Published: Mar 30, 2021
Focus:
Insights
One of the UK’s fastest growing cities, Manchester is the largest economy outside of London, and voted the most ‘Liveable City’ in the UK in 2019. The region has a large talent pool and a number of sector strengths including advanced manufacturing, life sciences & healthcare innovation, energy & environment and creative, digital and technology.
Maven’s local office is in Manchester’s city centre putting us at the heart of business activity in the North West. We caught up with Senior Investment Manager, James Darlington, and Investment Associate Tom Morgan to explain more about their roles at Maven and help local businesses understand what it really takes to raise equity finance to grow.
At Maven, we appreciate that each business is different, and not every management team requires the same level of support from its investment partner. So, we dedicate significant time and effort to getting the right 'fit' ahead of investment.
1. What are your roles at Maven? What do you do for local businesses?
As an Investment Manager at Maven Capital Partners James works on the NPIF (Northern Powerhouse Investment Fund) Equity Finance Fund which provides new funding opportunities for businesses in the Northern Powerhouse region (cheque sizes between £100K – 2M). In addition to the VCT funds which invest in VCT/EIS eligible businesses across the UK (cheques sizes between £1M – 5M). He also sits on 4 boards, 1 as an Investment Director as well as 3 NPIF investee boards as an Observer.
Tom is responsible for supporting the investment team on NPIF investments across the region working with James he helps local businesses identify and secure growth funding to support their expansion plans.
2. What do you think are the advantages to growing businesses operating in Greater Manchester?
The talent pool in Manchester is large and growing and there’s access to strong senior management individuals and teams. There’s also a relatively cheap source of human resource and office space – especially under the current climate location, so businesses can take advantage of lower rates and resourcing costs.
3. What would you say to a business that is put off by taking on investment and would prefer to grow organically?
Building a business without taking out a loan or using venture capital has become known as “bootstrapping” in the tech community. It involves using utilising internal cash and working capital to fuel the growth and development of a company. Growing organically can be beneficial as the founder does not take on debt or give up part of their business. However, using your own cash or cash from your business’s operations to fuel its growth can have some disadvantages. The main one being scale and speed. Using your own cash to grow your company means it’s likely it won’t grow as rapidly or to such a scale as it could if you used venture capital (or, to a lesser extent, a bank loan) to fuel its growth, development and expansion.
This is where equity financing is advantageous as it places no additional financial burden on the company. Since there are no monthly payment obligations associated with equity financing, the company has more free cash available to invest in growing revenues. Raising funds this way facilitates a longer-term approach to a company’s strategy thereby allowing business owners to focus on value creation without the short-term concerns of cash management and adhering to banking covenants.
Equity finance may suit the aspirations of high-growth businesses with a product or service that needs to rapidly grow market share due to its flexibility and the expertise that equity investors provide. Alongside the simple capital injection, investors will often support the company’s strategy via introductions to sector experts; advising on the recruitment strategy; aiding best practice corporate governance; financial management; sector insights as well as various other value adds. An investor’s aim should be to help management teams achieve their business plan whilst ensuring the working relationship is effective and harmonious. When all shareholders interests are aligned, the business has the greatest opportunity of maximising growth.
4. What do you think are the main obstacles to accessing finance to grow that businesses face today?
I believe the current investment scene, both regionally and in the city, is highly active and companies with a robust business model that can be delivered and/or enhanced with technology will find themselves in a strong position if they wish to attract institutional investment. If a business has the right model, operation, people and attitude – it will prosper and thus most likely to be able to secure equity funding if desired.
5. What’s your top tip for a business that’s looking to raise funding?
Ensuring you pick the right partner as that is what this should be viewed as, a strategic partnership as opposed to a ‘bag of cash’. Asides from the relationship ‘gut feeling’ you get when meeting a potential investor, from your side, I would suggest a clear and concise business plan; a dedicated and incentivised team and a strong product market fit that is already demonstrable via strong commercial traction.
6. As a national company, what other funding and support opportunities does Maven bring to the LEP region?
Our multiple funds can see the business through its entire journey from early stage start-up, through growth (VCT) and on to a part or full exit (MIP or MBO).
