On 31st March, Southampton Science Park was delighted to welcome Hugh Minnock, Senior Investment Manager - Private Equity team at Foresight Group, Matthew Burke, Head of Technology Ventures at Williams Advanced Engineering and Oliver Kelly, Partner at BDB Pitmans for an insightful Lunch & Learn session on attracting investment.
Matthew Burke began by explaining how Williams Advanced Engineering (WAE) emerged as a spinout to commercialise the principles, expertise and materials used in Formula One. With a range of investments that is no longer all about wheels, it has raised £64m in funding with a current portfolio of over 30 companies in collaboration with Foresight Group. This portfolio includes two Science Park companies: Utonomy, the funds’ first investment, and AudioScenic.
WAE looks to invest in companies that it can add value to through technical, commercial or promotional support. It seeks disruptive and defensible technology with a global revenue opportunity greater than £100m. Importantly it looks for companies that have a strong, ambitious management team with a deep market understanding and a clear roadmap to commercialisation.
“We expect to work with leaders who know who their first customers are going to be and are engaging with decision makers. They are ready to transition from technology to paid product and they are willing to put robust processes in place to spend in line with their commercialisation plan,” he commented. “Over the last year, the pandemic has shown us the importance of innovation and of a rapid response through companies coming together to accelerate and scale.”
Foresight’s Hugh Minnock revealed the importance of private equity and venture capital in the context of ‘UK plc’. Some £27bn has been invested in nearly 4,000 businesses in the last five years, 84% of which went to SMEs. Foresight itself has a cross-sector portfolio of over 100 SMEs with initial investments between £25,000 and £10m.
He said: “Growth equity helps companies to access cash faster and grab opportunities before somebody else does. Most people are familiar with Innovate UK grants and finance available through banks but there are limitations to these well-trodden paths, particularly when companies are still loss making or personal guarantees are required. That’s when funds like ours can help. There’s also a lot of venture capital out there looking to back great businesses, and a lot of good businesses out there that could perform very well.”
When choosing who to invest in, Hugh also stressed the importance of a strong management team with a clear strategy, but also one that will listen to experts. “Foresight prides itself on being a patient and supportive investor which looks to grow successful businesses, not financially engineer them. Through aligning ambitions and incentives, we typically look for a 3x return while company management achieves 10x prior to exit,” he added.
Rounding off the presentations, Oliver Kelly of BDB Pitmans turned to contractual matters, highlighting that there is no ‘one-size-fits-all’ approach: all funds operate differently, and it follows that the mechanics of transactions should too.
Oliver advised: “It’s important to view investment agreements with a dual hat: not just as a company founder. If you’re seeking funding, you must remember that investors invest on behalf of others who expect a return. Consequently, there are certain clauses that will always appear in legal documentation. There are reasons for these so my advice is not to waste energy on small matters that investors cannot move on. A specialised and experienced legal advisor will explain why these clauses exist, make sure you as a company owner understand the ramifications, and ensure you have all the protections you need.”
He went on to stress that getting organised well in advance of a transaction is imperative. Valuations and speed of investment will be impacted if key contracts are not in place. This is particularly the case with intellectual property and data protection: for investors, a lack of due diligence on these poses risks of large fines and reputational damage.
Science Park Business Development Director Jane Holt closed the session with an engaging Q&A session, with the panellists advising participants on a wide range of issues.
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