m ABL facility including CID, company, while ICG has 49%. We’ve Q what is the P&M, cashfl ow loan + funding £6.5m CID facility done a few things with them, such as biggest lesson you’ve from Bank Leumi (UK) opening an office in Melbourne after learned throughout signing a licensing deal with Unilever your career in the to sell Chicken Tonight, Raguletto food industry? and Five Brothers sauces in Australia I’ve had the and New Zealand. We’ve also bought A privilege of being Victoria Foods, which was a family- the country’s biggest owned baking business, and opened a butcher and its biggest noodle factory in Leeds. milkman, and it’s the same wherever you To fi nd out more about the Leumi ABL approach to business call Phil Woodward What prompted you to open a are in the industry: Q noodle factory in Leeds? you have to set the on 07900 802774 or email [email protected] or visit www.leumiabl.co.uk It all came about from one of the direction and get A big crises that we’ve had since the best people Brighton I London I Birmingham I Leeds I Manchester I Reading buying the business. Not long before the around you. Get them ICG deal, our noodle supplier in China engaged, support gave us four weeks’ notice to end the them, motivate them ABL MULTI FINANCIAL AWARD WINNERS 2013 -2014 relationship. We tried to find another and let them go. World Bank 2013

36 BVCAJOURNAL

01024 Leumi BVCA FullPage Ad.indd 1 24/04/2014 09:17 SECTOR FOCUS Creative On 25 December 2008, some 16 million people in the UK tuned in to watch spirit Wallace & Gromit From animation and music to TV and movies, the UK is a hotbed of creativity and imagination. By Rob Haynes

Were it not for an absent-minded into the hands of venture capital or inventor and his savvy pet beagle, private equity. Many creative firms are Christmas Day in 2008 would have passed often small or medium-sized enterprises, like any other. Yet on 25 December that and so have lumpy, unpredictable year, some 16 million people in the UK sources of revenue. Indeed, often their tuned in to watch a televisual treat, assets are intangible or intellectual in A Matter of Loaf and Death. At the time, nature. This means that such firms are it was the latest instalment of the Wallace often thought of as high-risk, and often & Gromit series, where the plasticine face closed doors when pursuing more protagonists solve a string of bakery- conventional types of borrowing. related murders. And bearing in mind the Queen’s speech attracted about half the Capitalising on talent number of viewers on Christmas Day, the Venture capital firms or private equity show’s success bore testament to another houses that can see past the obvious risks of Britain’s great traditions: creativity. may be well placed to capitalise on the Encompassing film, fashion, TV, video untapped talent. The fashion industry games, music and animation, Britain’s is a perennial favourite among private creative industries pull in the right equity houses. For example, equity numbers for investors, too. In 2014, the house Permira, with a portfolio worth sector will have accounted for some 6% €20 billion (£16.4 billion), acquired the of GDP, employed more than two million R. Griggs Group, the parent company of people and contributed some £16 billion Dr Martens, for a reported £300 million. to the country’s export account. For Elsewhere, Moncler and Zadig & Voltaire investors, the sector looks promising. in France, and Tory Burch in the US, have The UK has the biggest creative benefited from private equity backing. sector in Europe and, according to the However, a word of caution should Confederation of British Industry (CBI), accompany recent rumours that Labelux a potential growth rate of 4% per year. is looking to float the Jimmy Choo high- According to the CBI, the sector should end, high-heel label. Co-founder Tamara have grown from £57 billion in 2007 to Mellon has been critical of private equity £85 billion this year, provided it received houses that, in her words, were focused the right level of finance. Jobs in film, only on their exit strategies. TV, music and software have grown by Despite the value creation in the 8.6% per annum in recent years, bucking Jimmy Choo brand – it grew in value from the trend for muted expansion in the £18 million in 2001 to £525.5 million in wider economy. 2011 after several changes of hands – According to the CBI, the creative Mellon told the Daily Telegraph last year sector faces cyclical and structural that the business models of equity houses

challenges to finance – which may play risk stifling the creative spirit. PHOTO BY NATIONAL TRUST VIA GETTY IMAGES

38 BVCAJOURNAL BVCAJOURNAL 39 The main players producer Hartswood Films has trebled Private Equity Finance and Banking According to figures from Oxford its revenues in recent years. £16bn Economics, 85.4% of creative firms count The amount made from as micro and 12.1% are small businesses. Music exporting creative content While such an environment is ideal for Given the fickle nature of the UK’s venture capital and private equity to add musical tastes, it’s not surprising that There are not many banks that service value, there are some major players in the many labels have rather short lifespans. you in a division all of your own. We do. Financing sector that are worth keeping tabs on. Some, however, have stood the test Solutions of time. These include Rough Trade Silicon Valley Bank has a rich history of financing and banking £85bn Film (founded in 1978, the label has had the private equity funds, GP entities and management companies across Creative industries will be Unlike movie production companies in Smiths, Travis and the Strokes on its Hollywood, those in the UK are known books), XL Recordings (since inception all investment strategies and regions over the past 30 years with over worth this much in 2014 900 existing clients. Among our clients, you will find well-known funds – up from £57bn in 2007 for creating quirky, low-budget yet hard- in 1989, it has signed MIA, Dizzee Rascal Private Equity hitting films. Those of note include and, more recently, Adele) and 4AD (born across venture and growth, buyout, secondaries, fund of funds, private Finance and Cloud Eight films (whose biggest hit in 1980, the label signed Bauhaus, the debt, real estate and infrastructure in the UK, and internationally. Banking was Slumdog Millionaire), Ecosse Films Cocteau Twins, the Pixies and, more Funds (whose portfolio includes Mrs Brown, recently, Deerhunter, Ariel Pink and In the UK, we have a growing team focused on developing, tailoring Management Commercial Brideshead Revisited, and Nowhere Boy) Gang Gang Dance). and managing bespoke financial solutions for the industry, with & Valuation Banking Services* and Heyday Films (responsible for the lending commitments that have grown by over 140% during the Harry Potter films, I am Legend and ` Animation The Boy in the Striped Pyjamas). Wallace & Gromit creator Aardman last 12 months. Animations is the flag bearer for Television British animation, but other animation Few TV companies are as successful as companies are thriving, mostly as a All3Media, the powerhouse responsible result of their involvement in children’s Commercial Banking Select Clients for shows such as Midsomer Murders, The programming. Ragdoll Productions, for Offering Only Way Is Essex and Peep Show. But the instance, is responsible for Abney & Teal, Shine Group and Endemol give All3Media In the Night Garden and Teletubbies. • Financing Solutions a run for its money. Drama and comedy Elsewhere, Coolabi, Smallfilms and - Capital Call Bridge Lines of Credit indies have done well, reflecting an Sprout are collectively responsible for The - GP Commitment Facilities upturn in commissioning by broadcasters Clangers, and A Productions is behind - Management Company Facilities in these genres. For instance, Sherlock The Numtums. - Portfolio Company Debt Facilities (guaranteed by the Fund) - Bridge Financing for Liquidity Events for Funds (Portfolio Value Supported Credit) Five reasons to invest in creative companies • SVB Online Services • Current and Deposit Accounts firms typically offer their backers small The creative industries is also the UK’s Scalability • Payments Given the intellectual nature of many parts in the movie and tickets to the fastest-growing sector, according to the • Letters of Credit companies in the creative sector, several premiere screenings. Department for Culture, Media & Sport. businesses are highly scalable. Once a Expansion in the sector outpaced the UK • Cards song has been recorded or a TV show Growth economy in 2011-12, which only grew at • Foreign Exchange is in the can, the cost of delivering it to According to professional services firm 0.7% per year. • Experienced Client Advisory audiences around the world are tiny PwC, the global market for entertainment Services Team in comparison. For the investor, this and media will grow at a compounded Tax increased scalability means potentially annual rate of 5.6% in the next five years. Many creative industries get special huge upsides. Globally, this means revenues in 2017 of tax allowances from HMRC. For Adam Tweedy E: [email protected] T: +44 (0)20 7367 7800 SVB_UK £1.3 trillion, up from £951 billion in 2012. example, television tax relief applies Contact Us Namita Anand E: [email protected] T: +44 (0)20 7367 7892 Perks to core expenditure, including pre- Many companies offer their owners production, principal photography and Beating the downturn * SVB Capital is a division of SVB Financial Group and the entities managed by SVB Capital are non-bank affiliates of Silicon Valley Bank. Products and services offered by SVB Capital are not insured by the FDIC perks that they couldn’t acquire as Despite the economic downturn of post-production. Video game makers or any other Federal Government Agency and are not guaranteed by Silicon Valley Bank or its affiliates. Silicon Valley Bank is authorised and regulated by the California Department of Financial Institutions and the United States Federal Reserve Bank; authorised by the Prudential Regulation Authority with number 577295; and subject to regulation by the Financial Conduct Authority and limited regulation by the ordinary customers. For instance, films recent years, jobs in film, television, can claim tax relief on core expenditure, Prudential Regulation Authority. Details about the extent of our regulation by the Prudential Regulation Authority are available from us on request. that have been funded by venture capital music and software have grown by 8.6%. including design, production and testing. ©2014 Silicon Valley Bank. All rights reserved.

www.svb.com/uk 40 BVCAJOURNAL Technology Life Science Cleantech Private Equity & Venture Capital UK Branch | May 2014

Guest columnist BVCA Training & Events 2014 Industry intelligence, networking opportunities & learning solutions For the greater good?

Celia Moore, assistant professor of organisational behaviour at London Business School (LBS), on making ethical investments when under the influence of money

As an LBS faculty member who specialises The way a situation is framed in teaching ethics, I’m often asked about the affects the choices we make. business case for ethical investing. I believe Professor Ann Tenbrunsel from Training investors can make excellent returns on the University of Notre Dame socially responsible ventures – just look at found that people are much Maximising Value Creation 3-4 June Maurice Pinto’s £250,000 angel investment less likely to keep a privately in Innocent Drinks in 1999. The natural made promise, which turns Finance in Private Equity 9-10 June smoothie company was sold a year later for out to be financially costly, if 11-13 June some £30 million, netting Pinto a big return. they consider it to be a business Fundamentals of Early Stage Investments But there is also plenty of money to be made decision rather than a personal LBO Modelling 17 June from ethically questionable ventures, such as or ethical one. In other words, payday loan lenders that charge huge annual when making business decisions in our Skills of Negotiating 25-27 June interest rates for borrowing money. professional lives, we’re much less likely to Legal Agreements in Private Equity 2-3 September Asking for evidence that better returns take non-financial criteria into account. come from making ethical investment choices More recently, Kathleen Vohs from the Best Practice Financial Modelling 3-4 September is like asking for proof of the advantages of University of Minnesota explored how money Introduction to Private Equity 23-24 September having children. Sure, some studies will affects our choices. In a series of studies quantify the benefits of ethical investing published in Science journal, Vohs and her Management Teams: Maximising your most valuable asset 1-2 October or parenting, but others provide empirical colleagues showed that exposure to money in Non-Executive Directors 22-23 October evidence against both. any form – even the fake notes used in a game Ultimately, choosing to invest ethically of Monopoly – decreased a person’s empathy Foundation 3-7 November requires prioritising non-financial investment and altruistic behaviour. As Vohs says, when thinking about money, “You can get things Events done, but it comes at the expense of people’s feelings or caring about them as individuals.” Investors can make Young People in Private Equity Networking Evening 5 June “ Fortunately, there is good news, too. excellent returns on socially It is a near universal truth that people need Scotland & Northern Ireland National Dinner, Edinburgh 12 June to see themselves as moral and many of us High Growth Conference and Management Team Awards Dinner, London 18 June responsible ventures find it difficult to consistently act in ways ” that contradict our deeper values. The best BVCA Charity Day at Wimbledon 24 June criteria along with profit. Doing this in a argument I can make for ethical investing is sincere way may involve turning down that any other kind undermines how we want Channel Islands National Dinner, Jersey 10 July opportunities that fail to meet non-financial to see ourselves. As long as we keep our best North West National Dinner, Manchester 18 September criteria (environmental, social issues, human selves in mind, we’ll make investments that rights and diversity) that define what an are consistent with our priorities, both as LP Summit, London 8 October investor considers to be an ethical investment. business people and as human beings. LP-GP Dinner, London 8 October The bad news is that several psychological processes create obstacles when attempting to Celia Moore is assistant professor of BVCA Summit 2014, London 9 October make ethical decisions. Moreover, the context organisational behaviour at the LBS. As part Tax, Legal & Regulatory Conference, London 12 November of private equity and venture capital may of her role, she works in association with exacerbate these obstacles. Coller Institute of Private Equity Annual Gala Dinner, London 4 December

For training booking enquiries: E: [email protected] 42 BVCAJOURNAL For event booking enquiries: E: [email protected] www.bvca.co.uk T: +44 (0) 20 7420 1800

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