Growing british businessesMarch 2016 | News
Stephen Welton, CEO of BGF
I have never met an entrepreneur who wants to give up control of the company he or she has built. That’s hardly a big surprise.
At the same time, the entrepreneurs I meet want to eventually realise the full value of what they have worked so hard to create: to accomplish (or even surpass) all that they had hoped for when they started their business. They want to secure their family’s future, provide opportunities for their staff and see their business grow.
And, since most founders and business owners tend to know their company and markets like the back of their hand, they also often have clear ideas of how that growth can be achieved.
The big consideration inevitably comes down to funding that growth - because the decision around who or where to get investment from is frequently an emotional one. Private equity, senior debt and trade finance all have a role to play in the way that we fund businesses in Britain. The key is finding the right partner at the right time.
BGF was set up in 2011 to provide a new type of funding option for small and mid-sized companies: one that differed from traditional private equity and provided an alternative to debt. So, taking each of these in turn, how does BGF fit into the funding ecosystem?
Firstly, we make investments in return for a minority stake - which means we don’t run your business, you do. And, we invest off our own balance sheet. That’s important because it means we can provide funding over the longer-term and we don’t rush or pressure a company to exit. Again, this should happen at a time that is right for the business, or even not at all.
Secondly, equity capital is not necessarily a default option to debt, but it can be one solution for a business whose growth plans contain a level of risk that a bank is unable to fund. In recent times, plenty of business owners have had first-hand experience of the importance of a strong, adequately capitalised balance sheet and no longer can, or want, to build their business on debt alone. Our investments can provide an ‘equity cushion’ for companies that are taking on additional risk by embarking on a growth strategy. Indeed, for many of the businesses we back, growth is often funded by a combination of debt and equity - the two can go hand-in-hand.
Thirdly, we become a partner in your business. This partnership is based on an alignment of interests and a shared goal, supported by a properly funded plan which allows business owners to focus on execution. We know, from experience, that good execution of well thought through plans is the key to success in any business.
During the past five years, we have worked hard to define our model and earn the trust of British entrepreneurs. We have always believed that that it is the responsibility of the finance and investment community to present and articulate the different routes available to entrepreneurs so that there is real choice and higher awareness of what each option provides.
We have now invested nearly £800m from our £2.5bn investment pot, and backed more than 115 growing British businesses. They are putting our capital to work hiring people, supporting an export drive, funding acquisitions, rolling out new retail sites, driving innovation and investing in R&D, and more.
And even more than the money, we have created a network of over 2,000 of the UK’s most successful business people who can provide support and guidance to the entrepreneurs we back. We show CEOs the breadth of this network and help them pick out two or three people to meet based on their specific brief, usually for Chairman roles.
We believe that with investment and connections, comes confidence. And we believe that the success of Britain’s entrepreneurs depends on having a robust support infrastructure and on finding the right partners at the right time.
BGF invests in companies with revenues typically between £5m-£100m. We make initial investments typically of between £2m and £10m and can provide further funding to support continued growth.