5 November 2019
How did your journey as an investor begin?
Personally, I have been working with businesses since 1994 with a principal focus on lending against projected cashflows. This has involved working with management teams to understand the story behind the numbers and using this information to structure appropriate debt facilities. Facilities structured incorporate traditional senior debt, asset financing, mezzanine loans and capital markets products. The basic principles of cashflow lending remain key to the SMEs that we work with today.
Which are your main three focus areas for GLIF over the coming months?
My three principal areas of focus for the Greater London Investment Fund (GLIF) over the coming months are relatively straightforward. Firstly, we need to continue to ensure there is good market awareness of the availability of GLIF for SMEs across London in order to attract a diverse range of founders. Following on from this we want to provide a prompt review and analysis of the potential lending opportunities we receive which will allow us to give management teams an early steer regarding suitability of the Fund. Finally, we are keen to have a proactive and on-going working relationship with the management teams that we back to accommodate the fact that all businesses evolve over time and as markets change. Overall, we are keen to deploy the debt fund to SMEs in an efficient way to ensure that we are driving growth in the Capital.
What are the key attributes you look for when evaluating a deal?
When evaluating a transaction, the key attributes that I look for are a capable and passionate management team who are aware of the importance of cashflow management, growing and defensible revenues which demonstrate good commercial traction, and strong competitive positioning in the client’s relevant market.
What three characteristics do you look for before investing?
All businesses that we work with have a degree of complexity. It is critical when reviewing a business that we break down this complexity to understand the underlying drivers of the business model. So, I normally start by trying to identify the key drivers behind the revenue line. I then work my way down the P&L to look at key trends and identify changes in the principal cost lines and how these impact on profitability. In terms of cashflow, the focus will be on the working capital and capEx lines of a business as together these will drive the operating cashflow line and help determine the suitability of debt for the SME. Ultimately, we are looking to understand the dynamics behind the numbers.
How hands on are you with your investments? How do you like to work with the companies post investment?
At the FSE Group we take pride in having a relationship centred approach, in that whoever does the original transaction remains involved with the business on an on-going basis. We believe that this allows us to take advantage of the knowledge built up over the transaction process and helps us to build on the relationships already formed with the management team. As lenders we don’t ask for Board Representation however, we do like to remain closely involved with the businesses we back. As such, post investment we expect to receive monthly management accounts supplemented by regular calls and visits to ensure that we remain aware of the progress in the business. We would encourage all our clients to remain in close contact with the Fund Manager and to pick up the phone at an early stage if they anticipate a problem as we can then work with them to find the best way forward.
What drives the most successful scale-ups?
In my view the simple answer to this question is the management team. They have identified the market opportunity and they have the vision of how their business can meet this opportunity. Furthermore, they will have the responsibility for motivating and recruiting the team that will deliver on this opportunity.
If you had to pick a new sector to explore that would potentially fit your investment strategy, what would it be?
We are very lucky in London; in that we have fantastic infrastructure and support network for SMEs across a range of different sectors and more importantly a diverse pool of talented people who want to start new businesses. Through GLIF we are looking to support businesses in sectors identified as important for the capital’s economy by the Mayor in his Economic Development Strategy. These include cultural and creative industries, financial and business services, life sciences, low carbon and environmental goods and services, tech and digital, and tourism. I don’t have a specific sector that I want to track, I admire anyone who identifies a market gap in a sector and develops a solution to address this gap.
What one piece of advice would you give someone starting a company?
My advice to someone starting a company would be to give yourself time to think and assess business progress against your objectives at regular intervals. Management accounts and analysis shouldn’t be produced just to meet investor requirements, use this information to stand back and evaluate the business against your plans. We all change our plans from time to time and it is always better to instigate this change rather than to be forced to address problems at a later stage.
What small change has made a big difference in your life?
Audiobooks – I love reading but never have time to sit and read without falling asleep – I can now read whilst being on the move!