Review2014/15

Tipping thebalance infavour ofscale-ups.

Review 2014/15Contents

02 About BGF: Investment criteria

03 Chairman’s Statement:

Risk and reward

04 Facts & Figures: BGF in numbers

06 CEO’s Report: From start-up to scale-up

10 Market Overview:

Equity investment goes mainstream

12 Investment Report: Regional summaries

18 The Conversation: Stephen Welton talks to Sherry Coutu CBE

22 From cradle to success: BGF’s new venture investors

24Growing up:

What growth capital has meant for some early BGF investments

28 Partnerships & Collaborations: Inspiring young entrepreneurs

30 The Board

32The Portfolio: Our investments so far

01

This Review shows how the hard work of the past four years – in building awareness and understanding of BGF and, most critically, in face-to-face meetings with literally thousands of companies across the UK – has built the platform and relationships from which we have been able to meet new challenges and scale new heights.

Review 2014/15Investment Criteria

� We back privately owned and AIM-listed companies typically with a turnover of £5–£100m

� We initially invest £2–£10m of growth capital for a minority equity stake, and provide further funding as the company continues to grow

� We will consider an element of cash-out from our investment for existing shareholders

� We offer long-term funding, developing a meaningful partnership based on shared goals and objectives from the outset

� We invest in all business sectors with the exception of regulated financial services

� We undertake due diligence on all investments, but we make this streamlined and cost effective by being very focused

� We are transparent in our legal process and we adopt consistent legal terms and documents

� We are looking for management teams with a good track record, a proven business model and a growth strategy we can support

02

BGF provides long-term capital and support for the UK’s ambitious entrepreneurs

The words risk and business are often brought together to conjure up colourful stereotypes like Gordon Gekko, Bernie Madoff or the “Wolf of Wall Street”– an individual who is ruthless, excessive and above all a “risk taker”. Disapproving critics say the City itself is a place that shamefully encourages and rewards risk taking. And we hear journalists and politicians talk about ‘casino banks’ where traders gamble on the turn of the market’s wheel. But these critics are jumping to a misplaced conclusion; a conclusion that risk is always a bad thing and that taking risks can only be irresponsible, foolhardy, and even amoral.The truth is that risks are not all that easy to take - especially when the potential losses are significant. Indeed, it is not unusual to see senior executives rigid with fear and paralysed by data, when confronted by a serious investment decision. We need more risk takers. Or more specifically, we need more individuals who understand risk and can work with it. The CEOs that we have backed over the past four years clearly meet these criteria. But, BGF plays another important role. As the most active provider of long-term capital to growing UK businesses, I am proud that we are building a new cadre of experienced risk investors and strengthening and broadening the talent base of the UK investment industry. What is “risk”? Many would say it is the potential of losing something of value – physical health, social status, emotional wellbeing or financial wealth – as a result of a particular action. Of course it has many different applications but in financial contexts, it generally describes the possibility that an actual return on an investment will be lower than the expected return or at the cost of a greater return elsewhere.There is plenty of evidence to show that it is easy to misjudge risk and for its careful assessment to be irrationally clouded by subjective factors – emotion, public opinion or prejudice. People often overvalue rare and infrequent occurrences such as epidemic diseases or aeroplane accidents and yet remain relatively

unconcerned about high frequency events such as traffic accidents, household incidents, and medical errors. A clear distinction must also be made between risk and plain old uncertainty, and arguably this comes down to the extent to which potential exposure can be measured. The ability to understand, calculate and offset that exposure with an appropriate return is critical – and it is an absolute requirement for a successful business. Fear, immobility or paralysis driven by aversion to risk can only serve to stifle enterprise. We only have lifesaving medical procedures or jet aircraft and long-haul holidays for

instance because people took risks. Putting capital on the line and investing in some of the UK’s most exciting growing companies, the BGF team has to know a thing or two about risk. Theirs’ is a calculated risk, a vote of confidence in an entrepreneur’s ability to build a stronger, more valuable business, and ultimately they stand to gain from shared success with management. My message to British entrepreneurs is clear: more of them need to take a well-calculated risk on growing their businesses – not settling for merely “good” or selling out, but striving to become “great”, the business success stories of the future. Entrepreneurs should embrace the economic upturn with its latent opportunity, accept that now is a great time to invest, and keep an open mind about different ways to fund their growth. Ironically, sitting tight and accepting the status quo is possibly the most risky option for a business because if you’re not careful inertia rapidly becomes a permanent way of life. Delaying investment could prove a costly decision as competitors across the globe raise their game. The smart entrepreneur does not avoid taking risks but instead makes a proper assessment of them and looks for ways to manage or mitigate them. They ask “how can I take this step more cheaply (possibly by using someone else’s money); who can help me to get where I want to go (with contacts and learning); how can I do it faster; and how can I do it better than I had initially planned?”Sure, there’s no ready insurance policy for taking a growth risk, but help is available. And the BGF investment team is a great place to start.Calculated risk taking is ultimately critical to business growth. There should be no shame in taking a risk, and indeed no shame in not always getting it right first time. Successful British enterprise requires a culture where calculated risk taking is encouraged, applauded and properly supported. The UK needs more risk takers. The gamble we cannot afford, is to leave economic growth to chance.

Review 2014/15Chairman’s Statement 03

My message to British entrepreneurs is clear: more of them need to take a well calculated risk on growing their businesses – not settling for merely “good” or selling out, but striving to become “great”, the business success stories of the future.

Risk and reward Sir Nigel Rudd

17,000£5.3million £1.8billion 95 £17million £515million

people employed across the portfolio

average first investment

combined turnover of all BGF investee

companies

companies in BGF portfolio

average turnover of companies at time

of investment

total amount committed

Review 2014/15Facts & Figures

BGF in numbers At 31 May 2015

■ Direct■ Follow-on

020406080

100120140160180200220240260280300320340360380400420440460480500520540560580600

2011Q4

2012Q1

2012Q2

2012Q3

2012Q4

2013Q1

2013Q2

2013Q3

2013Q4

2014Q1

2014Q2

2014Q3

2014Q4

2015Q1

BGF Quarterly Committed £m

Invested Cost and Follow-on by Quarter £m

Aubin becomes BGF’s 25th new investment

First follow-on investment into

portfolio companyAberdeen office

opens

BGF headcount reaches 50 and first

5 offices open

£15.1 million 16 £65 million 8 3571

the most invested in a single company

different sectors

of follow-on investment into

investee companies

offices across the UK

acqusitions made by BGF investee

companies

experienced non-executive chairmen and directors introduced to

investee companies

BGF in numbers At 31 May 2015

05

■ Direct■ Follow-on

020406080

100120140160180200220240260280300320340360380400420440460480500520540560580600

2011Q4

2012Q1

2012Q2

2012Q3

2012Q4

2013Q1

2013Q2

2013Q3

2013Q4

2014Q1

2014Q2

2014Q3

2014Q4

2015Q1

Skyscape becomes BGF’s

50th new investment

Hobs Reprographics becomes BGF’s 75th

new investmentBGF headcount

reaches 100; Leeds office opens

8th office opens in Reading

Combined turnover of BGF portfolio reaches

£1billion

An incredible 500,000 new companies were created in the UK last year; a testament to increasingly business-friendly public policy and, what I believe is a more fundamental, pro-entrepreneur change in business culture. These are certainly exciting times. However, we cannot afford to be complacent. In fact, now more than ever, the hard work needs to start. The prognosis for a large number of those half a million new companies is not good. Some will not have made it to the end of 2014, and many more will be on life support. Some analysis suggests that as many as 90 per cent of start-ups ultimately fail, with over half disappearing in the first four years. In this year’s BGF Review I talk with the hugely successful entrepreneur, investor and mentor, Sherry Coutu about her recent Scale-Up Report. Sherry highlights that whilst the UK economy may be growing faster than any other G8 nation, we significantly lag behind the US and other leading economies when it comes to seeing those companies scale. Some of our most promising companies struggle to grow domestically and expand internationally, and are frequently taken over by larger – often foreign – firms at a significant discount to their potential. This is a major issue because these companies are crucial to national competitive advantage. These are the companies that will drive economic growth, job creation, and productivity in the longer term.The need to provide support to these businesses could not be more important, and the prize could not be greater. We also need to understand these businesses, their challenges and their vision. At BGF we talk with thousands of entrepreneurs and management teams

every year. We know where their pressure points are, and what the biggest barriers to growth are. And we can also draw on our own experience. Back in 2011 we too were a hopeful start-up – albeit a very well-funded one. We had big plans, plenty of ambition and lots of energy, but there was no certainty that we would succeed. Happily, in May this year BGF celebrated its fourth anniversary. I saw five critical elements that we needed to get right, which I also believe apply equally well to any start-up.

1) We needed to prove that there was a market need. When we launched, some people suggested we were a solution to a problem that didn’t exist. They claimed that there wouldn’t be demand, or that UK entrepreneurs simply don’t like equity investors. Some suggested our timing was wrong, as business confidence was at rock-bottom and most companies were focusing on survival, not expansion.The numbers speak for themselves. As Toby Austin, CEO of market data specialist Beauhurst, argues in the Market Overview (pages 10-11), equity investment must now be acknowledged as a mainstream funding option for small and mid-sized businesses at all growth stages. BGF has been a key player in this growth, and we are by far the UK’s largest provider of growth capital to smaller companies. But we are certainly not alone. Working alongside revitalised angel networks (thanks to EIS and SEIS), new peer-to-peer funding platforms, as well as more traditional venture and private equity investors, we have seen an explosion in the number of deals and money raised in the last four years. Beauhurst recorded over 1,000 investments and a record £2.3bn of new funding last year.

Review 2014/15CEO’s Report

From start-up to scale-up Stephen Welton

In 2011 the respective figures were 372 investments and £1.1bn. So, a clear market need, and good timing too.

2) We had to recruit a great team. As a minority stake equity investor BGF becomes a junior partner in the businesses we back. The quality of our relationship with the management teams we fund is therefore paramount. The BGF team need to know when to get involved and when to leave a company’s executive team to get on with running the business; they need the experience and the networks to be able to offer support in a variety of situations; and they need to be innovative and flexible to find the right structure to meet the individual needs of each business. They also need to be inspirational when talking at conferences, events and business schools; and above all entrepreneurial and ambitious for BGF. Drawn from a wide variety of backgrounds – equity investment houses specialising in all stages and sizes of companies, commercial and investment banking, law firms, manufacturing operations, IT, recruitment, professional services, HR, public policy, marketing and communications – we have assembled a terrific team with unrivalled depth of experience and knowledge, alongside a formidable address book.

3) We needed to demonstrate that we could meet enough companies (acquire customers). In 2010, the year before we launched, fewer than 50 first-round growth capital investments of £2m-£10m were made in the UK. From the very start our intention was to become a major force in the UK business funding ecosystem. We set out to build a company that could make more than 30 investments annually,

Since 2011 we have met more than 2,000 management teams. Our fastest investment took just under four weeks – we can move quickly if required – but most take longer. We are providing long-term capital and forging a long-term relationship after all.

From start-up to scale-up Stephen Welton

07

and manage a portfolio in the hundreds. That means we need to meet hundreds of new companies every year. In fact, since 2011 we have met over 2,000 management teams. Of course, not every company we meet is ready or even looking for funding. Our fastest investment took just under four weeks – we can move quickly if required – but most take longer. We are providing long term capital and forging a long-term relationship after all. Indeed some of the investments I was most proud of in 2014 were into companies we first met in 2012, and in one case in 2011. Our ability to continue to meet new companies through introductions from our bank shareholders, corporate financiers and other professional services advisers, through numerous national and regional events and sponsorships, and increasingly through the recommendations of our portfolio and Talent Network, is the bedrock for our continued growth.

4) We had to make sure we didn’t run out of cash. Admittedly, with up to £2.5bn of committed capital from our five shareholders this was unlikely, but I have included it in this list because it is one of the most difficult hurdles for many fast-growing start-ups, and of course the very issue that BGF is here to address. A related objective has been to work with our own shareholders so that they have the understanding and confidence in our ability to plan ahead and meet agreed goals. This is critical for any growing company with long term ambitions. We have also looked to our shareholders as a source of more than just money. Their support, from the most senior levels to the relationship managers looking after commercial and corporate clients, has

been critical to building BGF’s awareness and making connections with smaller and mid-sized companies.

5) Finally, we needed to build a culture within BGF that is obsessive about what we provide and how we provide it. This has meant strategically reviewing and improving everything we do. We are always looking for ways to simplify our approach, to make our processes more efficient and to better meet the needs of the teams we are backing. Just one example is our ground-breaking approach to financial due diligence where we employ experienced, sector specific finance directors to conduct a preliminary review bringing additional insight and focus to what may otherwise become an expensive and time-consuming process. Last year we employed an independent third-party research team to talk to our

portfolio CEOs. We wanted to know what the investment process was like from their point of view, and whether BGF was now living up to the promises we had made. We were heartened by some really positive feedback, but we also heard some great ideas and we have made changes accordingly. This year we have asked the same team to talk with the “ones that got away” – the companies that for a variety of reasons chose not to take BGF money and support. In the majority of cases they chose not to raise any new money. By definition these are successful companies. We want to understand if and how we could have convinced them to take on the investment and support to enable them to expand further and more rapidly. I am very definitely not claiming BGF is an unqualified success quite yet, but I believe we have made it past the first hurdle.

In April we passed £500 million in committed investment, and we have a portfolio of nearly 100 growing UK companies benefitting from our unique mix of long term patient capital and business support. These are important milestones.

Review 2014/15CEO’s Report

Cont.

In April we passed £500 million in committed investment, and we have a portfolio of nearly 100 growing UK companies benefitting from our unique mix of long-term patient capital and business support. These are important milestones and would not have happened without us. We’ve also had our first partial exit. In early 2015 Devon-based Sub10 Systems, a specialist developer of millimetre wave wireless solutions for mobile telecoms, agreed a merger with US venture-backed Fastback Networks. The merger created a group that is able to provide industry-leading technology essential to the deployment of the latest generation of broadband mobile networks, with a global footprint for sales, customer service and support. BGF remains a key minority investor alongside Sub10’s management team who have taken up executive

positions in the enlarged entity. This was a great opportunity to join together with a well-capitalised, fast growing company operating in the same space with complementary IP and product overlap to create a global leader. The Sub10 team is hugely excited by the opportunity and the merged entity is very well positioned for international growth. Whilst we anticipate further exits later this year, there isn’t any rush. Our long-term approach means we are still very happy to be invested for 7-10 years, and that is what most management teams have signed up for. Again, we are led by them, and the requirements of the business come first and foremost. Our approach at BGF is not to be prescriptive.

How does BGF scale-up?With more than 100 people and eight offices across the UK we have established a strong platform for growth. We launched with the ambition to become a champion for British businesses, the most active provider of long-term capital and the first choice investment partner for ambitious entrepreneurs from growth stage through to exit. Living up to this promise will ensure we fulfil our purpose and potential. In the next few years we will see if we measure up. In the immediate term I see two clear expansion opportunities.Firstly, investing in listed companies. In October last year BGF invested £10m in Kidderminster-based carpet manufacturer Victoria plc, listed on the London Stock Exchange AIM market. Our injection of growth capital followed a very similar approach to that which we have used successfully for a number of private companies. It took the form of long term loan notes with a cash paid coupon and

an option to buy equity. The funding was unsecured and flexible, in line with our approach as a provider of capital to support companies’ development over the longer term.Investing in smaller listed companies is a natural next step for BGF and the AIM market represents an opportunity for BGF to materially extend our addressable market and support an even broader range of growing companies. Victoria was our first listed company investment and our intention is that there will be many more as awareness of our offering grows. We are keen to forge closer links with other institutions operating in this market as part of that ongoing evolution. Secondly, we are launching a dedicated earlier stage investment capability. Primarily focused on emerging technology companies, this team will bring BGF’s unique blend of long-term, patient capital and active support to fast growing but pre-profit companies across the UK. The initial team comprises Simon Calver, the former CEO of LOVEFiLM, one of the UK’s most successful VC-backed technology businesses of recent years; Harry Briggs; and Rory Stirling, both highly experienced venture investors and well-known in the UK tech investment scene. You can read more about our plans in the feature on page 22, as we work towards a full launch in the autumn.

The future?There is no doubt in my mind that BGF has made a real and meaningful difference in its first four years. We now have the potential to make an even bigger impact. To do that, we need to work with entrepreneurs and like-minded organisations across the UK. This is the Age of the Entrepreneur.

Cont.

09

Review 2014/15Market Overview

Equity investment goes mainstreamToby Austin, CEO of Beauhurst

Two noteworthy milestones were reached last year – 1,000 deals and £2bn invested. We think that it’s time to recognise equity investment as a mainstream funding option.2014 was an outstanding year for the UK’s fast-growth companies, who completed 1,006 deals and collectively raised a record £2.3bn from a range of traditional and disruptive funders. 952 companies secured funding last year, with some of these tapping into investors more than once. Compared with 2011’s totals – £1bn into 363 companies – the change is particularly stark especially when you consider this was all in equity finance.Why has equity investment been growing so sharply? In general, alternative forms of finance have enjoyed a considerable amount of time and space given the banks relatively lower activity – the supply of business loans to SMEs remains at pre-crisis levels, even over half a decade on from the downturn. There are also reasons that are specific to equity funding. On the supply-side less experienced investors have been given an easier route to private company ownership by equity crowd funders. Investors have also used the tax breaks offered by the Government’s EIS and SEIS schemes to mitigate risk exposure. Poor returns in other asset classes played a role in convincing some sophisticated investors to shift capital over to early-stage equity.Meanwhile, a change in the way equity investors are perceived by business owners has affected the demand-side. Over the long-term, we’re finally seeing an understanding that the UK’s growth prospects won’t be served by business loans alone. There is awareness that fast-growth companies with five or ten year growth plans need funders with similarly long term perspectives. As this trend continues we expect to see more entrepreneurs and directors unlock the capital and support of equity investors.We believe these factors have contributed to the ongoing expansion of equity funding and the strength of 2014’s results.

£0m

£500m

£1,000m

£1,500m

£2,000m

£2,500mTotal number of deals and amount invested

2011

372deals

2012 2013 2014 2015as of 24/2/14

605deals

842deals

1,006deals

152deals

Beauhurst provides high-quality data and analysis, tracking thousands of growing companies, the deals they are doing and the investors that are backing them. Their products and services are used by over 100 private and public sector organisations. www.beauhurst.com

Crowd funders crowd out angel networksOne of 2014’s biggest stories was the rise of equity crowd funding platforms, particularly their appropriation of a significant number of seed-stage deals at the expense of traditional angel networks. More than 30 per cent of investments into fledgling companies were completed through these platforms in 2014 and we foresee that proportion reaching 50 per cent in the year ahead. Of course, the argument can be made that these platforms are really just angel networks in disguise (or that much success is down to pre-syndicated angel rounds topping up the platforms). Nevertheless, we think there’s a seismic shift occurring with ever more early investment rounds backed by this new wave of enthusiastic funders.

Stage set for future growth opportunitiesFast-growth companies at each stage of evolution collectively achieved record-breaking deal numbers, but the headline story was the phenomenal £1.46bn pulled in at the growth-stage – a threefold increase compared with 2011. In line with previous years, BGF was the leading growth-stage investor and participated in over one third of all transactions of between £2m and £10m, and accounted for half of total funds raised within that range.However, BGF participated in just 12 per cent of all growth-stage deals completed. While this share may appear modest, BGF was three-times more active than any other investor. There would appear to be a plentiful supply of investment opportunities at this growth-stage and it is encouraging to see more investors coming into the market. 2014 also saw a renaissance in venture-stage investment. The bounce-back was pronounced, with total investment shooting up by almost £300m to £658m. This should be reassuring for fast-growth companies approaching this lifecycle stage and, if the trend holds, should build a strong pipeline of potential growth-stage investment opportunities.

Scotland burned by referendum Sadly, the year saw one high-level hiccup: years of uninterrupted expansion in Scottish equity activity came to an end in 2014. We

feel the blame lay at the feet of the independence referendum – the contraction in activity aligns perfectly with the heating-up of the political debate and move towards “Yes” in the polls.With Scotland’s political future more clear, we hope that investors will return to its fast-growth companies but fear that historically low oil and gas prices may leave some anxious.

Going forwardScotland’s case highlights that growth in equity investment remains fragile and raises questions regarding longevity and sustainability. After all investors are known to be flighty and fickle, and could be lured away if returns improve in other asset classes or become imperiled by further political uncertainties.Two factors give some reassurance from these concerns.Firstly, in the near-term, early results for 2015 suggest that the momentum of 2014 continues. Investments recorded for the first two months of 2015 were two per cent higher compared with the entire first quarter of last year, and deal numbers are also on track to beat 2014’s performance.Secondly, on a separate but connected point, we’re seeing more people opening their eyes to the opportunities provided by data. We saw the ‘Scale Up’ report published in 2014, demanding data be leveraged to identify the most value-adding growth companies. We also saw the British Business Bank release reports to help players in the alternative finance segment, whilst backing funds investing in fast-growth companies.Of course, at Beauhurst we believe that the release of data can only be a good thing. Information symmetry should create a more efficient market with greater opportunity. We believe that opening up access to more information will help companies like ours assist advisors and those interested in fast-growth companies to make better decisions.

ConclusionIn summary, 2014 was a breakthrough year for equity investment. The task now in hand is to get more fast-growth companies involved, sustaining the growth in this segment of business funding and solidifying the momentum behind what appears to be an equity-influenced recovery.

0

50

100

150

200

250

300Investors (total)

2011 2012 2013 2014

5688 109 87

7

31

91174

■ Angel networks■ Crowd funding platforms

£0m

£250m

£500m

£750m

£1,000m

£1,250m

£1,500mTotal number of deals and amount invested at growth stage

2011 2012 2013 2014

91 deals

172 deals

254 deals

282 deals

11

With BGF now established as the UK’s leading provider of growth capital, it is easy to forget that just four years ago this organisation had not made a single investment. Since opening our doors in 2011, we’ve backed more than 90 exciting businesses, providing crucial capital for the next stages of their growth.

Review 2014/15Investment Report 12

Regional Directors’ Review

Reaching the £100m milestone in Scotland has been a real highlight for me and my team.

Simon Munro, Scotland

We need to be close, and relevant, to the companies we invest in and partner with.

Paul Oldham, South West & South Wales

As the portfolio of companies we have invested in grows, so does the idea behind a ‘BGF club’ of companies who can network, share ideas, problems and best practice and even do business with each other.

Marion Bernard, London & South East

Every business needs a story – one that articulates what it is, why it exists and what it can do for its customers.

Andy Gregory, North, North Wales & Northern Ireland

Every company we invest in is different – each has its own history, values, structure and risk profile.

Gavin Petken, Midlands

There’s a definite sense of optimism in the Midlands’ business community, and it’s one that has been building over the past 18 months. Manufacturing is experiencing a revival (thanks in no small part to the expansion plans of JLR), exports are on the up and stronger in the East Midlands than anywhere else in the UK, and established businesses – including our shareholder bank HSBC – are relocating or expanding here, creating jobs and, in time, prosperity.Big businesses aren’t the only driving force behind this change. Throughout the region, pockets of small to mid-sized businesses are beginning to deliver sustained growth at the same time as demonstrating that they are capable of competing on a national and international stage. And this applies to companies in the newer digital, marketing and hi-tech industries as much as to those engaged in traditional manufacturing activities. Diversification has been key. We have seen these trends play out in our own portfolio. TCL Group, a provider of landscaping services led by chief executive Simon Cashmore, has experienced exceptional growth over the past 18 months having more than doubled its revenues from £22m to £54m since we invested in the business in May last year. In the space of eight months, Simon and his team delivered organic growth, re-branded the firm and completed three acquisitions, all of which was helped by the £15m initial and follow-on capital BGF has been able to provide. On international expansion, another of our investee companies, Leamington Spa-based Palmer Hargreaves, commenced operations in China with the opening of a new office in Shanghai,

and has recently announced a major new contract with Porsche China. Perhaps another indicator of the growing confidence within the region’s business community is that the pace of our investments has accelerated over the past 18 months too. We backed eight new businesses and made additional investments in existing investee companies to accelerate further growth. We have also seen a significant surge in the number of business we have met with and that are seriously thinking about their options for funding over the next 12-18 months.Every company we invest in is different – each has its own history, values, structure and risk profile. Every entrepreneur or management team we speak with is different too. Their aspirations for their businesses and the questions they have about funding are personal to them: no two meetings are ever the same.So our job is to listen. Our goal is to support entrepreneurs and management teams that are focused on growth and have the potential to achieve it. When we meet with people who fulfil this criteria we do all we can to align ourselves with their aspirations, which means from the offset we are heading in the same direction and working in true partnership. We achieve this by being flexible in the way we invest and by adapting to the individual needs of each business. Take Dudson, a fourth-generation, family-owned business based in Stoke-on-Trent that has been making ceramic tableware for the hospitality trade for more than 200 years. Already a profitable, established business, Dudson’s management team came to BGF because it wanted to inject fresh capital into the business, without losing control. Chief executive Max

Dudson believes in the opportunities for further growth and feels passionately about making sure the business is in the best possible shape when the time comes to pass it on to the next generation. In May 2014 we provided a £3m funding package that is allowing Dudson to pursue growth without any pressure for the business to move outside of family control. This is something that no other funder appeared able to provide, and it is just one of the ways in which we have demonstrated that both culturally and financially BGF is different from traditional private equity. Another example of our flexible, scalable model of investing came just a few months later, in September 2014, when the Midlands team went on to lead BGF’s first investment in an AIM-listed company, Kidderminster-based Victoria plc, a manufacturer of carpets and floorcoverings. This was another significant milestone for BGF.Victoria was looking for a funder that could provide additional growth capital, without immediate equity dilution. We were able to meet this need through our unsecured, long-term offering, putting the company on the strongest growth course. Since our investment, Victoria has completed the acquisitions of Abingdon Flooring and Whitestone Weavers and taken annualised turnover to more than £200m.We’re looking forward to the next 12-18 months. If the business community in the Midlands continues to galvanise itself, and if small and mid-sized companies can retain the confidence to take calculated risks, then I am confident that the outlook will remain positive. And who knows: the region may even start gaining national recognition for the super-region that it is quietly but determinedly becoming.

Review 2014/15Investment Report 13

BirminghamGavin Petken, Regional Director, Midlands� The pace of investment accelerated

with eight new businesses joining the Midlands’ portfolio in 2014/2015

� First BGF investment in an AIM listed company, Victoria plc, led by the Midlands team

� The diversity of the portfolio and rate of growth strengthens the Midlands’ position as an SME powerhouse

Review 2014/15Investment Report 14

� A strong year with total investment in Scotland now exceeding the £100m mark

� Significant levels of follow-on investment provided to a number of portfolio companies to support rapid growth

� Deals in the pipeline from as far north as Shetland to as far south as the Borders

Scotland has seldom been far from the headlines over the past year. Between the independence referendum and the plunging price of oil, Scottish businesses have spent a great deal of time in the spotlight. Despite the “stop-start” nature of the business environment which resulted from this backdrop, it has been business as usual for BGF with our investments north of the border breaking through the £100 million mark this year.But it was an unusual year. The build up to last September’s vote on Scotland’s constitutional future quite clearly caused inertia in the business community. Many companies delayed making investment decisions until they knew the outcome of the poll, with others attempting to predict what separation from the rest of the UK would mean for their business.Even before the result of the referendum was known, companies throughout Scotland, and in the North-East in particular, were already facing a seismic change to their businesses as the price of oil halved in the space of six months. The oil and gas industry is cyclical by nature and many investors are scared off by these downturns. However, investing now in businesses which have strong fundamentals can actually put them in a very strong position when the market recovers. In many respects I see the current environment as a great opportunity for those companies who are well enough funded to benefit in the medium term.Reaching the £100m milestone in Scotland has been a real highlight for me and my team. The fact that one-fifth of BGF’s funding to date has been invested north of the border, despite Scotland only accounting for about 8 per cent of

the UK’s population, is a result of the steady stream of exciting opportunities that we have been seeing. Since BGF was launched, we have injected cash and expertise into 17 businesses in Scotland, with our initial investments ranging in size from £2.25m to £10.7m. Together, those 17 companies employ more than 1,200 staff and have combined turnover of around £295m.Now that BGF is fully established, we’ve seen a huge surge in demand for our services. Firms not only want to access the finance that we provide but also want to tap into the expertise of our staff and our Talent Network, people who have “been there and done it”, creating value either for themselves or for others. As a group the Talent Network has added a great deal of value to our portfolio companies and provides a strong differentiator for BGF.One of the key themes over the past year for our team has been about making follow-on investments into companies that are already part of our portfolio. By providing a second tranche of funding, we’re demonstrating that we’re in this for the long-haul, supporting companies that have already shown their potential to grow by providing the finance that’s needed to accelerate their expansion plans.Glasgow-based M Squared Lasers was one of the first companies in which BGF invested when we pumped in £3.85m back in 2012. The firm is performing well and is now looking to expand its international sales, so we were delighted to provide a further £750,000 in February 2015, alongside £2.5m from our partners at Barclays.

Another early investment for BGF was in Aberdeen based oil and gas pipeline engineering specialist STATS Group, which received £7.8m in March 2012. The business has since doubled in size and in January 2015, we followed our initial investment with an additional £4.3m, which will allow STATS to plough ahead with further international expansion. STATS is a great example of the strong appetite we have to invest in oil and gas companies despite the drop in commodity price.BGF is also still on the lookout for fresh opportunities. In February, we invested £3.5m into Stevenswood, one of Scotland’s largest manufacturers of PVCu and aluminium windows, doors and conservatories. The company, which turns over £11m, already sells its products from trade counters in Aberdeen, Dundee, Edinburgh, Glasgow, Kilmarnock and its head office in Livingston. Our funding will allow it to open further trade counters throughout Scotland.Our latest Scottish deal was a £10m investment into the independent subsea remotely operated vehicle (ROV) services company, ROVOP. With more and more equipment going onto the seabed, ROVOP is aiming to increase its global fleet to around 50 ROVs over the course of the next three years. At no time did we see the drop in the oil price as a barrier to the ROVOP deal. In fact, the opportunity to invest in a top class business and a management team looking to expand its fleet is exactly the sort of counter-cyclical move which we believe will position ROVOP extremely well in a year or two.

Aberdeen and EdinburghSimon Munro, Regional Director, Scotland

Every business needs a story - one that articulates what it is, why it exists and what it can do for its customers. As that business grows and enters new markets it must begin to tell its story all over again, to new customers and sometimes to new suppliers. During the past year, we have witnessed our investee companies doing just this – and it has been hugely exciting. It all starts, of course, with building the physical infrastructure. Earlier this year, Barburrito, a chain of fast-casual Mexican restaurants, announced its plans to open its first site in Wales. This move marks another step towards the business establishing a UK-wide presence. In fact, CEO Morgan Davies has more than doubled the number of restaurants in the chain since BGF’s initial investment in 2012. Revenues, too, have doubled as a result – from just under £4m prior to our investment to more than £8m today. Similarly, the number of Boost Juice Bars has increased from 10 to 25 during the same period, with new flagship stores opening in London, Newcastle, Brighton and Birmingham. And, locations for another 20 juice bars have been identified by managing director Richard O’Sullivan and his team. Meanwhile, Leeds-headquartered Xercise4Less is preparing to open its first site inside the M25, heralding the start of chief executive Jon Wright’s push to gain market share in London and the South East. Over the last 18 months alone, 15 new gyms have opened, and there are now more than 180,000 members across all 24 outlets.On the business-to-business side, Thornton Tasker at Nationwide Window Cleaning has been recruiting sales and

operational staff across the length and breadth of the country. In doing so, revenues over the past 12 months have doubled. The business has strengthened and expanded its national service provision whilst maintaining an efficient, single operating system run by his team in Yorkshire. And, Hobs Reprographics is using our £7m investment for the national roll-out of ‘Hobs Studios’, which house state-of-the-art 3D printing services for architectural, engineering, construction and product designers. The first studio opened in Manchester in December 2013, followed by Clerkenwell, London in May 2014 – and now the business has ambitions to build new facilities across the UK, to provide a truly national service.Once you’ve set up your stall, the next big challenge is to get the attention of your customer. And that’s no mean feat. Some of the business owners and chief executives we work with have a natural interest in and flare for how their business’ story, or their brand, should be expressed. Through his experience of turning Millie’s Cookies into a national household name in the late 90s and early 00s, Richard O’Sullivan knows the importance of a strong brand. He believes the point in which the story-telling really starts to gain momentum – or ‘pops’– is at around 20 sites.For other business owners, it’s more of a case of learning on the job. They may know themselves what their business stands for, but are less certain of how to get that message out. One of the benefits of having a growth capital partner is the additional money, time and headspace it allows business owners to think about things such as brand

and how this needs to develop as their business continues to grow.Moda in Pelle is a fantastic brand – which is one of the things that made the business attractive to us. Knowing the importance of never standing still for too long, at the time of our investment the owners Stephen and Claire Buck and CEO David Inglis were already part way through a brand refresh. We were able to introduce them to Judith Pilkington, former CEO of Space NK, who was subsequently appointed as non-executive chairman and is able to offer a highly relevant perspective on some of the changes that are being made. BGF is passionate about working with our investee companies to help them tell their stories. As a young company, new to the funding market, we know the importance of clearly defining who we are and what we stand for – and then delivering this message nationally. We are living, first hand, the same experiences as many of our investee companies. And without question, it is the advocacy of our portfolio companies that has given legs to the story we want, and are continuing, to tell. One lesson we have learnt over the past 12 months is that the stories behind the small and mid-sized companies in the North of England, North Wales and Northern Ireland are never dull. They are always original, often disruptive and frequently exciting. It’s been great to see the national aspirations of the business owners we have backed come to life – and we’re looking forward to see more of the same over the next 12 months as their businesses continue to grow.

Review 2014/15Investment Report 15

Manchester and Leeds Andy Gregory, Regional Director, North, North Wales and Northern Ireland� More than £100m invested in 17 business across

the North of England to date� Six businesses have received second or third round

BGF funding� Eight investors now working across the Manchester

and newly-opened Leeds offices� Portfolio includes manufacturers, retailers,

hospitality providers, healthcare suppliers and more

When BGF was set up in 2011, it was clear from the outset that we would never succeed in our mission as an institution investing in UK businesses by being based solely in London and travelling to companies around the country. We recognised that we needed to be close, and relevant, to the companies we partner with. Six regional offices were quickly established and Bristol was one of those.Even with this network of offices, each regional team is tasked with covering a huge swathe of the country and with that, a wide range of different types of businesses. As BGF’s Regional Director for the South West and South Wales, it is my task to manage a team of investment professionals who can cover an area stretching from Slough in the east to Milford Haven in west Wales and from Penzance in the south to Cheltenham much further north. This equates to some 500 square miles.Far from seeing this scale as a problem, we see it as a huge opportunity but one that needs careful planning, resourcing and infrastructure to be most effective. We have done well and in the last twelve months we have invested £39m in seven companies and provided a further £12m of follow-on funding into companies we have backed in earlier years. These new investments include fast-growing cloud infrastructure service provider Skyscape, luxury kitchen manufacturer Canburg, energy efficient systems specialist Ecovision and IT managed services business APSU. At the heart of our operation is an experienced team of ten investors and support staff. We work as one team, but

individuals take responsibility for specific sub-regions. We want to get to know a local market, know the local businesses and also the people advising these companies. For example, we recently completed the merger of portfolio company Sub10 Systems based in Newton Abbot, Devon with US firm Fastback Networks, creating a global wireless telecoms infrastructure business. This opportunity was originally introduced to us by a South West law firm that then worked on the transaction with us.The Thames Valley has also emerged as a strong sub-region for us, where we have backed a number of highly promising companies including Bullitt Group, Primrose and Intrapharm. In fact, demand for BGF capital and support has been so strong that we have decided to open a new office in Reading, and we are currently looking for larger premises. Three of our investors live in Thames Valley or Hampshire which makes it much easier for us to build our knowledge of, and relationships with companies in that important region – and spend a bit less time on the M4! We are keen to increase our investment into Wales. I live in Cardiff, and I have worked as an investor in Wales for many years. There are lots of small businesses, with pockets of innovation and cutting-edge technology among a vibrant start-up scene. But too few of these companies ‘scale-up’ and fulfil their potential; too many settle for a less ambitious path or simply sell-out too early. That is why we are working hard to demonstrate that BGF offers an alternative route and we want to meet

more ambitious Welsh companies that could use our capital to grow faster. For example, specialist scaffolding and site-services firm SHS Integrated Services, based in Barry, needed capital to grow but founder Paul Smith also wanted to crystalize some of the value in the business that he had spent many years building. BGF was able to help on both accounts and the company has invested to widen its service offering. We have invested in some impressive and dynamic businesses in the last 12 months. Canburg is supplying its luxury Smallbone kitchens to high-end apartments and villas in Manhattan and Dubai; Skyscape has quickly become one of the leading providers of secure cloud-based IT services to the public sector, and Intrapharm has already completed two acquisitions as it implements its plan to become a significant international pharma group.As a team, we meet every Monday to discuss the companies we have met, the companies we have backed and to plan events to bring advisers, banks, Talent Network members and other investors together. Despite the team spending a lot of time on the road, it pays to remember that we are all pulling together towards the same goal of helping UK companies scale and make the most of their potential for growth. That way they benefit, we benefit and the UK as a whole benefits.

Review 2014/15Investment Report 16

Bristol and Reading Paul Oldham, Regional Director, South West & South Wales� A total of £51m invested by our South West team over the

last twelve months which represents seven new regional companies backed

� New investee companies drawn from four industry sectors – IT services, healthcare, manufacturing and energy efficiency

� New investee companies headquartered in Devizes, Cirencester, Chippenham, Cheltenham, Corsham, Tetbury and Maidenhead

There has been a marked increase in investment activity across the London and South East region, with a further 14 companies deciding to partner with BGF in 2014/15 taking our total regional level of investment to £140m across 26 companies, representing an average of £5.4m per company. Far from being all located on our office doorstep in central London, these businesses are headquartered right across the South East in Great Yarmouth, Rayleigh, Harlow, Guildford, Uckfield and Slough. Our investee companies are drawn from a wide range of industry sectors including healthcare, media, manufacturing, IT services and leisure. A total of around 4,300 people now work for BGF-backed companies in London and the South East, a clear indicator of the scale of our investment activities beyond just the amount of capital deployed. Our investment team certainly had to grow to support this activity, bringing on board a further four investors during 2014/15 so that we now have a team of 14 talented investment professionals actively exploring new opportunities across the South East region and working closely with our established and rapidly expanding portfolio.So how have we been able to achieve all this?We recognise that our success has a large part to do with something reasonably intangible but absolutely critical in business at all levels. That is productive and close working relationships. Relationships tie all of our activities and successes together. They come in many different forms but are all extremely valuable in helping BGF achieve what we were set up to do.

Our Talent Network, which truly sets BGF apart from other investment firms, thrives on relationships. With over 2,000 senior board level executives involved, the Talent Network is also becoming a good source of introductions and this year led to our investments in premium British men’s footwear brand Oliver Sweeney and Sussex based print and marketing company, Pureprint. It’s also about building long-term relationships. For example, in September last year we invested in Molecular Products Group; we first met them in May 2011 at the original launch of BGF. This is a good example of maintaining a strong relationship with a management team and being ready to progress with an investment at the right time for the company. BGF’s relationship with its shareholder banks is continually evolving from them simply being our funders to a situation in which we receive incredibly valuable introductions to businesses they bank and who are looking for growth capital instead of, or combined with, more traditional debt funding.With around 60-70 per cent of our 2014 portfolio companies headquartered outside the M25 indicating the breadth and depth of our portfolio, building relationships with local advisers has been absolutely critical.We have been able to get to meet these businesses and entrepreneurs by forging close working relationships with the advisory firms local to these companies.Slowly but surely as the portfolio of companies we have invested in grows, so does the strength of the idea behind a ‘BGF club’ of companies who can network, share ideas, problems and best practice and even do business with one

another. This is already happening with companies such as Statesman Travel now supplying travel services to many other companies in our portfolio across the UK.At BGF we aim to work closely with other investors. A great example is our investment in fraud prevention software specialist Semafone based in Guildford where we invested alongside existing backers Octopus Investments. A number of co-investments have been completed across the London and South East region.Far from only being a London-based technology investor as is often thought, we are building a strong set of relationships with businesses operating across a number of sectors. These include healthcare, manufacturing and more traditional London type deals in media and marketing services with Zone, Unruly, Exchange Labs and Abacus e-Media.Above all, we are looking to continue building these relationships. We hosted or joint-hosted over 35 events in London in 2014 and hope to increase this in 2015, with our regular Growth Capital drinks and bespoke events for companies based around location or with a sector specific focus. Our portfolio is going from strength to strength and it’s great to see portfolio companies rolling out their fantastic concepts. You are likely to see more Gymbox gyms, Camino tapas and sherry bars, Cass Art stores, Peyton and Byrne cafes and bakeries on your travels in and around London and the South East. Please do use them for networking and events as well…you never know what opportunities and valuable relationships might come of it.

Review 2014/15Investment Report 17

LondonMarion Bernard, Regional Director, London & South East

� 14 new businesses have joined the London and South East portfolio in 2014/15

� 14 investors actively investing right across the region – from Great Yarmouth to Guildford as well as within London

� Diverse portfolio of 26 companies covering manufacturing, healthcare, media, IT, leisure and retail.

SHERRY COUTU CBE: is a serial entrepreneur and investor who serves on the boards of companies, charities and universities. She is the author of The Scale-Up Report on UK Economic Growth.

Sherry currently chairs Founders4Schools and is a non-executive member of Zoopla plc, the London Stock Exchange Group plc, Cambridge University (Finance Board), Cambridge Assessment, Cambridge University Press, Raspberry Pi and Artfinder. She also serves as an advisor to LinkedIn, Harvard Business School European Council and is a former Trustee of Nesta.

STEPHEN WELTON: CEO of BGF

The Conversation:

Sherry Coutu CBE & Stephen Welton

discuss a new name and a new focus for growing

businesses.

Scale-ups make up less than one per cent of the business population in Britain – and we want that number to be higher…

Review 2014/15The Conversation

Supporting our scale-upsStephen: In the UK, there is a small universe of fast-growing companies. You define them as scale-ups and in your report you talk about the need to prioritise these companies in terms of the support given to British businesses. Sherry: That’s right. Scale-ups make up less than one per cent of the business population in Britain – and we want that number to be higher because these companies have a disproportionate impact on job creation and economic prosperity. Scale-ups are businesses that have already tested their product market fit, are now growing quickly, employ ten people or more and whose revenues have grown by at least 20 per cent for at least two consecutive years. Stephen: And what about the other 99 per cent of the business community?Sherry: They’re an absolutely vital part of our economy but you can easily argue that there is already much more help and support in place for these companies than there is for the one per cent. What we’ve noticed is an absence of specific services, finance and skills for companies that are growing fast and that’s a problem because it’s harder to grow a company quickly than to grow it slowly. They need the right services at the right time. Without this, businesses are much more

likely to fail or sell too early because they can’t feel confident about the future. Stephen: It’s interesting to hear you talk about that because there’s a huge amount of effort spent on start-ups – government policy is aimed in that direction and there’s a lot of EIS money around – and that’s fantastic. But starting-up is just the beginning; there is very little focus beyond that. And so it becomes almost Darwinian. Some businesses fail because in the end, they didn’t get the product market fit right, or they did but the market changed and they didn’t respond and adapt quickly enough. But there are too many businesses that sell-out too early or fail unnecessarily. In order to succeed and to scale-up, these businesses need to be nurtured. Clearly funding is a vital ingredient here but there are others.Sherry: Yes, and one of the problems is that we are not identifying those businesses quickly enough. For that, we need better and timelier data. At the moment, scale-ups are being identified with a 12-18 month delay – so there’s a huge risk that the support isn’t getting to these companies when they need it. The moment may simply pass by – and clearly, that isn’t good enough. One example we hear over and over again is that because companies in the

UK are not, or don’t want to be over-financed, they are turning down customer orders. They don’t feel confident about their capacity to fill the order at the time it comes in. Stephen: Tellingly, this ability to identify scale-ups is also welcomed by business owners themselves. Your report actually states that close to 90 per cent felt they would be able to grow their company faster if they were identified by others as a scale-up company – so I couldn’t agree with you more on the data point.

Addressing leadership-talent gapStephen: One of the things we tell the chief executives of the companies that BGF has backed is to keep talking to us about your barriers to growth: if you need more cash to get over this hurdle or that hurdle, let us know – because we don’t want the growth of the business to be stymied by something that further investment can help to overcome. The UK still has a way to go before this is the prevalent attitude in the funding market – where all too often businesses still, again, sell-out too early. This is in stark contrast to the US. Americans think that to succeed you’ve got to have strong breadth of management and you’ve got to go for it 100 per cent. There are no baby steps, you’ve either got to make it or

...too many businesses sell-out too early or fail unnecessarily. In order to succeed and to scale-up, these businesses need to be nurtured.

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There are a lot of frustrated entrepreneurs in Britain who want to scale-up but can’t. So you have to figure out what the barriers are.

Starting-up is just the beginning; there is very little focus beyond that. And so it becomes almost Darwinian.

Review 2014/15The Conversation

not. I don’t know whether that difference is cultural, capital, access to networks and support, or – playing Devil’s Advocate here - just coincidence?Sherry: I don’t think it’s a coincidence and I also reject that it’s a cultural issue to do with ambition. There are a lot of frustrated entrepreneurs in Britain who want to scale up but can’t. So you have to figure out what the barriers are and our research tells us that it’s largely to do with the lack of leadership capacity I mentioned earlier. I think that’s a significant barrier to growth in the UK. For example, in the tech space, executives with scale-up experience are usually snapped up within 11-14 days. At the moment, it’s difficult for businesses to compete in that timeframe – and remember UK businesses are not just competing with other UK businesses they’re competing with the rest of Europe and the US for these hires. First, they have to find the talent, then they have to get board or even shareholder approval because usually it’s an expensive hire. And then, if the hire is from somewhere outside of Europe, you have to start getting them a visa, which could take three months. By this time, they’ve taken a job at one of the other ten companies offering them a position.

I’d love for the UK to put in place a system similar to Canada’s or Denmark’s, which is if a company is scaling-up and they identify leadership talent, they have a 15 day window where they can hire them and the visa process is waived aside to be filled out in the two years afterwards. Stephen: That sounds like a sensible idea. But does it not presuppose that the talent isn’t already here in the UK? What about our home-grown leadership talent? Very quickly, BGF has built up a network of 2,500 extremely high-calibre senior business people who will go into BGF-backed companies as a non-executive chairman or director to work with the chief executives. From the feedback we receive, this resource and this access is as valuable, if not more so than that the capital we provide. So I think we’ve shown there isn’t a supply issue when it comes to senior people that want to use their experience and skills to help entrepreneurs.But is the type of talent you are referring to, or are you talking about the executive-level talent?Sherry: Yes, the latter. Your non-executive network and the coaching your talent network members provide is absolutely critical. You should really shout about that. But since non-executives

can take up four or five non-executive directorships they spread their knowledge and help across four to five scale-ups simultaneously. The issues are different when it comes to executive talent. In part it’s maths: the US has ten times the population of the UK so there is simply a bigger pool. Stephen: What about leadership education programmes as one way to expand that talent here in the UK? There are already some really interesting programmes happening, there’s LSE’s ELITE Programme and Goldman Sachs’ 10,000 companies.Sherry: The results of some of these programmes have been amazing and businesses have experienced extraordinary growth afterwards. They were experiments at first but there’s now enough independent third-party evidence to suggest that they really work. The programmes go through a set curriculum: finance, exporting, hiring and the like. The issue is that the potential demand for these programmes vastly outstrips supply since each cohort can only take around 20 or 30 people; we’ve got more than 9,000 scale-ups, on average employing 83 people, growing at 20 per cent per year. So, I’d love to see these programmes offered by every

Cont.

…one of the things we do at BGF is bring our chief executives together, face-to-face.

…by acting together to support scale-ups and expand the size of the scale-up community, we can take ourselves on a journey to create at the very minimum £225 billion over a ten year period.

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university so that you don’t have to come down from Manchester or Edinburgh to London to attend the courses. That would go a long way towards helping these companies.

The power of peersStephen: In terms of education or shared learning, one of the things we do at BGF is bring our chief executives together, face-to-face, every year for our Chairman and CEO Day. Sherry: I love that. When I was a chief executive being around my peers was the best thing ever, because you realise you’re not alone. Stephen: Absolutely. It’s an opportunity for our chief executives to discuss their experiences, their challenges and their doubts. There is reassurance in peer-to-peer networking and learning from other people’s experiences.Sherry: And once you’ve made a connection with these people, the next time you run into a problem you don’t have a solution to, you can phone your friend in a non-competing business across town and say ‘I’ve got this situation, can you help me figure it out?’. It takes five minutes for someone who’s been through it six months before and it takes a lot longer if you ask someone

who has no idea or you have to start from scratch trying to figure out where to go. Your annual get-togethers are fantastic. You should do it at CIO level, at CTO level – convening the world’s leading data scientist to talk about cyber security for example. That would be very cool. I can help with that.Stephen: We’ll take you up on that offer! But you’re right, it’s not just the government that has convening power. Of course, it has more convening power than a single, private company but the private sector collectively can bring together different ingredients and different people. That too can be very powerful. And this is the critical thinking behind the creation of the Scale-up Institute. Sherry: Yes, this is a new organisation, with a small permanent staff, funded and supported by some key players in the growing companies’ ecosystem. It is a real opportunity to create a focal point for scale-up companies, and for anyone interested in them. We need the private sector, the government and businesses to come together to support scale-ups. We know there is an overarching issue but it is a solvable issue once you break it down into its component parts. We know the size of the opportunity – by

acting together to support scale-ups and expanding the size of the scale-up community, we can take ourselves on a journey to create at the very minimum £225 billion over a ten year period, if not more if you think about the productivity gap that exists. So why wouldn’t we work together to fix the issues? I would like to see the Scale-up Institute become this co-ordinating and convening body and working to leverage inputs from public, private and third sectors.Stephen: From a BGF standpoint, we are directly addressing one of the challenges and that’s funding, but we recognise there are a lot of other related issues and the funding on its own is not sufficient. So bringing together enough likeminded organisations that have a common sense of purpose rather than just a narrow self-interest, and recognising that if you can start to solve some of these problems, the financial benefits that accrue to all of the constituents of the ecosystem and the UK economy as a whole is clearly considerable. Sherry: And now is exactly the right time to act.

Cont.

From cradle to success

Review 2014/15BGF Ventures

We are launching a new £200 million fund to support the entrepreneurs behind some of the UK’s most promising earlier stage companies. After a distinguished career working for blue-chip companies, VC firms and start-ups, Simon Calver (left), Rory Stirling (right) and Harry Briggs (centre) have joined BGF to work with these dynamic pre-profit businesses. Here they lay out our vision for the fund and describe how it will be different from other venture capital organisations.

As the man who grew LOVEFiLM from a disparate group of competing businesses into Europe’s biggest DVD rental and video download company, Simon Calver knows better than most the loneliness of the long-distance entrepreneur. “To be the CEO in a business you have started yourself can be incredibly lonely. To have someone there to mentor and help you is incredibly useful. I’ve been there myself, and I hope I can bring a bit of that wise counsel to bear.”From September, he will get the chance to do just that; working with new colleagues Rory Stirling (ex MMC Ventures) and Harry Briggs (ex Balderton Capital), both extremely well-known and well-regarded on the UK tech investment scene.With £200 million to invest, this will be the largest ever dedicated UK venture fund, set up to identify and invest in some of the UK’s most promising earlier stage companies, offering the entrepreneurs behind them not only finance but also close operational and strategic support as they develop and grow. This approach mirrors what has already been done with great success in the growth capital arena … it is a scalable idea.

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A distinct offeringThe new ventures fund is a distinct offering, sitting alongside and complementing BGF’s already well-established growth capital business, harnessing the power of the BGF network of regional offices and the skills and experience of the existing growth capital investment teams.Where BGF looks to support and scale-up profitable businesses with revenues of between £5 million and £100 million that have a good track record, traction in the market and strong established management teams, the new team will target earlier stage companies, often yet to establish a strong revenue or profit stream but with the potential to grow those revenues swiftly. Initial first round funding for individual companies is more likely to be in the range of £500,000 to £5 million. But, with the resources to fund further rounds, total investment is not limited, which crucially will enable us to back our investments and build bigger businesses. Like BGF, the ventures team will also be open to co-investment with other venture firms. “It is important to collaborate broadly to further develop the overall ecosystem. By working with other investors we can also learn from them and build our own reputation in the market place.”

UK headquarted businesses The focus will be exclusively on UK headquartered businesses and the new team is optimistic that there will be plenty of potential targets. “I see no reason why we shouldn’t see fantastic tech companies coming out of the UK of the sort emerging on the US West Coast and in Scandinavia. We’ve seen many already and I’m confident there are plenty more for us to work with”, says Harry. Working with BGF’s existing investment teams across our eight regional offices will be critical. While other UK-focused venture firms tend to be London-centric, the new operation has the chance to work through the network and reach across all regions – to exactly those places where earlier stage businesses often struggle to raise finance.The initial priority is to get the proposition right and spend time understanding how BGF’s network and people can be most effectively put to use to support younger companies. Rory explains, “Let’s spend a bit of time understanding what our niche is and how we can differentiate ourselves. BGF has set a great example – it has been selective about investment targets, concentrated on picking good quality

businesses, and focused on building a reputation for being a really valued partner to entrepreneurs. We will follow a similar path.”One of the most exciting aspects of the new role for Simon is that this is as much a start-up as the businesses it will be investing in. “As a team we have the freedom to decide how we operate, who we target, how we leverage the expertise in our growth teams and make the very most of the infrastructure we have.”

A strong team “We also need to be incredibly entrepreneur-friendly – offering the business founders a great experience.” For the new team, understanding the needs of the people managing these earlier stage companies is a big part of the task. “There are a number of practical things entrepreneurs are looking for,” says Rory. “It’s not just help, advice and wise counsel. They’re also looking for a confidante, someone they can share the experience with, because a lot of these people are young and going through the process of creating a business for the first time.”

Building a legacyThe timing for the new venture also looks good. Simon believes the UK start-up environment is healthier now than ever before. “I went into the public company world (as CEO of Mothercare) and when I came out two years later I was just amazed how dramatically the environment for starting a business and securing funding had changed. Spend time in Shoreditch, in Cambridge, Manchester or Leeds: there’s vibrancy about what’s going on at the moment, a real sense of confidence. I don’t think there has been a better time to be an entrepreneur and a start-up business.” Harry is in no doubt as to how the success of BGF’s ventures will be measured initially. “We’ll be judged on the company we keep and the deals that we bring in. So securing the best investments, working with the best, is something we all want to do.” But longer term the team has a broader vision. “We want to create a fantastic environment for UK tech investment. We want to be the ‘go to’ place for entrepreneurs. If in 10 to 20 years time that is how we are being described we will have been a great success.“This is about building a legacy in the market place. We think that is incredibly exciting – for the partners and for the UK.”

Review 2014/15BGF Portfolio Review

BGF made its first growth capital investment in October 2011. Fast-forward nearly four years to the present day, and it is now invested in some 100 businesses, drawn from a broad spread of sectors and regions across the UK. During the intervening four years, those companies have had access to funding and the wider support that comes with BGF backing. The following article looks at how this backing has impacted those businesses and how much closer they now are to achieving their growth ambitions.

Growing up: What growth capital has meant for some early BGF investments

Matt Macri-Waller, CEO of Benefex, is a trailblazer in more ways than one. Not only has the online employee reward and benefits business that he founded a decade ago become a market leader, but he was also the first entrepreneur to accept growth capital from BGF. The £4.2m that BGF put into Benefex in October 2011 was its maiden investment.Reflecting on the company’s progress since then, Macri-Waller is clear that the investment has proved transformative: “We would have grown and developed without BGF’s help, but at a far slower pace. We would now be a completely different type of business, almost certainly behind our main competitors.”Matt Macri-Waller explains that he was initially attracted to BGF because he knew that Benefex needed more than just an injection of funding to realise its potential. Having already achieved a turnover of £5m, he knew that it would be very tough to reach the £10m mark without additional support. He recalls that Benefex “definitely needed capital to implement its plans, but also a more strategic approach to growth.”Benefex put BGF’s money to work immediately, scaling up the business’ infrastructure with a recruitment programme and an office move. The business appointed a new sales director to build a more industrialised sales operation and accelerated its product development to meet market demand.“For the first time we were able to plan and invest ahead of our growth curve, rather than having to bootstrap development,” Macri-Waller says. “We found ourselves with the breathing space to explore strategic ideas for the medium and longer term.”The results of Benefex’s hard work over the past four years speak for themselves. The company has almost doubled its headcount, to around 130 people, and seen its recurring revenue rise from £3.2m

to £9.5m. It has won a string of high-profile new clients, including Marks & Spencer and the London Stock Exchange, and has launched a brand new product to help employers cope with the requirements of the new auto-enrolment pension regime.Matt is confident that there is plenty more growth to come for Benefex – not least from internationalisation of the business model – but he is also very aware that a conventional private equity backer would now be thinking about exiting its investment. “By contrast, BGF has set us no particular timeframe, which means we’re free to concentrate on going after a significant market opportunity,” he says. The management team at Benefex has also developed and Matt credits BGF’s strong network for an introduction to the company’s current Chairman Steve Bellamy. Steve has brought extensive experience of developing businesses in the IT sector. He also acknowledges the broader benefits of being part of a well connected entrepreneurial network: “It gives us the chance to meet people who face the same challenges as us,

albeit in their own sectors, and share ideas about how to tackle similar

issues.”Siobhan Peyton, co-founder and CEO of Peyton and Byrne, says something similar of Mike Johnson, the Non-Executive of the catering and restaurants

group. Johnson, who was introduced to Peyton and

Byrne by BGF following its £6.25m investment in December

2012, had previously worked with businesses including Sodexho, operating in the same marketplace, but on a much bigger scale.“Historically, Peyton and Byrne has been a family business but we wanted to evolve towards something more structured,” Peyton says. “We knew

that was important to the company in terms of its development, but also to our staff, who needed to feel that they were working for a business

that offered opportunities to everyone.”

Since BGF’s investment, Peyton and Byrne has new bakery and café

outlets in Hammersmith and Greenwich, opened new restaurants in high-profile venues including the Royal Academy and the Imperial War Museum, and renewed and won a number of major venue catering contracts. This is only part of the story, however. Siobhan Peyton believes that workplace-based catering services could be the next big market opportunity for the company, particularly in the City of London.Crucially, the company is now able to manage its day-to-day operational responsibilities while also bidding for new business and planning strategically for the longer term. All this makes for accelerated growth. BGF’s funding has been put to use in two quite different ways by Peyton and Byrne. Part of the investment has facilitated the rollout of new shops and restaurants, while the remainder has supported the substantial enhancement of the company’s management structure. In addition to a new chairman, Peyton and Byrne has taken on new executives in operations, development, finance and sales.“The pay-off from this sort of investment isn’t necessarily immediate,” Peyton explains. “But we knew that the business had to be built on really solid foundations if we were to achieve our ambitions for it – these building blocks are what will enable the company to succeed over the longer term.”At York Mailing, founder and CEO Chris Ingram also understands the significance of ensuring that the business is fit for purpose as it scales up. BGF invested £10m in the printing business in July 2013 and helped Ingram to invest further in the

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Review 2014/15BGF Portfolio Review

finance function so that it was sufficiently well-equipped for future growth, not just the immediate need. He recalls “BGF brought insight into future requirements that we didn’t have the expertise or experience to see for ourselves at that point in time. It helped us to professionalise the management of the business, which is so important for a company that is growing as quickly as we are. Becoming a little more formal in the way that you run the business is a natural part of growing up.”This has been particularly relevant to York Mailing, which specialises in the retail and direct marketing sectors, given the way that it has used the finance that BGF provided. The company completed an acquisition of The Lettershop Group within days of BGF’s original investment and, last year, with BGF support, bought Otley-based GO Direct Marketing to add a new data-driven analytics services to its retail offering. It has also made significant capital investments across its businesses – including in Pindar, which it had acquired in 2011 – with a strengthened balance sheet enabling it to secure additional asset finance on favourable terms when it was needed.York Mailing’s numbers speak for themselves. Since BGF’s investment, annual turnover has increased from £63m to £110m and the business now employs 530 staff across four sites - and Ingram’s plans for the future remain ambitious. “Our vision is to create a business that is 50 per cent bigger than where we are at this point in time,” he says. “There is a real opportunity to create a wider supply chain for our retail customers and we are continuing to look for acquisitions that will broaden our offer.”At Springfield Healthcare Group, another early BGF investment – it provided £4.4m of growth capital to the company in June 2012 – founder and Group Chairman Graeme Lee is also

excited about the future.Lee’s business, the largest independent

provider of domiciliary care in Yorkshire and Humberside,

used BGF’s funding to expand two areas of its business. It enhanced its operational delivery of personal care to elderly people in their own homes,

while also developing the Seacroft Care Village

in Leeds. This is a brand new concept for the care sector, offering

a full range of care options, from day care to full-time nursing, within one purpose-built facility.Lee was convinced that the care village would be seen as a model for the future and he appears to have been proved right. “We were building within a month of BGF’s funding coming in and we opened our doors to residents in November 2013,” he recalls. “A year and a half later, we’re at full capacity and ahead of our anticipated revenues – it’s been a real success.”Such was the response to the concept that earlier this year, Springfield secured a further £2.2m of funding from BGF to build a second care village on the site of the iconic Terry’s Chocolate factory in the heart of York. The facility is due to open its doors to residents in January 2017.Graeme Lee’s plans for Springfield Healthcare don’t stop there – the company is also exploring two other sites for new care villages. “We’ve got a chance to innovate in a way that will change perceptions of how care should be provided,” he says. “BGF is giving us the time that we need to achieve these goals whilst maintaining the very highest standards, and this is important to our business.”Interestingly, not all the funding that Springfield has drawn on has come from BGF, with the company in a strong position to approach other providers of

finance and create a blend of equity and debt investment that is best suited to this particular business. Lee talks about experiencing “a real credibility benefit from partnership with BGF that has been valuable when we’re competing to buy businesses or land.”Springfield’s plans will also see it compete for further domiciliary care contracts, as well as expand into new areas such as care for young adults with learning disabilities and children’s services. The progress made to date is already impressive: the company has taken on 300 new employees since the initial BGF investment and seen its turnover rise from £8.5m to nearly

£16m. With three new care villages set to open over the next two

years, staff numbers are likely to pass 600, which will make Springfield a very significant local employer.Most importantly, Graeme Lee believes his

decision to partner with BGF, as opposed to other

finance providers, has been vindicated. “I had already turned

down three offers from private equity firms that wanted us to be much more aggressive than I felt comfortable with,” he says. “BGF has provided us with funding, as well as ongoing support but it has also left us free to run the business in the way that we have wanted, which for me is crucial.”Leigh Howarth, Group Chief Financial Officer of STATS Group, feels similarly about the importance of partnership. “BGF’s willingness to take a minority stake and leave the existing management in control was important to the business,” Howarth says of the £7.8m investment that BGF made in the specialist oil and gas pipeline engineering business in March 2012. “BGF is a long-term investor and has always recognised that we can build something very special here if we are given the time to do it.”

Cont.

Howarth himself joined the company after the initial investment was made, having been introduced to STATS’ founder and CEO Peter Duguid by BGF, and he has since played an important role in putting the funding to workthroughout the business. That process has seen STATS double its annual turnover to around £30m, create 145 new jobs and open operational bases in Canada, the Middle East and the US. STATS’ progress continues andits partnership with BGF has recently strengthened with a further £4.3m investment in the company, which will support continued expansion, particularly in the North American market. “We are a capital-hungry business because of our desire to have assets on the ground in all our core markets,” says Howarth. “Without BGF support, we would have grown this business, albeit at a far slower pace as we would have been dependent on our operating cash flows to build the asset base.”

The importance of a strong balance sheet and a

long-term approach has been underlined in recent times by the significant fall in the oil price, which has seen some of STATS’

customers deferring projects. STATS has had

the funding required to diversify its business into new

territories and market segments, some of which are far less impacted by oil price movements. Ultimately, BGF’s investment has enabled STATS to begin fulfilling its ambition to build on its technology and service offering, in order to become a worldclass business with global reach. “We’ve invested heavily in our people and resources,” adds Howarth. “Whilst there may be some hunkering down to do over the next 12 months, this is a business with huge confidence about its future.”

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Inspiring young entrepreneurs

Review 2014/15Partnerships and Collaborations

There are a number of key elements that make up entrepreneurial success: innovation, commitment, relevant skills, knowledge and connections are among them. But more than anything else success requires the confidence to take the first step.

This is why we are lending our support to two charities whose aim is to encourage and arm young people with practical skills and real-life business experiences. New Entrepreneurs Foundation (NEF), created in 2010, offers final year students, recent graduates and non-graduates a direct route into business. Each year, it selects around 30 young, aspiring entrepreneurs from over 1,000 applicants, to take part in a one year programme that combines real-life experience in fast-growing businesses with intensive training and mentoring. The aim is to fast track the participants’ careers and equip them with not only the hard and soft skills to start, run and grow their own company, but also an invaluable network. Importantly, NEF’ers come from a vast array of backgrounds: school leavers, fresh graduates, engineers, humanities students and many who

29

have experience in business already. Their business ideas are equally diverse. Last year’s cohort included healthy soft drinks, a new biofuels technology, a B2B procurement service, a new mobile advertising concept and wearable cycle lights. These are still early days for NEF, but already graduates from the first years of the programme are successfully raising funding and real businesses are being created. Young Enterprise is aimed at younger children, between the ages of 11 and 19. It seeks to empower young people by making the connection between school and the world of work, again through practical enterprise programmes.BGF sponsors the Young Enterprise Tenner Challenge, a nationwide competition that gives these children a taste of what it’s like to be an entrepreneur - a chance to think of a new

business idea and make it happen, using real money to take calculated risks in the field of business, to make a profit and a difference.As the headline sponsor, BGF investors sat on the judging panel – evaluating the weekly competitions based on sales pitches, trade stands and more, as well as the national competition. We were truly in awe of the ideas we saw and results achieved. We also thought that we ought to rise to the challenge ourselves. So we ran the competition internally here at BGF: amongst other enterprises, we had an art auction, a bakery business, life coaching courses and a shoe shining franchise where training was received thanks to the team at investee company Oliver Sweeney. At BGF, we work day in and day out with some of the most ambitious and exciting

entrepreneurs in Britain: we know that what they do, and what they achieve, is the real inspiration to future generations. So we want to encourage our investee companies, and our corporate friends, to get involved too: either through supporting their local schools, or just as we did, running the challenge internally to raise money for Young Enterprise. Every day, this country gets better and better at supporting entrepreneurialism, but what we need is a constant stream of young people with the tenacity, talent and vision to pursue their ideas and turn them into the big business of tomorrow.NEF and Young Enterprise are doing fantastic work at driving this forward, and so are these young people. If they are anything to go by, the future of British entrepreneurship is in good hands.

7

A) CHAIRMAN SIR NIGEL RUDD:Sir Nigel is best known as founder of Williams plc in 1982, which went on to become one of the largest industrial holding companies in the United Kingdom until its demerger in November 2000, creating Chubb plc and Kidde plc. He is presently Chairman of Heathrow Airport Holdings Limited, BAA Aviation plc, Aquarius Platinum Limited and Meggitt PLC. Sir Nigel was knighted in 1996 for services to manufacturing. He has a long record as an active angel investor in small and medium-sized businesses, and has been Chairman of some of the largest companies in the UK, including Invensys, Pilkington, Alliance Boots and the UK’s largest car retailer, Pendragon, the company he founded with one dealership in 1982. He was a Director of Barclays PLC for 13 years, latterly as Deputy Chairman. Sir Nigel became Chairman of BGF in February 2011.

B) CEO STEPHEN WELTON:Stephen is responsible for day to day management and implementation of overall strategy as well as chairing BGF’s Investment Committee. He has over 20 years’ experience in the development capital and private equity industry worldwide. He joined BGF after 10 years with CCMP Capital (formerly JP Morgan Partners) a global private equity firm. He has extensive experience as an investor working with private companies, most recently as Chairman of Edwards, the global engineering group headquartered in the UK. Before this, he was Chairman and CEO of TV Travel Shop prior to its successful sale to a global media group. Prior roles in growth capital in the UK include Managing Director of Barclays Private Equity and at Henderson Ventures, which he co-founded. During 2013, Stephen was a member of the advisory group formed specifically to guide the UK Government on the direction and priorities of the British Business Bank, a Government funded institution looking to provide lending and support to small and mid-sized businesses. Stephen started his career in banking and is a qualified Barrister-at-Law. Stephen was appointed Chief Executive of BGF in February 2011.

C) DIRECTOR OF RISK & FINANCE MATTHEW REED:Matthew Reed started at BGF in March 2011 and joined the Board in 2013. He is responsible for BGF’s regulatory, finance and operational functions, risk and corporate governance oversight.He was educated in Australia where he obtained his Chartered Accountant qualification. Matthew has held a number of Chief Financial Officer roles with private equity firms including, CCMP Capital Partners UK, Trilantic Capital Partners UK and Santander Infrastructure Capital. Prior to this Matthew worked for JP Morgan Chase for six years, where he held financial controller positions in both Luxembourg and London, and later acted as Global Product Controller in the bank’s Worldwide Security Services business.

8

1A

5C

3B

9

2

6

4

Review 2014/15The Board 30

The Board

1 AUDREY BAXTER: Following a successful early career as a merchant banker in London, Audrey returned to the family business, Baxters, in 1988. She became Chairman and CEO in 2000. Baxters was founded in 1868 and Audrey is the fourth generation of the family to run and expand the business into new markets. Today, Baxters is a global company, with operations in Eastern Europe, Australia, South Africa, and North America. Since her return to the business, Audrey has significantly grown the turnover from £20m and is today CEO of a £300m company. Audrey is also a member of the Court of Aberdeen University.

2 JOHN BURGESS: John has had a long and distinguished career as a private equity investor, during which he was a non-executive director of a number of UK and European-based businesses, both large and small. He is currently Chairman of the External Investment Committee of Partners Capital, and a Governor of the Royal Academy of Music.He was a co-founder and Managing Partner of BC Partners until he retired in 2005. BC Partners is a leading European private equity firm that has played a major role in the development of the large buy-out market in Europe over the last 25 years. Prior to BC Partners, John developed his private equity experience with Candover Investments and F&C Ventures, following eight years with the Boston Consulting Group in Paris and London.

3 NEIL JOHNSON: Neil is currently Chairman of Synthomer plc and e2v plc. He also chairs Motability Operations plc, a major finance and leasing company owned by the UK banks.Neil was formerly CEO of the RAC, and chaired telematics company Cybit Plc through IPO and ultimate sale to a US private equity house in 2010. After directing the European automotive interests of British Aerospace, he served a term as director general of the Engineers Employers Federation and later set up a transatlantic trade and business promotion body, British-American Business Inc. Following an early career in the Army he began his business career with a series of roles within Lex Service Group, British Leyland, Jaguar and Land Rover. Neil also sits on a Ministry of Defence Advisory Board. Neil is the senior independent director on the BGF Board and was, until 2012, an Independent Member of the Metropolitan Police Authority.

4 STEPHEN MURPHY: Stephen is Non-Executive Chairman of Wyevale Garden Centres, Jumeirah Group, the UAE based international hospitality group, the Learning Clinic, a UK medical technology business, Byron Hamburgers Ltd, a leading UK gourmet burger restaurant chain, and Ovo Energy Group Ltd. He is also an Advisory Partner at Ashcombe Advisers LLP, a specialist corporate finance and advisory business.Stephen was Group CEO of the Virgin Group from 2005-2011, having succeeded the Founder, Sir Richard Branson. He oversaw the worldwide interests of Virgin Group and was responsible for global strategy. He has previously worked for Mars Group Plc, Ford Motors and Unilever Plc.

5 TIM BOAG (RBS): Tim Boag is responsible for the commercial banking franchise for RBS and NatWest across London and the South East. Tim began his career as a graduate with NatWest and has fulfilled a number of roles across RBS Group. He has worked in both the Corporate and Investment Banking areas, and was Finance Director of the Global Structured Finance Business in 2005/6. Tim Chairs the RBS South East Regional Board which focusses on supporting enterprise within the region and is a member of the Chartered Banker Institute Professional Standards Board.

6 JAMES CHEW (HSBC): James is Global Head, Regulatory Policy at HSBC Holdings plc . Since joining the HSBC Group in 1993, James has worked in a number of areas including on joint ventures with BSkyB for the launch of digital television in the UK and Merrill Lynch for on-line bank and stockbroking. Most recently, he was Group Head of Acquisitions and Disposals and Deputy Head of Group Strategy. As part of the Business Finance Taskforce in the UK, James was the interim CEO responsible for the establishment of BGF.7 RICHARD HOLMES (Standard Chartered): Richard Holmes is CEO of Standard Chartered Europe, a position he has held since 2008. Prior to this, he was Chairman and CEO of American Express Bank Ltd., American Express Company’s international banking subsidiary, based in New York. Richard has more than 30 years’ experience across a wide range of functions in international banking, having served in finance, operations and financial market positions at Wells Fargo Bank and at Bank of America.Richard is Chairman of the CBI’s Financial Services’ Council, sits on the Board of Trustees for Asia House and is a member of the Board of Directors of British American Business and City UK.

8 ALAN TURNER (Barclays): Alan is Head of Product, responsible for the cash management, lending, trade finance and FX products offered globally by Barclays via its Corporate Banking division. He is a member of the Executive Committee of the Corporate Bank and the Group Credit Committee of Barclays Bank.Alan joined Barclays in 1991 and has held a variety of roles within the retail, corporate and investment banking divisions of the firm. Prior to his current role, he managed the lending arm of the Corporate Bank and previous roles included leveraged finance and high yield bond origination in London and head of the leveraged finance business in Asia Pacific.9 KAREN BOTHWELL (Lloyds Banking Group): Karen leads the Regulation & Governance teams within Lloyds Banking Group’s (LBG) Commercial Banking Credit Risk function. The role includes governance and assurance responsibilities for LBG’s Commercial Banking credit processes, regulatory interpretation and risk oversight of the LBG private equity portfolio. A qualified lawyer, Karen has worked within Bank of Scotland and LBG since 1987, in roles within Legal, Structured Finance, Joint Ventures and Growth Capital Investment. Karen is also a Fellow of the Chartered Institute of Bankers (Scotland).

Independent Non-Executive Directors

Shareholder Directors

Review 2014/15The Board 31

Sector Investment date Turnover

Company location

BGF investment

3sun Group Products and services for global energy industry Energy March 2014 £20–30m Great

Yarmouth £10m

Abacus e-Media Web content management and audience development platforms Media August 2013£5–10m London£3.25m

Broadbandchoices Price comparison website and software

Media/Software & computer services September 2012£10–20m London£10m

Camino Authentic Spanish bars and restaurants Food retail/production December 2012£5–10m London£3m

Cass Art Arts materials retailer Retail December 2013£10-15m London£3.2m

CennoxSpecialist ATM products and services Support services June 2012£20–30m Camberley, Surrey£5m

FlowlineDrainage contractor Support services May 2014£5–10m Rayleigh, Essex£3m

Furniture VillageIndependent furniture retailer Retail August 2014£100m+ Slough£6m

GymboxBoutique gym chain Travel & leisure June 2014£10–15m London£12m

Molecular Products Medical devices, gas filters and oxygen generators Chemicals September 2014£15–20m Harlow, Essex£4m

McMillan Williams Solicitors Consumer focused high street law firm Business Services February 2015£10-15m London£5m

Oliver Sweeney Premium men’s footwear retailer Retail March 2015£10–£15m London£3.75m

Peyton and Byrne Branded public catering, restaurant and bakery business Food retail/production December 2012£20–30m London£7.1m

PlastiquePackaging manufacturer

General industrials (packaging & containers) July 2014£20–30m Tunbridge Wells,

Kent£5m

PTS Consulting Global IT consulting and project management consultancy Support services October 2013£30–50m London£8.7m

Pureprint Innovative print and marketing solutions company Business Services December 2014£30–50m Uckfield£5.3m

Renal Services independent provider of dialysis services to NHS patients Healthcare November 2014 £5–10m London£3.1m

Semafone Fraud prevention software

Software & computer services October 2014£5–10m Guildford, Surrey£4m

Rethink International recruitment and talent management Business services April 2015>£100m London£2.5m

Statesman Travel Travel management for corporate and private clients Travel & leisure October 2011£75–100m London£4.25m

Thames Card TechnologyPlastic card manufacturer Support services December 2013£15–20m Rayleigh, Essex£3.2m

The Consulting ConsortiumIndependent regulatory consultancy Professional services March 2014£10–15m London and

Leeds£10m

Region: London & South East

Review 2014/15The Portfolio 32

Our investment portfolioAt 31 May 2015

Sector Investment date Turnover

Company location

BGF investment

The Exchange LabProgrammatic digital marketplace Media November 2013£20–30m London£5m

Unruly MediaSocial video distribution Media December 2011£20–30m London£4m

Workshare Cloud enabled document collaboration software

Software & computer services September 2012£10–15m London£8.45m

Zone London-based digital marketing agency Media January 2015£15–£20m London£6m

Region: London & South East (continued)

Review 2014/15The Portfolio 33

Sector Investment date Turnover

Company location

BGF investment

BHR GroupFluid engineering, research and technology Business services June 2014£5–10m Cranfield,

Bedfordshire£2.6m

Celaton Artificial Intelligence Software

Software & computer services December 2012<£5m Milton Keynes£4.5m

Bulldog Hotel Group Coaching inns operator Leisure & Hospitality March 2015£10–£15m Lincolnshire£4.5m

Brownhills Glass Glass processing business Manufacturing March 2015£5–10m Walsall£2.9m

Dudson Producer of ceramic tableware for travel and hospitality industry Household goods April 2014£20–30m Stoke-on-Trent £3m

GCIIntegrated telecoms and data services Telecoms January 2012£50–75m Lincoln£10m

Palmer Hargreaves Marketing and communications agency

Media/Professional services December 2013£10-15m Leamington

Spa£4m

Rutland CyclingCycle retailer Retail March 2014£10–20m Rutland£2.8m

RVL GroupSpecialist aviation services Business services November 2015£5-10m Derby£2.8m

ShuropodySpecialist footcare provider and retailer Retail September 2012£15–20m Coventry£5.1m

TCL Group Estate management and landscape installation, design and consultancy Support services May 2014£30–50m Chapel Brampton,

Northants£15.1m

Victoria AIM-listed manufacturer/distributor of carpets and floorcoverings Household goods September 2014>£100m Kidderminster£10m

Wow! StuffToy development & distribution Consumer goods March 2012£10–20m Wolverhampton£7.1m

Region: Midlands

Sector

Sector

Investment date

Investment date

Turnover

Turnover

Company location

Company location

BGF investment

BGF investment

ACS ClothingSupplier of formal hirewear Retail January 2014£10–15m Glasgow£8.5m

Region: Scotland

AFG Media Fancy dress & party fashion, including Morphsuits Consumer goods June 2012£10–15m Edinburgh£4.2m

Arran AromaticsLuxury toiletries, lifestyle products and gifts Consumer goods August 2013£5–10m Isle of Arran£4.8m

Aubin Specialist chemicals for the oil and gas industry Energy February 2012£10–15m Aberdeen£2.25m

Duncan & Todd OpticiansChain of opticians Retail December 2013£10–15m Aberdeen£9.1m

Barburrito Fast-casual Mexican restaurants Food retail/production March 2012£5–10m Manchester£6.8m

Better BathroomsOnline and high-street bathroom retailer Retail October 2013£30–50m Warrington£10m

Boost Juice Bars National chain of juice bars

Food retailers, producers December 2012£5–10m Manchester£3.9m

Medicina Medical devices – specialising in enteral feeding

Healthcare equipment & services December 2013£10–15m Bolton£6m

Moda in PelleWomen’s shoe retailer Retail October 2014£15–20m Leeds£3.5m

Nationwide Window Cleaning Provider of window cleaning and associated services Support services October 2014£5–10m Harrogate£3m

Springfield HealthcareDomiciliary healthcare provider Healthcare

equipment & services

June 2012£15–20m Leeds£7.35mSpringfield – The Grange Residential care home and private independent living

VTL Manufacturer of precision engineered components for the auto industry Automobiles & parts July 2013£50–75m Huddersfield£5.5m

Wear Inns Freehold community pub estate Travel & leisure May 2012£10–15m County

Durham£8m

Xercise4LessLow-cost gym Travel & leisure August 2013£5–10m Leeds£12.1m

York Mailing Specialist production of promotional print materials Media July 2013£100m+ York£10m

Region: North, North Wales & Northern Ireland

HorburySpecialist interiors Support services June 2014£50–75m Rotherham£2.5m

Hobs Reprographics The largest independent 3D printing company in the UK Business Services December 2014£30-50m Liverpool£7m

Cussins House builder based Construction December 2014£5–10m Alnwick£5m

ChemoxySpecialist chemicals manufacturer Manufacturing February 2015£50–75m Cleveland£10m

J&B Recycling Waste collection, recovery and recycling services Support services July 2014£10–20m Darlington£7.5m

Review 2014/15The Portfolio 34

Review 2014/15The Portfolio 35

Benefex Software supporting online employee reward and benefit schemes

Software & computer services October 2011£5–10m Southampton£5.8m

Bullitt Design and manufacture of specialist mobile phones and audio products

Electronic & electrical equipment December 2012£50–75m Reading£10.1m

Canburg Design, manufacture and retail of luxury fitted furniture

Household goods & home construction August 2014£30–50m Devizes,

Wiltshire£8m

EcovisionSustainable energy systems

Household goods and home construction August 2014£5–10m Highgrove,

Gloucestershire£4.4m

Intrapharm Labs (Abbey Pharma)Specialist pharmaceuticals

Pharmaceuticals & biotechnology August 2014£5–10m Maidenhead£2m

Magma High performance carbon pipe for subsea oil and gas applications Energy/Industrials December 2012Not disclosed Portsmouth£12.8m

PrimroseOnline retailer of garden products Retail May 2012£30–50m Reading£4m

SHS Integrated Services High specification industrial scaffolding services Support services September 2012£15–20m Barry, Wales£5.4m

Skyscape Cloud infrastructure services for the UK public sector

Software & computer services April 2014£10–15m Farnborough,

Hampshire£4m

Sub10 / Fastback Millimetre wave wireless solutions for mobile telecoms Telecoms November 2013£5–10m Newton Abbot,

Devon£3.3m

Trunki Innovative, multi-functional travel products for children Consumer goods April 2013£5–10m Bristol£5.2m

Vysiion Group Communications infra- structure and outsourced IT service provider IT & Technology March 2015£10–£15m Chippenham£4m

Region: South West & South Wales

InoappsOracle reseller and platinum partner in EMEA

Software & computer services September 2013£15–20m Aberdeen£12.5m

Jumpstart R&D tax credit assistance for UK businesses Professional services February 2014£5–10m Edinburgh£3.4m

M Squared Lasers Design and manufacture of lasers and photonic optical instruments

Technology hardware & equipment April 2012£5–10m Glasgow£5m

Mono Consultants Network support services to UK mobile telecoms sector Telecoms March 2014£30–50m Glasgow£7.5m

PetrotechnicsSoftware developer for hazardous industries

ROVOP Subsea remotely operated vehicle (ROV) services company

Software & computer services May 2013£10–15m Aberdeen£6m

Energy April 2015£20–30m Aberdeen£15.6m

SPEX Services and products for subsea and downhole environments in oil and gas Energy March 2014£10–20m Aberdeen£5m

STATS Group Isolation services for onshore and offshore oil and gas pipelines Energy March 2012£30–50m Aberdeen£12m

Stevenswood Manufacturer of PVCu and aluminium windows, doors and conservatories Manufacturing February 2015£10–£15m Livingston£3.5m

Task Fronterra Global geoscience consultancy focused on the oil and gas sector Energy April 2014£5–10m Aberdeen£3.8m

APSU Provider of IT managed services

Software & computer services October 2014£10–20m Cirencester,

Gloucestershire£7m

Sector Investment date Turnover

Company location

BGF investment

Region: Scotland (continued)

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British entrepreneurs are driven, determined and ambitious.They are building the global brands and businesses of the future.They are driving the economy forward.But they want to achieve more.They want to build more, create more, sell more, expand more, profit more, grow more.They want to be more.We’re here to make sure they can.

Aberdeen 0345 600 3699Birmingham 0345 266 8862Bristol 0345 266 8864Edinburgh 0345 266 8863Leeds 0345 600 0142London 0345 266 8860Manchester 0345 266 8861Reading 0345 266 9677

Website www.bgf.co.ukEmail enquiries@bgf.co.ukTwitter @bgf_team

Get in touchBGF (Business Growth Fund plc) is the UK’s most active provider of growth capital to small and mid-sized businesses having backed close to 100 entrepreneurs, with over £500 million of long-term capital, in four years. BGF’s team of over 70 investors, operating from eight regional offices in the UK, make initial investments of between £2m and £10m and then actively look to provide additional funding to support further growth. The investment provided is typically in the form of equity in return for a minority equity stake and a seat on the board for a BGF director. BGF’s philosophy is to provide long-term equity investment for companies with strong growth potential and in doing so expanding the funding options available across the UK.

BGF is an independent company with capital of up to £2.5 billion and is backed by five of the UK’s main banking groups – Barclays, HSBC, Lloyds, RBS and Standard Chartered. BGF is managed autonomously with an independent management team.

BGF is authorised and regulated by the Financial Conduct Authority.