BuildingBritishBusinessReview 2011/12

14Our investments: BGF’sinvestment process – how weinvest and our portfolio to date.

15Case Studies:Six of our early investments.

Inve

st 10The Conversation: BGF’s Headof Investments, Richard Bishopand Sir Richard Lambert discussthe realities of investing in BritishSMEs.

Info

rm 20Who we have been working with:

Insp

ire 24

The big question: What drives Britishbusinesses? The founders of some ofBGF’s portfolio companies and BGF’s ownnon-executive directors discuss whatinspired them, and the advice they wouldgive to today’s entrepreneurs.

32The Board: Ensuring that BGF haseffective infrastructure, strong internalgovernance and appropriate investmentstrategies.

Gro

w 30More than just money: HowBGF provides more than justcapital to help grow successfulBritish businesses.

Contents 01

BuildingBritishBusinessReview2011/12

02Chairman’sForeword:Welcome to BGF’sfirst Annual Review.

04BGF facts & figures: The UK has astrong base of successful SMEs but theyneed more long-term capital and greatersupport.

06CEO’s Review: Our first year – building ateam, setting up a nationwide infrastructureand making our first investments.

Nearly all successful entrepreneurs understand the importance of seeking external guidance. A mentor can add great value at this early stage.

Bridging the Equity Gaps

1 The first equity gap. There are a few specific start-up

funds and government-backed initiatives but for

many new entrepreneurs the most flexible and

realistic sources of funding will be savings, friends

and family, overdrafts and credit cards.

2 A relationship with a bank starts to develop.

As revenues become predictable a commercial

overdraft should become available, but a lender will

probably require security and a personal guarantee.

4 With stronger revenues and an established customer

base, some bank debt should become available, again

often with additional security required.

5 An established trading record can also mean that

alternative asset-backed sources of finance such as

invoice discounting and factoring become available.

6 The company should by now have a strong

relationship with its bank, and longer-term debt

finance will be available. But:

• it will not be limitless, and it may not be enough

to fund growth plans;

• debt alone may not be the most appropriate funding

for the next stage of the company’s development;

• a fledgling business needs to be adequately

capitalised as the future is not always predictable.

3 This is still a new venture, with minimal track record

and little profit. But if the company is growing, a

significant capital injection may be required. The

second equity gap. Angel investors and smaller

venture capital funds are best placed to meet this

need and provide the support the business requires.

Turnover 0Employees 1–2Profit 0

Turnover <500KEmployees 3–15Profit Break even

Nearly all successful entrepreneurs understand the importance of seeking external guidance. A mentor can add great value at this early stage.

Accountants, lawyers and bankers can help with much more than simple transactions.Now is the time to start making more use of the strategic advice they can offer.

Management information demands are growing and strong systems will be needed if the company is to continue growing. Now is the time to appoint a dedicated finance director if you don’t have one already.

Bridging the Equity Gaps

1 The first equity gap. There are a few specific start-up

funds and government-backed initiatives but for

many new entrepreneurs the most flexible and

realistic sources of funding will be savings, friends

and family, overdrafts and credit cards.

2 A relationship with a bank starts to develop.

As revenues become predictable a commercial

overdraft should become available, but a lender will

probably require security and a personal guarantee.

4 With stronger revenues and an established customer

base, some bank debt should become available, again

often with additional security required.

5 An established trading record can also mean that

alternative asset-backed sources of finance such as

invoice discounting and factoring become available.

6 The company should by now have a strong

relationship with its bank, and longer-term debt

finance will be available. But:

• it will not be limitless, and it may not be enough

to fund growth plans;

• debt alone may not be the most appropriate funding

for the next stage of the company’s development;

• a fledgling business needs to be adequately

capitalised as the future is not always predictable.

3 This is still a new venture, with minimal track record

and little profit. But if the company is growing, a

significant capital injection may be required. The

second equity gap. Angel investors and smaller

venture capital funds are best placed to meet this

need and provide the support the business requires.

Turnover +/- > £100mEmployees 150+Profit Great

Turnover £5m+Employees 25–150Profit £500k+

Turnover 0Employees 1–2Profit 0

Turnover <500KEmployees 3–15Profit Break even

Turnover £2–5mEmployees 20–80Profit Still small

This is a critical time. The entrepreneur has achieved early success. But the company has the potential to continue

growing – making bigger profits, employing more people, making a greater contribution. This is the greatest equity gap.

This is where BGF, as a junior partner, can provide the patient capital, active support and the confidence all entrepreneurs

need to bridge the gap and make sure their company achieves its full potential.

A stock-market listing, a private equity buy-out, a trade sale, or continued life as a large, successful privately owned company. Great companies take many forms, but they have all made this journey, taken risks and seized opportunities. They have bridged the equity gaps.

During the past twenty years equityinvestment fell out of fashion for the

owners of most small and medium sizedbusinesses. This was perfectlyunderstandable. Lenders were falling overthemselves to provide debt. Borrowingmoney was easy. New finance was quick tosecure and the entrepreneur could get onwith running their business.There is no denying that these were easiertimes to raise money for speculativeventures, but I would argue that during thistime too many companies began to loseperspective on one of the most importantelements of business – understanding risk.When you really understand the riskinvolved in a project it becomes mucheasier to identify and secure the mostappropriate funding. If the project isrelatively safe, the resultant cash flows arepredictable and the returns consistent, thentraditional bank debt or asset-backedlending may well be ideal. But that is not

always the case and so in other scenariosan equity partner can often play a valuablerole.I had been conscious that there was ashortage of capital for small and mediumsized businesses for a number of years,and that major institutional investors hadmoved out of this space with no one newcoming in to fill the gap. I was one of anumber of business people who talked topoliticians across all parties, and to anyoneelse who would listen, arguing that a newinstitution was needed, one with a nationalprofile but strong regional presence, withdeep pockets and an appetite to make areal difference. When five of the largestbanks came together, sharing this vision,and asked me to become chairman of thisnew institution I jumped at the opportunity.BGF was first mentioned as arecommendation in the report of theBusiness Finance Taskforce in October2010. I officially joined in February 2011,

and just three months later we launched. I would like to pay my thanks to everyoneinvolved in setting up this new financialinstitution from scratch, in such a shortperiod of time; it really was a trulyimpressive achievement.Alongside building the infrastructure,securing regulatory approvals, hiring over60 people and opening six offices acrossthe UK, we also needed to get the offeringright. One of the side effects of equity’s lossof profile has been that a number ofcommonly held myths and misconceptionshave emerged. Equity investment is typicallyseen as too expensive and too onerous.Entrepreneurs assume that they will losecontrol of their business. And it issometimes seen as short-term, driving abusiness to the timetable of externalinvestors not to that of the management’sstrategy. The truth is that it rarely is, andcertainly doesn’t have to be, any of thesethings. BGF only ever takes a minority stake. Ourinvestment is the strongest vote ofconfidence a management team couldreceive. We invest directly from our ownbalance sheet, so there is no externaltimetable. We provide long-term capital, weare happy to invest for seven-to-ten years.And we are working extremely hard tomake the investment process as simple andefficient as possible. We believe that BGF’sapproach is exactly what manyentrepreneurs are looking for and theevidence so far backs this up. Over thepast few months we have been seeing areal demand for growth capital among theUK’s high growth, smaller and mediumsized businesses. The ambition of thecompanies we are talking to across thewhole of the UK is undoubted. These areBritish businesses that can grow rapidlyand are the dynamic heartbeat of theeconomy. They actively need, and deserve,the full and vocal support of everyone witha stake in the success of the Britisheconomy. BGF is already making an impactand, with continued encouragement andactive support from the businesscommunity and beyond, we believe that wecan grow to become a significant andlasting investor in UK companies. �

“The ambition of the companies we are talking toacross the whole of the UK is undoubted,” sayschairman, Sir Nigel Rudd. “These are Britishbusinesses that can grow rapidly and are thedynamic heartbeat of the economy.”

Chairman’s Foreword 03

A hypotheticalquestion:

What would you doif somebody offered

to invest millionsin your company,

provide access totheir businessexpertise and

network but leaveyou in control?

Not a hypotheticalquestion:What would you doif somebody offeredto invest millionsin your company,provide access totheir businessexpertise andnetwork but leaveyou in control?

Any more questions?0845 266 8860

bgf.co.uk

Agricultu

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Manufacturing

Tran

spor

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Business Services

Fina

nce

Public

Con

s S

ervs

Pro

per

ty

Retail

Wholesale

Construction

Nor

th E

ast

Yorkshire

London

So

uth East

East Anglia Wales West Midlands

East Midlands

North

Wes

t

Sco

tland

Sou

th W

est� No. of companies with turnover of £2.5m – £100m

� No. of those companies reporting growth of 33%+ overprevious three years

The number of high growth companies has fallen from 6,559 to3,945 since 2008. We need to urgently arrest this decline.

Sectoral distribution of high growth companies

Regional distribution of high growth companies

25,000 companies with a turnoverof £2.5m–£100m 4,000 companies growing by 33% in3 years and at least 10% in two ofthose 3 years400+ looking for significant financefor growth each year

Fewer than50first roundgrowth capital investments of£2m–£10m made in either 2010 or 2011. Over 45 differentorganisations investing. Thisdemonstrates the need for morecapital and a new substantial andstructural approach to the problem.

The High Growth Companies BarometerBGF has been working with Experian pH to identify and analysethe UK’s universe of high growth companies. Specifically we havesought to find companies with a turnover between £2.5m and£100m, and with reported growth of 10% per annum.We believe that the number and distribution of these companies isa strong indicator of the current economic strength and futuresuccess of the UK economy. These businesses will help drive theeconomy.

04 Facts & Figures 05

“If the UK could narrow the gap so thatthere are both more “gazelles,” but alsoso that more slow-growing firms reachsteady state growth rather thanstagnating, they could add up to £50bnto the economy by 2020” CBI, 2011

�

The 6% offastest growingmedium-sized

businesses (MSBs)account for over 60% of new jobcreation among

all MSBs.

6% 60%

11 investments made by BGF since October 2011. With 9 so far in 2012.

6 BGF offices across the UK.

35 experienced investors recruited to BGF’s regional teams.

£2.5bn committed by BGF’s shareholders to fund investments.

BGF’s investment pace isincreasing to an average of twodeals per month. The currentplatform will be able to make up to40 initial investments each year.When follow-on funding isincluded, BGF could be investing£300–400m annually in fastgrowing UK companies.

�£2.5bn

The UK has a strong base of successful small and medium-sized companies... ... but these companies havesuffered from a lack of significantgrowth capital provision.

BGF provides the scale and long-term commitment to really make adifference.We have the capital to dramatically expand the market andinvestment options, to the benefit of all SMEs.

11

Mid-sized companies represent lessthan 1% of all firms BUT accountfor 22% of all economic revenueand 16% of total employment.

x35

5,000

10,000

15,000

25,000

20,000

03 04 05 06 07 08 09 2010

06 CEO’s Review 07

them find the most appropriate way to fundtheir future growth. I want securinginvestment from BGF to be about morethan just money. So, in addition to long-term capital investment, we offercompanies the opportunity to meet and beguided by some of the most experiencedbusinessmen and women and investmentexperts in the UK. The feedback we aregetting from entrepreneurs suggests thatour partnership approach and sharing ofexpertise, guidance and contacts is almostas valuable as the capital we inject intotheir businesses.We started investing last October and as ofMay 2012 BGF has made eleveninvestments and has committed over£55m of new money to fund the expansionof fast growing British firms. We arecurrently averaging two investments amonth. BGF’s ambition, in the firstinstance, is to be capable of making 40initial investments a year, investing around£240m per annum. Together with follow-oncapital for existing investee companies, theannual level of investment could reach£300–400 million. To put this in context, in2011 fewer than 50 first round, growthcapital investments were made incompanies within BGF’s target market.Even more tellingly over the past two yearswhilst more than 45 different entities havemade growth capital investments ofbetween £2m and £10m, only five havemade more than three such investments.There simply hasn’t been enough capacityto create profile and momentum forminority equity providers, and therefore, tosee the market expand. This is why, fromthe outset, we have sought to create along-term structural solution to what ismost definitely a long- term structuralproblem. When you add in the related debt

funding this unlocks, the impact on the UKeconomy will be meaningful. We need to provide capital in an attractiveway that works for ambitious businessowners. That is why we only ever take aminority stake; we are building, not buying,businesses. The entrepreneur stays incontrol; BGF is the junior partner. We canbe flexible in how we structure ourinvestments and because we are fundingfrom our own balance sheet we can investfor the long-term. We genuinely believe thatthis is the patient capital that fast growingcompanies have been looking for. Thesecond element has been to build anetwork from which we can grow, andfrom which we can support the companieswe invest in. We believe that small andmedium-sized businesses need theirsources of finance to operate as locally aspossible but to think globally. We have builtan initial team of 35 experienced investors,based in six offices across the UK(Birmingham, Bristol, Edinburgh, London,Manchester and Aberdeen). This teamgives us the ability to find new investmentopportunities and to forge long-termsupportive relationships with companiesand with the strong financial advisorycommunities that exist in all our majorcities. However, we know that stand-aloneregional players can find it difficult toprovide the national, and ofteninternational, perspective and network thata growing company requires. Nearly everycompany that we invest in will haveinternational ambitions, and none will becontent solely operating in their immediatelocal market. These companies need apartner with national presence andinternational understanding. BGF is thattoo. The UK’s heritage as a trading nation,which is open and outward looking, is one

we want to harness. The final element is to collaborate closelywith others. This too is central to ourphilosophy. We want to ensure that fundingis more generally available where it is mostneeded. Two good examples of this: Firstly,whilst BGF does not fund start-ups, we dobelieve that the creation of brand newbusinesses is where it all begins. That iswhy we have committed, as a key sponsor,to work with the BBAA to build theecosystem for start-ups, helping to bringtogether Angel Investors withentrepreneurs, supported by governmenttax policy. Secondly, we have a verypractical approach, to working with ourshareholders and banks to unlock the debtpotential of SMEs on the back of our long-term capital investment. With a strongerbalance sheet, enhanced board andgreater governance, the companies weback are more creditworthy. This creates avirtuous equity cycle that both fundsgrowth and unlocks more debt capacity atthe same time. Our challenge is significant,but the prize is greater still. BGF wants andneeds to be a champion for UK SMEs.They are both the lifeblood and future of avibrant economy. So this review is aboutour mission: how and who we invest in;how we work with companies to help themgrow; our broader ambitions to inspiretoday’s entrepreneurs to achieve more andtomorrow’s business owners to take theirfirst steps; and the role we are looking toplay as a trusted source of information toeducate and inform both business ownersand the wider economy about theimportance and the needs of fast growingSMEs.

We are Building British Business.Stephen Welton

The idea that there is a general lackof funding for fast growing, profitable

small companies was first identified over80 years ago. Famously the MacmillanReport of 1931 found, “a chronic shortageof long-term investment capital for smalland medium-sized enterprises”, whichquickly became known as the “MacmillanGap”.Numerous public and private sectorinitiatives have come and gone since thenwith varying degrees of effectiveness. For aperiod of time ICFC and its successor 3i,provided an institutional answer. Later theavailability of cheap and plentiful debt,often lent against what would be regardedtoday as a project with an equity riskprofile, filled, or at least masked, the need.But today, once again, there is in Britain areal need for sources of long-term, patientcapital for growing small and medium-sizedbusinesses. This is the need that BGF isseeking to meet. These businesses haveenjoyed an unprecedented amount ofattention in recent years. About time too,many people would say. From researchundertaken by NESTA we know thatgrowing SMEs are among the mostimportant and effective job creators in theUK economy. Analysis by Experian hasshown that a great many SMEs have highgrowth potential but never go on to fulfil it.And a recent report by the CBI suggestedthat if we could get more SMEs to grow,and more to grow faster, they could add upto £50bn to the economy by 2020. Ourown commissioned research indicates thatthere are in the region of 4,000 – 7,000British companies with more than tenemployees, and a turnover between £2.5mand £100m, that are growing at ten percent or more year-on-year. Not all of thesecompanies are looking for capital today,

but a good number are. And moresignificantly there are many that could be,and need to be, if the UK economy is goingto return to long-term, sustainable growth.What is certainly true is that all thesecompanies would benefit from, anddeserve, more recognition and support.Over the past 10–20 years thesecompanies have been let down. Whilst it istrue that some great new companies haveemerged, in general there has been toolittle focus on what these businessesactually need.What is stopping good local firms frombecoming big national success stories?Access to finance provides one answer butthis isn’t the whole story. There are manyadditional reasons. The first is that thereare too many “good” excuses for deferringinvestment. The state of the globaleconomy, another eurozone crisis or fearsfor domestic inflation, can all provide areason to wait another year. But historyshows that many great companies werecreated in downturns and that there isnever a perfect time to invest.Secondly, many business owners simplydon’t like the idea of increasing debt. Whytake the risk? Which leads to my thirdreason: stalled ambition. Too many Britishbusiness owners are happy to settle for‘good’ and don’t see the need to push onto become ‘great’.But just as we shouldn’t solely blame thebanks, we shouldn’t lay all the responsibilityat the feet of the entrepreneurs. Taking acompany to the next stage can bedaunting. At the very least, running abigger company requires more resourcesand support. Knowing where to turn andwho to trust are critical. This is BGF’smission. We want to help businesses focuson what is within their control and help

Stephen Welton

Building BritishBusinessOur first year

Our ambition is to see ourinvestee companies growand prosper.�

We provide long-termcapital of £2m–£10mfor ambitious, smalland medium-sizedcompanies looking to grow.

08 09

Sir Richard Lambert and Richard Bishop talk business

The Conversation:

RL: Another thing that I think is interestingis that studies looking for trends amongthese companies have rarely found anycommon characteristics, apart from theirentrepreneurial leadership. But they havefound these entrepreneurs in every sectorand every part of the country. I think thatpoliticians often get it wrong when theyassume that it's going to be high tech andslick service companies that grow rapidlyand are successful but actuallyentrepreneurs and innovation can turncement companies into spaceships.

RB: Yes, the high growth firms tend to bethe ones that are more innovative anddisruptive in their markets. But thosemarkets can be anywhere. For example,look at the new brands that have emergedfrom a supposedly commodity market

such as soft drinks. This has been a verystaid sector for years and years, but thensomeone has a vision of how can they cando things differently.

RL: So if you put a young, fast growingbusiness that may be turning over a fewtens of millions up against some very bigcompetitors, that is not necessarily a badplace for that business to be. They are upagainst competitors that have been doingthe same thing for many, many years inthe same way and that are very corporate.Bigger companies are rarely as fleet offoot. They don’t have that burningambition that an entrepreneur has.

RB: The vision, strategy and ability toimplement must be there too. We look fora clear strategy. Can they continue to

drive top line growth? And can they do itprofitably and sustainably? That requiresmobility to keep evolving the managementteam, not just bringing new people in andit also means working out when it’s theright time for other people to move on.This can sometimes be the foundingmembers that helped get the businessgoing initially. A business of £30m is verydifferent to a business of £5m, and one of£60m is different again. So the ability tokeep evolving the business, to recruittalent and to nurture it in the business isvery, very important.

RL: My sense is that businesses like thesehaven’t been well served by the capitalmarkets over recent years. And I think thatthe private equity industry has not servedthese companies well either. There has

RB: I think there are two types of SMEs.There are those that start small, staysmall, and are very happy being small.They might employ somewhere betweenone and ten people and effectively it’s away of creating an income for the owner,and enabling them to control their owndestiny; the definition of working foryourself. These companies generally don’twant or need our investment. Thedifference between those and thebusinesses that we are looking to back isprobably ambition.

RL: NESTA did a memorable study a fewyears back that showed that it is just sixper cent of companies that have created60% of the jobs in the last ten years. Thatis why those high growth companies areso critical, and so important now.

RB: The people that we are looking toback have a burning ambition to run theirbusiness. By the time that we get to themthey’re probably turning over close to £5mand they have already decided that theywant a bigger business. So we arelooking, over the next ten years, to buildbusinesses of real scale, some of which Iexpect will become household namesover that period.

RL: That’s interesting. Of course there aremany medium-sized companies out therethat are never going to change or growvery much. They are perfectly happy justticking along. Then there are others thatgrow very rapidly from, say, 100employees to 300. That’s really exciting.Presumably these are the companiesyou’re seeing.

RB: Yes it is. One of the most recentbusinesses that we invested in is makingaround £10m in profit, so it’s a significantbusiness but it’s still founder-run andfounder-owned. He was looking forcapital but he also felt that if he wasgoing to increase profit to £20m or morethere was a lot more that he needed,such as a proper chairman, goodgovernance, and access to more ITresources, that would enable him to build a business that can scale, safelyand profitably, rather than overtrade ...We often see businesses that aresuccessfully growing the top line buthaven’t grown their infrastructure quickly enough to be able to go on to the next stage.

Richard Bishop – BGF Head of Investments

Richard Bishop joined BGF in June 2011 after 21 yearswith 3i where he was a founding partner of the globalgrowth capital business. He has been on the boards ofmany of the companies 3i has invested in over theyears, and has vast experience of helping companiesto achieve their growth potential. Richard is based inBGF’s Birmingham office.

Sir Richard Lambert

Sir Richard Lambert has held some of the highest roles in themedia, business and public policy. He served as Director Generalof the CBI, from 2006–2011, following three years as an externalmember of the Bank of England’s Monetary Policy Committee.Prior to this Sir Richard spent over 30 years with the FinancialTimes culminating with a decade as the paper’s editor. Hecurrently sits on the board of Business in the Community, and isthe Chancellor of the University of Warwick.

10 Invest 11

The Conversation:

been a move away from growth capitaltowards doing buy-outs, and from smallerbuy-outs to larger buy-outs. And beforethe crash, increasing levels of leveragedrove returns, rather than using minoritystakes to fuel growth.

RB: Yes. And I can understand why thatis. It is easier to buy a business than it isto invest in one.

RL: So are the transaction costs of whatyou’re doing, quite high?

RB: They have the risk of being high butwe are focused on driving them down.And we are saying that this is a lower riskway of investing, because the founder isnot taking all his money away but keeping the majority of cash in thebusiness. This demonstrates the scale of his commitment.

RL: Is this one of the conditions that you require? How strongly do you insiston this?

RB: It is fundamental. When you’re aminority shareholder, alignment of interestis everything. We all sweat over the legaldocuments in the run up to completing aninvestment, but unless you are aligned onthe way in, and you stay aligned until theday it’s the right time to get out, then itwon’t work.

RL: And you have a person on the boardas well?

RB: Yes, we always have a BGF employeeon the board, usually one of our seniorinvestors. And we usually look to appointan external non-executive as well, whocan bring sector credibility or someexperience in building a business in someof the areas where the entrepreneur islooking to do so. Already some of thechairmen that we are working with are ofthe highest calibre and it’s no great choreto sell these ideas and these people to theentrepreneurs, because even if they arereticent before they meet them, oncethey’ve met the sort of people we canintroduce then they are usually hugelyenthusiastic about working with them.

RL: And presumably they need themoney, when they need the money. I mean you need to be fairly agile in thatsense? There is no point in saying in threeyears’ time you can ...

RB: That’s right, and what we’re saying topeople is look, within four-to-six weeks ofagreeing the terms of a deal we aim toprovide the capital.

RL: A lot of policy people are focusing onGermany at the moment because it is awidely held belief in the UK that Germanylooks after their SMEs and mid-sizedcompanies much better than we do. They

have more banks, their banking system ismore local, and above all else the thinkingis much longer term.

RB: I worked in Germany for a couple ofyears. I think that it’s as much to do withthe culture of building businesses ratherthan selling businesses. So there aremany, many businesses of real scale inGermany that are still entirely privatelyowned. In the UK these businesses wouldhave either been sold or floated. Germanyhas much more of a culture of building abusinesses for the longer term andconsequently the financing industry hashad to learn to sit longer term with them.

RL: Right ... so the egg comes before thechicken. And that means the lessons forthe UK are as much about nurturing aculture of long-term entrepreneurship andbusiness building, as they are aboutfinding structural and institutionalsolutions.

RB: I met a lot of German entrepreneurswho were second or third generation.They had no intention of selling theirbusinesses in the foreseeable period,because they were very confident in whatthey were doing and they wanted to keepbuilding it. That is why I think BGF is sowell placed. We’re happy to invest on amuch longer-term basis than conventionalinvestors. We have the great benefit ofinvesting from our own balance sheet,

12 Invest 13

with the capital that we draw down fromour shareholders. So we can invest forfive-to-ten years, rather than on a short-term basis. And that really resonates withentrepreneurs because most of themdon’t know when will be the right time tosell up.Our ability to provide additional capital inlater years as well, is also really attractivebecause at the moment people areassuming that for the next two or threeyears the market is going to be tough. So they don’t want to take capital now,thinking that they might have to sell in2015, potentially before there sector hasseen any real recovery. In some waysthese follow-on investments are theeasiest you ever make because it’s anabsolutely known entity. You know themanagement, you know you can worktogether and you know the growth story.

RL: You are also going to create a newclub of entrepreneurs and that will surelybecome aspirational for otherentrepreneurs to join because of thenetworks they can build amongst eachother.

RB: We are already seeing opportunitiesfor businesses that we are talking to, totrade with each other and support eachother. Our mission here is to support thebest and most ambitious businesses, butthen to help them support each other in abig culture of entrepreneurship.

RL: I’m an optimist naturally. And when Iwas at the CBI the thing that I really tookcomfort from when travelling around thecountry was that there are actually a lot ofcompanies, mainly private companies,that you have never heard about,companies that the Department ofBusiness don’t know exist, and that aredoing really exciting stuff. You’ve got agreat job.

RB: It’s the best job in the world, I think,and the most exciting part of it is meetingthese fantastic businesses.

RL: And what is it like now, while businessconditions are pretty uncertain?Companies are pretty risk averse at themoment, so how does it feel when you’reout and about?

RB: We are getting a very good responseat the moment. There are lots ofbusinesses that set aside what they see inthe media. They are saying “I know I cangrow. I can see where my next customer iscoming from. I can see where my nextmarket is going to be”. At a micro level –they see growth. There are strong pocketsof growth across the economy. And it’sgoing to be these innovative andambitious entrepreneurs that are going tofind them, because that’s why they get upevery morning. That is why they spend 15 hours a day in their businesses. Soalthough there is a lot of doom and gloom

at a macro level, at an individual companylevel there are some fantastic stories.

RL: If you read the early history of ICFC,which, sadly, I have, one of the things thatcomes across is that they felt they hadmore than just a kind of economicpurpose. They felt that they were doing apublic good of some sort ...

RB: That resonates very strongly in ourbusiness. We were launched in May 2011with a handful of people and now we’vegot over 60. It is not only the committedcapital and the opportunity to invest thathas attracted people. It is also the factthat building UK businesses is great funand has a great purpose to it. A lot ofpeople that I’ve interviewed have said “I really like what BGF is trying to do and Iwant to be a part of it”.

RL: Yes, yes ... and the fact it sounds a bitlike a Roald Dahl children’s story?

RB: Yes, The Big Friendly Giant. It’s asource of constant amusement to peoplethat we meet but I take the view that we’restuck with it and it’s an ice-breaker.

RL: Yes, maybe it’s not so bad. �

RL: …the lessons for the UK are as much about nurturing a cultureof long-term entrepreneurship andbusiness building, as they areabout finding structural andinstitutional solutions.

� RB: …we can and will invest for five-to-ten years, rather than on a short-termbasis. And that really resonates withentrepreneurs because most of themdon’t know when will be the right timeto sell up.

�

14 Invest 15

INVESTMENT DATE

October 2011INVESTMENT

£4.2m SECTOR

SoftwareCOMPANY LOCATION

Southampton

TURNOVER

£5–10mNUMBER OF EMPLOYEES

60BGF INVESTORS

Paul Oldham, Erin Hallock, Rodney Appiah

Benefex is software company providing online employee rewardand benefit schemes that enable organisations to tailor their offerpackages to individual employees, communicate effectivelyonline with staff, and outsource administration and support.With over 50% growth year-on-year, Benefex continues toexpand rapidly with turnover approaching £10m in 2012. Thecompany currently provides services to over 500 clients,including the AA, Coca Cola and Bank of America, and managesonline benefits schemes for over one million employees in morethan 40 countries.

Why BGF invested:� Opportunities to expand into the US with existing customers. � New pensions auto-enrolment product to be launched in 2012. � Continued investment in people and infrastructure needed to

meet proven demand.

“We are entrepreneurial and ambitious, and werecognised that the business had reached the point where weneeded external capital to take it to the next level and invest inkey areas. Having grown the business from startup, it wascritical for us to find the right partner. We chose to work withBGF because we felt that they shared our enthusiasm andambition and offered more than just money. Advice, guidanceand contacts will be invaluable.” Matt Waller, CEO Benefex

Benefex

�

Investing in your success

Our investmentprocess

Some of our early investments

INVESTMENT DATE

October 2011INVESTMENT

£4.25m SECTOR

Travel ManagementCOMPANY LOCATION

London

TURNOVER

£90–100mNUMBER OF EMPLOYEES

145BGF INVESTORS

Raf Goovaerts, William Gresty

Q4 2011

GCI Com WOW! StuffSTATS GroupBarburrito*

INVESTMENT DATE

February 2012March 2012March 2012March 2012

INVESTMENT

£10,000,000£4,800,000£7,800,000£3,250,000

BGF REGION

MidlandsMidlandsScotlandNorth, North Wales & NI

Q1 2012

M Squared LasersWear InnsPrimroseCennox

INVESTMENT DATE

April 2012May 2012May 2012June 2012

INVESTMENT

£3,850,000£8,000,000£4,000,000£3,000,000

BGF REGION

ScotlandNorth, North West & NISouth West & South WalesSouth West & South Wales

Q2 2012 … so far (1 April – 31 May)

Statesman Travel

� We are looking for ambitious management teams with a goodtrack record and a proven business model.

� We invest £2m–10m of growth capital for a minority equity stakeand a board seat, in privately owned, profitable SMEs typicallywith a turnover of £5m–100m.

� We offer long-term funding of 5–10 years. We want to develop ameaningful partnership, agreeing shared goals and objectivesfrom the outset.

� We invest in all business sectors with the exception of financialservices and property development.

� With £2.5bn of committed capital we work hard to move veryquickly for the right opportunities.

� We have a strong local approach. With six offices across the UK,we strive to be close and relevant to the businesses we invest in.

� We seek to provide early feedback on all applications and makepractical suggestions for alternative options if we cannot investourselves.

� We will undertake due diligence on all investments and make thisas streamlined and focused as we can.

� We have the flexibility to structure investments to meet individualneeds; from ordinary shares to loan stock.

� We anticipate a three-month process from the first conversationwith a company with a business plan and looking for capital. Thisequates to about four-to-six weeks from agreeing heads of terms.

“We welcome approaches from companiesearly on in their planning for growth. As apartnership investor, we like to get to knowthe companies and people we invest in.”

Our investments so farStatesman was acquired in 2007 by its current management team.Joint Managing Directors Mervyn Williamson and Jon Langley,have significant experience in the travel sector and led themanagement buy-out of Phoenix Travel Group, together with itssubsequent sale to TQ3 Travel Solutions in 2003. Since acquiringStatesman they have grown revenues significantly and built areputation for high levels of service and for seeking out andapplying innovative solutions to set new industry standards.The BGF investment, together with additional funds from existingshareholders and support from Lloyds Banking Group, enabled thestrategic acquisition of Commodore Travel and put the combinedentity among the top ten UK travel management companies.

Why BGF invested:� Dynamic management team with proven track record of

managing acquisitions.� Opportunity to leverage scale of the combined group to

generate client acquisitions.� Potential for diversification of customer base.

“BGF has a compelling offering that will enableus to take our business to the next level. We wanted an investorthat would not only provide growth capital but that would workalongside us as a partner over the long term” Mervyn Williamson, Joint MD �

Benefex Statesman Travel Unruly Media*

INVESTMENT DATE

October 2011October 2011December 2011

INVESTMENT

£4,200,000£4,250,000£4,000,000

BGF REGION

South West & South WalesLondon & South EastLondon & South East

* Total investment committed

16 Invest 17

INVESTMENT DATE

March 2012INVESTMENT

£4.8m SECTOR

Consumer GoodsCOMPANY LOCATION

Wolverhampton

TURNOVER

£10–20mNUMBER OF EMPLOYEES

100BGF INVESTORS

Alistair Brew, Erin Hallock,Gurinder Sunner, Will Gresty

Wow! Stuff is the leading UK toy development companybehind blockbuster toys such as the Air Swimmers andMy Keepon. Both of these were named in Hamley’s Top5 toys for Christmas 2011 and Toys R Us’ USA Fab 15list for 2011. Founded by Richard North in 2006,together with scientists Kenny McAndrew and Dr.Graeme Taylor, in five years it has developed revenuesof nearly £20m and a pipeline of innovative toys. Wow!Stuff is now achieving a compound annual growth rateof 42%, with more than 50% of sales generatedoverseas. BGF’s investment will enable the company tobring new and revolutionary products to market,develop future innovations and expand into the US,where significant growth opportunities exist.

Why BGF invested:� Proven track record of

finding and exploitingblockbuster toys like AirSwimmers, My Keepon.

� Very strong pipeline of newproducts and establishedrelationships with leadinginventors and engineers.

� Enormous potential forinternational growth.

“BGF’s investment is great news for us. Theirfinancing and the additional expertise they bring to us as apartner investor will help us to turbo charge our ambitions andmaintain our position as one of the fastest growing privatelyowned British companies. We would love to think of ourselvesas the Dyson of the toy world.” Richard North, founder andCEO of Wow! Stuff

Wow! Stuff

�INVESTMENT DATE

March 2012INVESTMENT

£7.8m SECTOR

Oil & Gas ManufacturingCOMPANY LOCATION

Aberdeen

TURNOVER

£20–25mNUMBER OF EMPLOYEES

135BGF INVESTORS

Simon Munro, Mike Sibson, Richard Pugh

STATS STATS is an oilfield service sector business based in Kintore, nearAberdeen. Founded by Peter Duguid and Lorraine Porter in 1998, it isan engineering-led business that provides isolation services for onshoreand offshore oil and gas pipelines. Its proprietary tools, manufacturedin-house, are used to plug and isolate ‘live’ sections of pipelines toenable safe pump and valve replacement and general repair andmaintenance work. The ability to repair a pipeline without a shutdownand without evacuation can save tens of millions of pounds of lostproduction. The company employs 130 people and has grownorganically and through acquisition. Its 2011 revenues of £14m are setto grow by over 75% in 2012, with much of that growth forecast in theMiddle East. BGF’s investment will fund further recruitment, build outthe fleet of proprietary isolation devices, and allow the business toexpand its international footprint.

INVESTMENT DATE

December 2011INVESTMENT

£4m SECTOR

Digital Video AdvertisingCOMPANY LOCATION

London

TURNOVER

£10–20mNUMBER OF EMPLOYEES

100BGF INVESTORS

Marion Bernard, Chris Hodges, Rodney Appiah

Unruly connects highly creative, impactful videoadvertising content with consumers. The success ofsocial video campaigns for global brands includingEvian’s “Roller Babies” and T-Mobile’s “Life’s forSharing”, has demonstrated Unruly’s ability to deliverto a network of over 10,000 publisher websites,platforms such as YouTube, Twitter and Facebook,influential blogs and mobile applications. Contentdistributed by Unruly currently reaches 725m uniqueusers each month.With 2011 revenues of £15m, and having beenprofitable since 2009, Unruly has 100 staff across nineoffices and has doubled in size each year.

Why BGF invested:� Digital video advertising is one of the fastest

growing categories in strategic brand development,with social video proven to be particularly effective.

� High calibre team with demonsatrable ability tocapture market share and grow profitably.

� Proprietary IT infrastructure that enables it to targetbranded video content at consumers, and tomeasure its clients’ return on investment in branddevelopment.

� Over 220 agency clients representing over 360brands ... well positioned to pursue an internationalexpansion strategy.

“Five years agowe set out to help brandscapture the massiveopportunity in social video andwe’re delighted that such adistinguished group ofinvestors shares our conviction.We welcome BGF to teamUnruly” Scott Button, CEO

Unruly Media

�INVESTMENT DATE

January 2012INVESTMENT

£10mCOMPANY LOCATION

LincolnTURNOVER

£45–50m

SECTOR

Communications & Data ServicesNUMBER OF EMPLOYEES

220BGF INVESTORS

Tim Whittard, Gurinder Sunner

“In the past we have relied on bankdebt or company cash reserves to finance ourgrowth. The thought of private equity backing hadnot particularly appealed. BGF made us thinkdifferently. I haven’t ceded control of my business,but am in a stronger position, because of theirinvolvement as a partner and long-term equityinvestor, to realise the ambitions that I have for it”Wayne Martin, Founder and CEO of GCI Com

GCI Com

�GCI is an independent communications and data services provider.Headquartered in Lincoln, GCI has a turnover approaching £50mand employs 220 staff across nine UK offices. The group wasformed in 2000 and has since grown rapidly, through a mix oforganic growth and 19 strategic acquisitions. Today, it is one of thefastest growing managed communication providers in the UK with a68% compound annual growth rate over the last two years.The company serves the rapidly expanding and converging dataservices and communications markets. It provides inbound andoutbound telephony and data services to medium-sized corporatesand smaller enterprise customers on a national basis. Its highquality, blue chip customer base includes a diverse mix ofcompanies from a wide range of sectors, including construction,industrials, media, retail and distribution.

Why BGF invested:� Successful, entrepreneurial and

ambitious management team, led byfounder and CEO.

� Expanding customer base with highdegree of contracted revenue willcontinue to benefit from GCI’s growingsuite of services and assets.

� Strong sector growth from acceleratingconvergence of IT and telecomsindustries and resulting move towardsmobile solutions, cloud computing andunified communications.

Our early investments Continued

“We had reached a critical juncture in the development of the business. Wehave a leading position in our niche market, which in turn has enabled us to establish afoothold outside our home North Sea market. After weathering some tough economicconditions we had come out the other end in great shape and with more growth opportunitiesthan we could afford to pursue. To take the business to the next level and capitalise on theseopportunities, we realised that we needed an extra boost. That boost has come in the form ofan equity investment and the active support of BGF, whose experience and contacts will helpus to make the transition from a successful UK firm to an international business of scaleoperating across multiple regions.” Peter Duguid, CEO and founder of STATS

Why BGF invested:� Managing the integrity of assets is one

of the fastest growing sectors of the oiland gas market.

� Strong presence with a range of bluechip customers, developed on the backof market leading products, engineeringexpertise and customer service.

� A high calibre team with proven abilityto grow market share both in the UKand internationally.

�

18 Invest 19

INVESTMENT DATE

May 2012INVESTMENT

£8m SECTOR

Leisure & HospitalityCOMPANY LOCATION

Billingham, County Durham

TURNOVER

£5–10mNUMBER OF EMPLOYEES

175BGF INVESTORS

David Colclough, Loren Holland

Founded in 2006 by local entrepreneurs John Weirand John Sands, Wear Inns focuses on the acquisitionand management of freehold community pubs acrossthe North East and Yorkshire. NVM backed Wear Inns from start-up and has seenthe company build an estate through regional andnational acquisitions. On average, Wear Inns hassucceeded in improving the turnover of its pubs byc90% within six months of their acquisition andrefurbishment. In the last three years, Wear Inns hastrebled its sales with net revenues now totalling £7.3mand has achieved like for like sales growth of 7.2%.The estate currently comprises 15 sites and employs175 people.BGF has invested £8m and NVM a further £2m, toenable Wear Inns to acquire further sites and createnew jobs in the coming months.

Why BGF invested:� Experienced management

team with a clear roadmapfor expansion throughfurther acquisition.

� Proven ability to identify andacquire underperformingbusinesses with greatpotential.

� A winning formula forcreating great communitypubs.

“Since starting the business six years ago, wehave built an estate of great community pubs offering goodvalue and good quality across the North of England. We havenow reached a point where we want to take that approach astep further with the goal of growing our estate over the next fewyears. Any acquisition programme requires a level of financialflexibility. So we set out to find an additional partner who couldsupport us in funding further acquisitions. We were also keen towork with like-minded people with a commitment to this region.BGF fits the bill and it’s great to be working with them, as well asour existing backers NVM.” John Weir, co-founder and CEO ofWear Inns

Wear Inns

�

INVESTMENT DATE

March 2012INVESTMENT

£3.25m SECTOR

Leisure & HospitalityCOMPANY LOCATION

Manchester

TURNOVER

£5–10mNUMBER OF EMPLOYEES

100BGF INVESTORS

Andy Gregory, Neil Inskip

Founded in 2005 by Manchester based entrepreneurs, Morgan Davies andPaul Kilpatrick, award-winning Barburrito is a chain of fast-casual Mexicanrestaurants that offer healthy food to eat in or take away. Having started as asingle unit in Manchester and the UK’s first ever burrito bar, the businessnow operates from six sites in Manchester, Liverpool and Leeds and employsover 100 people.Net revenues for FY 2012 hit £4 million and like-for-like net sales are up 20%on last year. Over the last two years the business has invested heavily inoperations, branding and its supply chain to enable rapid expansion.Barburrito’s rapidly growing popularity with consumers is due to itconsistency in serving fast, fresh and healthy Mexican food.BGF’s £3.25 million equity investment will fund an active rollout programmewith the business planning to triple its number of restaurants to c18 sitesover the next four years. The bulk of the new restaurants will be in primelocations in London, and as a result of this expansion, Barburrito expects tocreate approximately 250 new jobs.

Why BGF invested:� Mexican food is one of the

fastest growing sectors infast casual dining sector,and Barburrito is a proven hitwith customers inManchester and Leeds.

� A vibrant brand backed byan excellent operationalplatform provides strongfoundations for growth andthe rollout of newrestaurants.

� Highly experiencedexecutive and non-execmanagement team.

“We’ve made great progress sincestarting as a single site in 2005. In the last two yearswe have opened three new stores and doubled thesize of the business. The time is right to roll out ouraward winning formula to a national customer baseand we needed additional funding to achieve this. Itwas important for us to find the right partner, aninvestor that is able to offer more than just money.BGF has demonstrated that they not only share ourenthusiasm for the sector but can bring valuableadvice, expertise and high level contacts to the table.”Morgan Davies, joint MD and founder of Barburrito

Barburrito

�INVESTMENT DATE

April 2012INVESTMENT

£3.85m SECTOR

Design & Manufacturing COMPANY LOCATION

Glasgow

TURNOVER

£5–10mNUMBER OF EMPLOYEES

25BGF INVESTORS

Duncan Macrae, Mark Bryant, Chris Hodges, Patrick Graham

“Gareth and I have built a lasermanufacturing business in thepast and we thereforeunderstand the benefit that anequity injection can bring. Welooked at a number of optionsand then approached BGFdirectly. Having spent timetalking to them over the last 6months, we feel confident thatthey are the right fit for us.” Dr Graeme Malcolm,co-founder and CEO of M Squared Lasers

M Squared Lasers

�M Squared Lasers designs and manufactures lasers and photonic opticalinstruments for applications in frontier science, bio-photonics, defence,microscopy, spectroscopy and metrology, and remote sensing. M Squared’slaser based systems can remotely detect and image gas leaks and performenvironmental monitoring; for example, identifying the extent and location ofa methane leak in the oil and gas industry, and the detection of explosives,chemicals or pollutants. Founded seven years ago by Dr Graeme Malcolmand Dr Gareth Maker, M Squared Lasers already has an impressive blue chipcustomer base, including some of the world’s most respected researchinstitutes and largest hi-tech manufacturers. The company sells lasers to andcollaborates with a range of blue chip partners and research institutionsacross Europe, North America and Asia, including Thales, Philips, Osram,Stanford University and the Max Planck Institute. BGF’s investment will fund further R&D as well as sales and marketing.Specifically it will help accelerate the full commercial launch of Firefly, M Squared’s latest product and a unique laser for remote sensing using mid-infrared and TerraHertz radiation where there are few if any real alternatives.The potential uses are as varied as detecting improvised explosive devices,leakages in oil and gas pipes, and even detecting the “angel share” of whiskylost to leakage in traditional Scottish barrels.

Why BGF invested:� Genuine technology product

breakthrough – faster andeasier to operate, at lowercost.

� Strong existing customerbase, with huge potential forfurther international sales.

� Proven and ambitiousmanagement team.

Our early investments Continued

20 21

We want to inspire today’sentrepreneurs to achievemore, and tomorrow’sbusiness owners to taketheir first steps.

22 Inform 23

Who we’reworking with so far…

We are working hard across the businesscommunity with banks, advisers, businessnetworks, business schools anduniversities, the media and government tomake the case for equity as an driver ofgrowth and an essential element of anywell capitalised enterprise.

Together we are working to help providethe knowledge and tools that companiesneed to make good decisions.Increasing the awareness of growthcapital should be a key priority for allthose keen to expand the UK economy.

Growth capital is not a new idea, but formany entrepreneurs who have startedcompanies in the last few years it hasbeen increasingly hard to come by.Familiarity and understanding has fallenaway; a number of common myths andmisconceptions have emerged.

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24 25

We bring insight and analysisto help entrepreneursovercome the challengesthat face them and seizetheir opportunities to forgefast-growing businesses.

STARTING OUT Scott Button I think proximity to successis really important. When I was in my mid-twenties I happened to come in to contactwith a couple of self-made billionaires andthat made me think, “Well, if they can do it,anyone can do it – why not?” Then, it isprobably a bit of naivety, inexperience andmay be stupidity? One does difficult thingsbecause one is overconfident, I suppose.That is a quality that it’s important to try andkeep and maintain.

Richard North In my case it wasn’tsomething in my mind that said I could bean entrepreneur, but that there was nothingin my mind that said I couldn’t. I wastrained as an accountant and worked inindustry for a while but I always felt that mytalents would be better used striking out onmy own. I was never very good at beingpart of a big organisation; certainly in thosedays anyway. I felt that I could make myway by starting my own business. I had theself-confidence of a young person, Isuppose.

Stephen Murphy I think some peopleare put off by what they think is thechallenge of business. They’re wrong.People often have much more ability thanthey believe. There is no reason why peoplecan’t go into business even with a smallidea and as I can attest, many small ideascan become very large ideas.

Mervyn Williamson There is clearly arisk to working for yourself, or running yourown company, as opposed to working foran organisation. You don’t really shut off. Itis 24/7 and 365 days a year. If you go onholiday your laptop goes with you. It is adownside, but there is also an excitementthat goes with it. You don’t let go of whatyou are doing and you are alwaysmonitoring what is going on.

Richard North People see brick wallsand ceilings and feel that they areinsurmountable. Entrepreneurs look atthose brick walls and ceilings and they thinkthat there is a way to crash through them.

MAKING IT HAPPENStephen Murphy I don’t think that thereis a special ingredient for success inbusiness. But I do think that if you’ve gotenthusiasm, application, understanding andthe ability to work with people, then youcan be successful.

Neil Johnson Can you motivate thepeople around you? Not just the peoplewho work with you but your customers,your staff and even family sometimes. If youcan do that I believe you will get there.

Stephen Welton Some people say theyare not lucky and that’s the reason theyhave not achieved their ambitions. In my

Are entrepreneurs made or born? The founders of BGF’sfirst investee companies and some of BGF’s own non-executive directors talk about what and who got themstarted, and the advice that they would give to anyonewho wants to follow them.

The big questionWhat drives British businesses?MERVYN WILLIAMSON

STATESMAN TRAVELMANAGEMENT

�

SCOTT BUTTON

UNRULY MEDIA

�

AUDREY BAXTER

�

STEPHENWELTON

�

RICHARD NORTH

WOW! STUFF

�

NEIL JOHNSON

�

NIGEL RUDD

�

STEPHEN MURPHY

�

26 Inspire 27

mind a “lucky entrepreneur” is the personwho, when presented with an opportunity,seizes it and makes it happen rather thanwaiting for someone else to prove it first.

Scott Button Luck is critical. I think youneed a fair amount of luck and a fairamount of being in the right place at theright time. In addition to luck, just a sense ofambition and trying to build something big,of trying to have an impact and frankly ofnot knowing when to stop.

Audrey Baxter I was lucky enough to beborn into a successful family businessstarted four generations ago. Certainly partof what motivated me was a sense ofloyalty to the brand that had been part ofmy family for so long and was known andloved across the UK. However, I was alsoinspired by how much more we couldachieve by growing the business and thebrand internationally. That was a big driverfor me.

Mervyn Williamson For me, you’ve gotto have the ideas in the first place, but you

have also got to have the right people todeliver what you are trying to sell.

Scott Button Ideas are often the easy bit.There are lots of people with ideas and lotsmore people will tell you that it was theiridea, someone else just did it first. Soexecution, actually just doing the damn stuffand doing it well, with a real focus onoperational excellence and on trying to bebetter than anyone else – that is wheresuccess comes from.

Sir Nigel Rudd I think that people alsounderestimate the amount of hard workthat needs to go in. You simply can’t be 9–5 if you run your own business

SUCCESSRichard North There have been a fewpoints along the way when I’ve looked, notjust at my own bank account but thecompany’s balance sheet, and I have beenable to think “now it’s solid and it can standon its own two feet.” I think it’s at that pointyou feel like you’re arriving. Not yet arrived,but arriving.

Scott Button In some ways you neverfeel successful of course ... and that is whyyou keep driving on. But at Unruly, I thinkthe first time that we hit a million in revenuewas a big moment.

Stephen Murphy I believe it is importantto set goals. I remember feeling successfulquite early on. I never had the plan to get to

the top of the organisation and I just reallyenjoyed what I did. I enjoyed business. Ihad some success in my early career andwhen I look back on that I see each ofthose as a positive step in the rightdirection.

ADVICE Richard North The best piece of advice Ihave ever been given is never, ever, evergive up.

Neil Johnson As you succeed, alwaysbe very careful to look after the peoplearound you because ultimately they havehelped you to succeed and get whereyou’ve got to. Don’t make the mistake ofthinking that you’ve done it all on your own.

Stephen Welton You really are only asgood as the team around you. They needto share the same sense of ambition, haveclarity about their objectives and beempowered to deliver. No business canever achieve real scale without greatteamwork.

Sir Nigel Rudd The best bit of advice Iwas given is to really try and understand

risk. People sometimes do things withoutunderstanding the risks that they are taking.Though of course to make a profit in anybusiness you’ve got to take risks, butyou’ve got to quantify that risk.

Audrey Baxter Don’t just accept thestatus quo. Don’t be afraid to raise the baron your ambitions. In many ways it wouldhave been easy for me to sit tight and enjoyrunning what was already a much-loved UKcompany. Why take the risk with what myfamily had worked so hard to establish? If Ihad taken that approach and not pushed tokeep pace with a changing businessenvironment, Baxters wouldn’t be thecompany it is today.

Stephen Murphy Build a team and workwith people. The further up in business you

get, the less you can do yourself. I had toget other people to do things within a planand I think that being able to work withthem and inspire them and to help themand coach them became very, veryimportant.

Mervyn Williamson I’m an accountant,so you’re going to get a financial answer.Know your numbers, know your costs.Know your costs more than your incomestream. When you’re income stream is notthere you’ve got to make sure that yourcosts are right.

Scott Button I will give you some advice,which is that advice is overrated. What Imean is, whilst it’s really important to beopen and open minded to other people thathave been successful, it’s really importantto keep some perspective. You will comeacross lots of successful people who havedone something one way and assume thatthat is the only way to do it. So knowingwhat to keep and what to reject I think isreally important. �

Scott: In some ways you never feelsuccessful ... and that is why youkeep driving on.� Nigel: The best bit of advice

I was given is to really tryand understand risk.�

28 Inspire 29

30 31

To succeed companiesneed more than justcapital. We also bringour networks, experienceand expertise to helpbusinesses grow.

“Successful entrepreneurseeks long-term investment

partner... with more than justmoney to bring to the table.”Although at first sight this may look like anentry in a corporate lonely heart’s column, ithighlights a serious and significantchallenge that every entrepreneur is likely toface. Entrepreneurs need an absolute andsingle-minded focus on their business andan unshakeable determination to succeed.Entrepreneurs need the freedom to runtheir businesses in the way that they wantto but it can be a lonely and isolatingexperience. How much time is there to trulyassess the competition, form valuablebusiness connections or share experienceswith other entrepreneurs?BGF recognises this need and we’ve madeit a central tenet of what we offer investeecompanies. The feedback that we aregetting from entrepreneurs suggests thatour partnership approach, sharing ofexpertise, guidance and contacts, is just asvaluable to them as the capital that weinject into their businesses.For Matt Waller, the young entrepreneurwho founded online employee benefitsbusiness Benefex, and the first CEO to bebacked by BGF, this was the deal clincher:“We had taken the decision that weneeded the additional experience of anexternal investor, as well as the capitalthat they could offer. BGF offered thewhole package – their team really tooktime to understand us and one of theirexperienced investors now sits on ourboard. They provide the “turbo charge”that we need to scale up the businesson an international level, but still allowus to remain in the driving seat.”That balance is a key part of BGF’sapproach. While we may be a juniorpartner we are not passive. We set out tomake a real difference to the businessesthat we back. After all, our interests arewholly aligned with the management team

and our return will be determined by theirsuccess. But, we don’t expect to take thewheel – they occupy the driving seat.To double or triple profits, you may needsome help and it is important to recognisethat can mean growing the infrastructure ofa business as well as the top line.So what does BGF bring to thepartnership? First and foremost, we offercompanies the opportunity to meet and beguided by some of the most experiencedbusinessmen and women in the UK.We are building an external Talent Networkspecifically to develop relationships with abroad range of experienced businessleaders from across the corporatespectrum, who can offer valuable executiveand non-executive support. Their commonpurpose is a commitment and drive toencourage and help ambitious small andmedium-sized businesses to grow. BGFboasts an impressive list of non-executivedirectors on its own Board includingamongst others, Audrey Baxter, the CEO ofBaxters Food Group and Stephen Murphy,the former Group CEO of RichardBranson’s Virgin group of companies.Equally the Boards of our investeecompanies have also benefitted, with KeithPacey, former CEO of Maplin Electronicsrecently appointed Chairman of Wow! Stuff;David Scowsill, serial Chairman and currentPresident of The World Travel & TourismCouncil joining the Board of StatesmenTravel and Graeme Coutts, former CEO ofExpro appointed Chairman of STATS. Byforging these relationships, we can give ourinvestee companies unique access to apool of expert and inspirational talent,which is unlikely to be have been availableto them before. In our experience, thisadditional insight and leadership is criticalfor developing businesses. Entrepreneurstell us that it is not accountants with a headfor figures that are at the top of their wishlist. It is instead real life experience fromsomeone who has been there and know

what it is like to run a business. Theinjection of external advice is not just aboutputting someone on the board of acompany. BGF has also hired specialistprofessionals of its own in key areas suchas manufacturing, HR and IT to offerinvestee companies big company expertiseand hands-on mentoring. This approach isunusual at this end of the market andoffers smaller growing companies realoperational support as they move to thenext level of their development. Lastly, BGFoffers strength in depth. Investeecompanies will together form a new “club”of entrepreneurs. This club will provide theforum and opportunity for experiences andideas to be shared, and commercialopportunities to be developed. Be itguidance on employee benefits andrewards from Benefex; access tocompetitive corporate travel arrangementsthrough Statesman; or cutting edge insighton the fast moving world of digital videoadvertising from Unruly Media; ourcompanies have a lot to offer each other.As BGF’s portfolio of investee companiesgrows, so will the benefits that it will bring.Entrepreneurs are generally people who areable to explain to anyone who will listen,just why their businesses are so good. TheBGF investee community or “club” is suchan audience and the forum for genuinedialogue. �

I mentor our investee companies sothey can get the best from theircurrent team and put plans in placethat will support their futuredevelopment. HR is one of the criticalelements that we review with companiesfrom the pre-investment stage; and postinvestment we look to provide HR supportas an important part of our 100 day plan.For example, at one of the companies wehave invested in, we have been workingclosely with a new HR Director to developa set of staffing policies, as well as to plana professional development course for themanagement team. Our investees are notlarge corporate entities and, following BGFinvestment, they enter a highlytransformational stage. Many do not yethave their own dedicated HR managementin place and so our role is to lend somepractical support, to assist management inidentifying the gaps and to find the rightpeople to fill them. Having been in the HRmarket for many years, I can use myconnections to introduce compatible HRprofessionals and I can also accessrelevant networks where there is a tradingopportunity. Benefex is a good example ofa company that is actively targeting HRdirectors with their employee benefits andrewards capability. Our challenge for thelonger term is to scale up our approach sothat support can be provided to a widerange of companies in the most effectiveway possible. We are addressing this nowand our ideas include establishing a hub orportal where information can be readilyaccessible, as well as hosting regular HRforums where our companies can discusskey issues, share ideas and hear fromother experts in the field. We are practicalin our approach, keen to find solutions thatreally can work for SMEs. �

Our advisory role begins before ourinvestment is formalised. Wecontribute to the due diligence processand we look to ensure that the findings aremaximised within the initial 100 day plan foreach investee company. However perhapsmore significantly, our offer to investees isvery much about the wider contributionthat we make beyond the financialcommitment. At the earliest stage we wantto demonstrate this and show how it canapply to their business in real terms. So preinvestment we will review IT strategy,capability, online presence, security andbusiness continuity and we makerecommendations about how these areascan be strengthened and scaled up as thebusiness grows. Post investment, we workwith management to make this happen –as we have done with our investments todate. Our contacts are all important. Weknow the IT and telecoms market and canmake helpful introductions to serviceproviders and suppliers where they areneeded. Our contacts also representcommercial opportunities. For example,corporate travel provider Statesman iscurrently talking to BGF’s own network ofsix regional offices and a number of ourinvestee companies; as is GCI Com, whichoffers telephony and cloud computingsupport. Our role is to recognise thesesynergies and make the connections. Ourportfolio is likely to triple in size over thecourse of the next year alone. As thishappens, we will be able to do more toshare best practice across the group andwe are currently looking at the creation of aregular IT Directors forum. We will alsodevelop significant buying power and weare looking at how we can harness this forthe benefit of our investee companies.Technology will be a major enabler andcompetitive advantage for smallercompanies. �

We set out to make a real difference to thebusinesses that we back.�

32 Grow 33

More than just moneyBGF – Excellence forentrepreneurs

MARION BERNARD, REGIONAL DIRECTOR (LONDON & SOUTH EAST) JENNY CHANDLER HEAD OF HR JOHN EGGLESTON, DIRECTOR OF IT

Would you like to work with some ofthe most ambitious businesses inBritain today? BGF is actively seeking experiencedbusiness leaders. To you, we say, “Takethis opportunity to work with some of thefastest growing and most ambitiousbusinesses in Britain today, some ofwhich will be the household names oftomorrow”. We are looking for strongtrack records of growing small andmedium-sized enterprises as Chairman orCEO, or as an entrepreneur who has beenthere and done it before. The job requirescollaboration, energy, inspiration and adynamic approach. If your ambitionsmatch ours, we’d like to hear from you.The level of commitment required isflexible. It could involve joining the boardof one of our investee companies orspending a small amount of high valuetime providing industry insight, makingintroductions or acting as an ambassadorfor a business.Being part of the network will also provideopportunities to invest alongside BGF insome of the most exciting businesses inthe UK today. The important thing is that,by investing together, our interests arefully aligned with the management teamsand our common goal is growth.We are offering something different. Theopportunities that we see are not thosethat will readily come to the attention ofheadhunters, banks or professionalnetworks. Our resources, including ateam of over 60 people, six regionaloffices and a fund of up to £2.5bn, areentirely dedicated to finding the bestyoung businesses that the UK has tooffer. This is a unique opportunity to join abusiness at an early, and oftentransformational stage, and to help buildfantastic management teams.To find out more and get involved please contact Cate Poulson, Head of BGF Talent Network.

BGF is governed by a Main Board comprisingsenior representatives of our fiveshareholding banks, four independent non-executive directors and a Chairman.

This Board does not take investment oroperational decisions, but ensures we operateto the high standards expected of a majorfinancial institution.

Led by our Chairman Sir Nigel Rudd, theBoard ensures we have an effectiveinfrastructure, strong internal governance andappropriate overall investment strategies.

CHAIRMAN > SIR NIGEL RUDD: Sir Nigel is one of the most well knownbusinessmen in the country. As founder ofWilliams plc in 1982, he created one of thelargest industrial holding companies in theUnited Kingdom until its demerger inNovember 2000, creating Chubb plc andKidde plc. He is presently Chairman of BAAand the technology company Invensys plc.Sir Nigel was knighted in 1996 for servicesto manufacturing. He has a long record asan active angel investor in small andmedium-sized businesses, and has beenChairman of some of the largest companiesin the UK, including Pilkington, AllianceBoots and the UK’s largest car retailer,Pendragon, the company he founded withone dealership in 1982. He was a Director ofBarclays PLC for 13 years, latterly as DeputyChairman. Sir Nigel became Chairman of BGF inFebruary 2011.

CEO > STEPHEN WELTON: Stephen chairs BGF’s InvestmentCommittee. He has over 20 years’experience in the private equity and growthcapital industry. He joined BGF after 10years with CCMP Capital (formerly JPMorgan Partners) a global private equity firm. He has extensive experience as an investorworking with private companies, mostrecently as non-executive Chairman ofEdwards, the global engineering groupheadquartered in the UK. Before this, hewas Chairman and CEO of TV Travel Shopprior to its successful sale to a global mediagroup. He also has 10 years of UK privateequity and development capital experienceas Managing Director of Barclays PrivateEquity and at Henderson Ventures, which he

co-founded. He started his career in bankingand is a qualified Barrister-at-Law. Stephen became Chief Executive of BGF inMay 2011.

INDEPENDENT NON-EXECUTIVE DIRECTORS

AUDREY BAXTER: Following a successfulearly career as a merchant banker inLondon, Audrey returned to the familybusiness, Baxters, in 1988. She becameChairman and CEO in 2000. Baxters was founded in 1868 and Audrey isthe fourth generation of the family to run andexpand the business into new markets.Today, Baxters is a global company, withoperations in Eastern Europe, Australia,South Africa, and North America. Sincebecoming CEO Audrey has grown thebusiness by more than 50 per cent, andannual turnover currently exceeds £150m.Audrey is also a member of the Court ofAberdeen University.

JOHN BURGESS: John has had a longand distinguished career as a private equityinvestor, during which he was a Non-Executive Director of a number of UK andEuropean-based businesses, both large andsmall. He is currently Chairman of theExternal Investment Committee of PartnersCapital, a wealth management firm, and aNon-Executive Director of C&C Group,which owns the Magners and Gaymerscider brands and Tennent’s beer. He was a co-founder and Managing Partnerof BC Partners until he retired in 2005. BCPartners is a leading European privateequity firm that has played a major role in

the development of the large buy-outmarket in Europe over the last 25 years.Prior to BC Partners, John developed hisprivate equity experience with CandoverInvestments and F&C Ventures, followingeight years with the Boston ConsultingGroup in Paris and London.

NEIL JOHNSON: Neil is currentlyChairman of Umeco plc, an aerospace anddefence advanced composites engineeringcompany, and Chairman of internationalmodel and toy manufacturer, Hornby plc.He also chairs Motability Operations plc, amajor finance and leasing company ownedby the UK banks. Neil was formerly CEO of the RAC, andchaired telematics company Cybit Plcthrough IPO and ultimate sale to a USPrivate Equity house in 2010. After directingthe European automotive interests of BritishAerospace, he served a term as DirectorGeneral of the Engineers EmployersFederation and later set up a transatlantictrade and business promotion body, British-American Business Inc. Following an early career in the Army hebegan his business career with a series ofroles within Lex Service Group, BritishLeyland, Jaguar and Land Rover. Neil alsosits on a Ministry of Defence Advisory Boardand is an Independent Member of theMetropolitan Police Authority.

STEPHEN MURPHY: Stephen currentlyserves as Principal of his own advisorybusiness and as an adviser to AshcombeAdvisers, a boutique corporate financehouse. Previously Stephen was Group CEOof Virgin Group from 2005-2011 havingsucceeded the founder, Sir Richard

Branson. Stephen joined the Virgin Group in1994 with a remit from Richard Branson torationalise and restructure the businessfollowing the sale of Virgin Music. In 2000 hebriefly left the Group to become CEO of IPPowerhouse, but rejoined Virgin in 2001 totake responsibility for all of Virgin’s aviationand rail interests. Stephen oversaw thecreation of many new Virgin businessesincluding Virgin Blue in Australia and VirginAmerica in the US. Stephen has extensiveexperience of working with entrepreneursacross a variety of sectors. Stephen qualified as a charteredmanagement accountant and spent hisearly career in FMCG and retail with roles atUnilever, Mars Group, Burton Group andQuaker Oats.

SHAREHOLDER DIRECTORS

TIM BOAG (RBS): Tim is responsible forthe UK lending activities of RBS in areassuch as acquisition finance, energy,infrastructure and public sector. Tim began his career as a graduate withNatWest and has fulfilled a number of roleswithin RBS Group, including for Risk,Relationship Management and morerecently Financing across a broad range ofsectors. He has worked in both theCorporate and Investment Banking areas,and was Finance Director of the GlobalStructured Finance Business in 2005/6. Tim is actively involved in a number of pan-RBS and divisional initiatives, including thedevelopment of professional standards andsupporting enterprise. He is a Non-Executive Director of Lombard.

JAMES CHEW (HSBC): James is GroupHead, Regulatory Policy & Development inthe Financial Services Policy Unit at HSBCHoldings plc. He considers key regulatorypolicy developments which will affect theGroup across the world. After joining theHSBC Group in 1993 James worked in jointventures, including with BSkyB for thelaunch of digital television in the UK. Jameshas been both Group Head of Planning andGroup Head of Acquisitions and Disposals.Amongst other transactions, he was a keyplayer in HSBC’s disposal of the FrenchRegional Banks in 2008 for $3.2bn.As part of the Business Finance Taskforce inthe UK, James was the interim CEOresponsible for the establishment of BGF.

TIM HINTON (Standard Chartered):Tim is Global Head of Small and MediumEnterprise Banking (SME), based inSingapore. He is responsible for strategyand driving sustainable growth of the Bank’sSME business in 30 countries across Asia,Africa and the Middle East. Tim joinedStandard Chartered in 1986 as a graduatetrainee and has worked in a number ofdiverse roles and markets across the bank,including in Singapore, Hong Kong, Korea,India, the UAE and UK. Prior to his currentrole he was Head of Private Banking, UKand Jersey but during his career has workedmainly in Wholesale Banking (WB) and clientcoverage. From 2005-10, Tim led one of thebank’s largest and fastest-growingbusinesses, the Local Corporate clientsegment within WB, and in 2008 he took onthe added responsibility for the CommodityTraders and Agribusiness portfolio.

JOHN KELTING (Barclays): John Keltingis responsible for the revenue of BarclaysCorporate globally, across all products thatthe Corporate Bank provides to itscustomers. He is a member of the ExecutiveCommittee of the Corporate Bank and theGroup Credit Committee of Barclays Bank.He was formerly Co-Head of Global FinanceEMEA at Barclays Capital. In this role hewas jointly responsible for Equity CapitalMarkets, Debt Capital Markets, LeveragedFinance, Loan Origination and the FinancialInstitutions Group.Prior to joining Barclays in 1998, he held anumber of roles in debt and equity financingwith institutions including HSBC and 3i.

JOHN WATSON (Lloyds BankingGroup): John trained withPricewaterhouseCoopers as a CharteredAccountant specialising in CorporateFinance. Following time as an InvestmentManager at 3i and Finance Director ofCraneware Limited (now PLC), he workedon large buyout equity transactions beforemoving to senior executive roles within thebank. John was a founder member of theBGF Board in his role as Portfolio Director ofLloyds Banking Group (LBG) Commercial,where he was responsible for managing therisk of the Bank’s lending to small andmedium sized businesses. John is also aNon-Executive Director of NorthfaceVentures Ltd.In early 2012 John left LBG to take up a rolewith Dalnair Investments and a new LloydsDirector will shortly be appointed. �

AUDREY BAXTER

JOHNBURGESS

NEIL JOHNSON

STEPHENMURPHY

TIM BOAG

JAMES CHEW

TIM HINTON

JOHN KELTING

JOHN WATSON

TheBoard

STEPHENWELTON

NIGELRUDD

34 Grow 35

Think of us as the Junior Partner.But one with a phenomenalnetwork of connections.An in-depth knowledge ofbusiness and finance. A wealthof strategic and operationalexpertise. Years of experiencein your sector. And up to £10 million to invest in your business. Today.

Any more questions?0845 266 8860

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Business Growth Fund has been established to help Britain’s fast growing,smaller and medium sized businesses. Growth potential is the key criterion.BGF will invest between £2m and £10m per business in return for a minorityequity stake and a seat on the board for a BGF director. BGF has up to £2.5bnwith which to make long-term equity investments in growing companies acrossthe UK that today do not have access to this source of capital.

BGF is an independent company, backed by five of the UK’s main banking groups –Barclays, HSBC, Lloyds, RBS and Standard Chartered. BGF also works closely withother key business organisations.BGF has specifically been set up on a local basis to be close to the businesses weinvest in. If you want to understand more about BGF or talk about how we mightsupport your business, or your clients, please get in touch with us. �

TELEPHONE

Birmingham 0845 266 8862

Bristol 0845 266 8864

Edinburgh 0845 266 8863

London 0845 266 8860

Manchester 0845 266 8861

WEBSITE

www.bgf.co.ukEMAIL

enquiries@bgf.co.ukTWITTER

Twitter @bgf_team

BGF is one of a range of initiatives designed to forge better, more effectiverelationships between the banking sector and UK businesses. BGF works in closecollaboration with the British Bankers’ Association as well as with other key businessorganisations and government across the UK. BGF is authorised and regulated by theFinancial Services Authority.

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