By Matthew Cushen
Investing is my third career. Skiving off school to sort out our Post Office when Mum & Dad went on holiday started me as a retailer. Then helping to open the first overseas Virgin Megastore (in Sydney, Australia for any pub quiz nerds). Then properly learning the trade at Woolworths back in the UK (several £100 million’s accountabilities whilst still in my 20’s shows retail is a true meritocracy).
Later I became a consultant. My first 15 months helping Mukesh Ambani work his way through $5 billion to ‘do retail’ in India (i.e. create branded, multi-site, organised retail in a country where at the time only 3% of retail sales were with retail brands). 12 years on, that business is now valued at $57 billion – not a bad return on his investment. Over time I found my calling, as an innovation consultant, helping very large businesses to rediscover their creative mojo. Although retail is in my blood (with IKEA and Waitrose being recent clients), I’ve plenty of other clients (such as ABInbev, the world’s largest brewer) that value a retailer’s sense of customer and speed of execution.
15 years of investing in start-ups as a hobby – including a lucky break and a 370% return on my first investment – led to my third career. Five years back my mate Paul and I, created a proposition to find, fund then help start-ups to grow. Paul has been an entrepreneur his whole life, direct from a college setting up what has become a top marketing agency and along the way setting up and selling other businesses.
So why the potted biography?
It is only to land the blindingly obvious. Not all investment managers have the same background. And it is worth digging into, as it is the foundation of someone’s ability & confidence to help others.
Unsurprisingly, IFAs & Wealth Managers are often drawn to the most established brand names in the tax-advantaged (SEIS & EIS) space. But those firms are mostly run by financial services careerists. They might be fantastic at engineering a balance sheet or analysing some financial ratios – but those are skills that draw incremental value from more mature businesses. They are less valuable in the very early stages of a company’s life.
Over the last few years, others have joined the industry that is like us, with hard-nosed commercial backgrounds. This helps when hunting for entrepreneurs (‘it takes one to know one) but then backing them not just with cash but real, tangible help. And be in no doubt how essential this help is. Even the most talented entrepreneurial team will have gaps in their skill set and decision making. We find there are 5 regular categories of help:
STRATEGY: an entrepreneur needs faith in their proposition. But tenacity can easily deafen them to insight and blind them to different possibilities. We ensure that they are aware of when and how often they need to look up to the horizon to reconsider the big strategic decisions – e.g. target market, product development priorities or funding. Then to create different possibilities, analyse objectively and make choices.
From our portfolio, an example is Weekly10 – a Software as a Subscription (SaaS) product for businesses to measure and improve employee engagement and performance in real-time. The market is intimidatingly huge – every organisation employing people across the globe. So it’s important to segment the market to prioritise marketing effort & investment. And then to continue to review. Such as, at the start of the pandemic, which offered up home working as a huge new need state that needed for which Weekly10 is a solution – resulting in a redirection of marketing effort and product development (further improving a Microsoft Teams integration so we could ride in their slipstream).
RISK: battle scars heighten your sensibility to risk, smelling it or systemically seeking it out, and provide the experience to mitigate it quickly.
Since an investment in 2019, Bedfolk – beautiful bedding from Portugal sold direct to consumer – has been growing very fast and outperforming their forecast sales. This further accelerated on the back of the pandemic, being at the perfect intersection of consumers looking afresh at their home décor and being an eCommerce operator. The team were running very hard to keep up but it was all good news. Until we looked ahead and saw out-of-stocks looming. This wasn’t a time to discuss theory or to eke out more effort from the founders. I quickly built new forecasting & ordering inventory model. (Having looked after the supply chain for John Lewis Department Stores I was amazed at how much knowledge I could forget in 20 years!). We just got to this in time to avoid really bumpy availability and have maintained the exponential growth all though 2020 and into 2021 – from sales of £6k for the month when we invested to £340k in the month just gone, just 22 months later.
CREATIVE: innovation is a team sport, generally the more thoughts and energy in the mix, the better the result. So we often get involved as a creative spark and to bring some different perspectives to the table.
Earlier this year we took on a business that was called Tradesmart – a secure payment solution to help tradespeople to get paid on time, take card payments and offer customer finance. The market, the core idea and the team were sensational. But we hated the humdrum name and the way the proposition was being articulated. The team listened to our concerns (a good sign) and agreed they could do better. We helped them to get under the skin of what the proposition was really about (creating trust between tradespeople and their clients) and the backstory for the brand (the coming together of an electrician with empathy for the problem and a tech entrepreneur with the background to solve it). From which was born Kanda (pronounced candour) a modern tech brand all about creating trust. And critically, with the potential to scale over time beyond the first market, tradespeople, into other sectors.
ANALYSIS: in our experience, it is a rare entrepreneurial team that has truly impressive, advanced data manipulation and analytical skills. These are generally skills that are recruited for later. So we help fill the gap, such as when stress testing cashflow scenarios or for looking at patterns in marketing metrics.
TEAM: no entrepreneurial team is born fully formed. However strong individuals may be, there will be blind spots. We help identify the gaps and show the existing team what they are missing, then help to recruit the right talent. We, coach entrepreneurs, to understand and release their own potential so they are always growing.
Hopefully, this handful of examples help to illustrate the value of investors getting involved. Of course, as investors, we spend plenty of time & effort identifying the right investments, but we have learnt that where the returns are made is by spending the majority of our time with the entrepreneurs we have already backed – accelerating growth, identifying & mitigating risk and developing their capability.