QIB Q2: Regional Investment

On Thursday 30th May 2019 over 70 investors and facilitators of investment gathered at the Engine Shed for the sixth in a series of Quarterly Investment Briefing events. These events are designed and run by Engine Shed to bring the investment community together to network, share and learn – with an equal emphasis on time for networking as there is on the content provided at the event. This quarter, we elected to focus on the theme of regional investment – ranging from who the most active investors are in the region, to the newest programmes and inspiration from elsewhere in the UK. We also spent some time considering the 24 companies that we know about that are raising investment at the moment, six of which are looking for £1m or more.

I opened the event with a quick run through of statistics that I have gathered recently and a reminder of our region – the West of England (or CUBA – counties that use to be Avon according to one of our speakers). I have attended 3 roundtable discussions and 3 major events on the topic of investment in the last 10 days and so I have had a wide range of conversations about the investment ecosystem or infrastructure that exists in our region. I met with and heard from colleagues from the British Business Bank, the UK Business Angels Association, HM Treasury, DCMS, InnovateUK, BEIS, NOTWICS and I can’t even begin to list the audience members! What were the strongest themes in these conversations you might ask – for me, I’d suggest:

  • How can we identify and better support the lead angels in the region? How can we support more angel investors to develop their role as a lead angel?
  • Linked to the above, how can we activate and better support the angel community so that more investment happens in the region? UKBAA tell us that we have the third biggest community of angels outside London, but that 68% of angel investment goes into the Golden Triangle (Cambridge, Oxford and London).
  • 70% of our companies would rather forgo growth than take equity investment and only 14% of official scaleup companies take equity investment – should we be providing greater education to help companies better understand the finance options available to them?
  • How do we overcome the £50 - £500k gap in terms of available funds? This was seen to be a more significant concern than in other regions of the UK
  • A handful of speakers (across different events) challenged us to better collaborate to make significant impact – whether through our asks to Government as part of the Local Industrial Strategy, or to create something akin to NorthInvest as described by Tom Bridges, one of our speakers, or to Cambridge Ahead or London’s Capital Enterprise

Once my short welcome was complete, we heard from three lightning speakers with different perspectives and insights into the investment landscape locally. First Ed Rowberry and Ryan Munn spoke about the City Funds they will launch in Summer 2019 with a focus on impact and social investment, then Tom Bridges joined us from ARUP where he is the Leeds Office Leader and Director Cities Advisory and finally Nathan Morgan shared insights from his work as Director of Scaleups and explained the innovative new Funding Academy that they have recently launched in Bristol.

I have shared a few of my own reflections on their various talks below – you can also flick through and download the slides from slideshare, which is linked at the bottom of this post.

Ed Rowberry and Ryan Munn, Bristol and Bath Regional Capital (BBRC)

BBRC exists to provide civic-led, commercially focused and innovative investment solutions that catalyse regional change and in the context of this event, particularly important is their objective to “connect local and external investors with commercial and innovative opportunities that provide both financial and social returns.” I invited Ed and Ryan to introduce the City Funds to the QIB audience – not least because there is increasing overlap between impact, social and mainstream investment such as Ascension Ventures ‘Fair by Design’ fund – a fund which invests to address the poverty premium.

Ed and Ryan have created the City Funds in partnership with Quartet Community Foundation and Bristol City Council and will work in a coordinated way to reflect the priorities outlined in the One City Plan and focus on four key themes: Community Initiatives, No Child Goes Hungry, Economic Inclusion and Environmental Transformation.

The fund will focus on ‘place’ and will launch in July/August 2019 with £10M initially under management. Working across communities, councils, investors, business and foundations, the work will include comprehensive support for organisations along their growth pathway and will specifically offer capacity building and investment readiness amongst other support. The funds will offer both grant funding and impact investment.

Ed finished their contribution by emphasising their commitment to make sure the Bristol City Funds are additional, collaborative and transformative – which can only be achieved through discipline and scale, and working with the wider market. If you, as a mainstream investor, would be interested to connect and contribute to this work, check out their website: http://www.bristolcityfunds.co.uk/

Tom Bridges, ARUP Leeds Office Leader and Director Cities Advisory

I met Tom in my first year as Scaleup Enabler (in 2017) at a session run by Bristol City Council focused on the creation of their strategy for an inclusive and sustainable city, he and I shared ideas and observations about the challenges of raising investment outside London for fast growth (scaleup) businesses. Hence, I was very pleased when he accepted my invitation to speak at the QIB this quarter – to offer some challenge and inspiration for the attendees particularly from his work both with ARUP and prior when he worked extensively with Leeds City Council on their economic development and regeneration.

Tom shared a number of reflections and stimuli around the theme of “building an ecosystem for innovation driven entrepreneurship.” He opened with an explanation of the Leeds Inclusive Growth Strategy and briefly explained their 12 point plan (included in his slides). He spoke about their commitment to boost innovation, to support startup and scaleup and to enable innovation in public services. Tom went on to talk about the ongoing involvement that Leeds has with MIT REAP (the Regional Entrepreneurship Acceleration Program which helps regions foster economic growth and social progress) and showed an image of its home at the Cambridge Innovation Centre, Broadway, Cambridge Massachusetts. Tom went on to shock the audience with news that companies resident in the single building in that image see more investment than the whole of the UK.

Like Ed and Ryan before him, Tom highlighted the importance of the collaboration between entrepreneurs, investors, corporates, government and universities (as taken from MIT’s materials), he took time to celebrate Engine Shed for the work we do in bringing these groups together, and challenged us, as a broader group to do more. Tom shared a snippet from another Tom’s work – Tom Forth, who has analysed Business R&D spend against Gov’t, university and charity spend. The chart certainly suggests that the South West has more to do in both areas – we are under investing in R&D compared with our competitors.

NorthInvest was an important aspect of Tom’s presentation and a useful role-model as we consider how to expand our work in this area. For the uninitiated, NorthInvest is a not-for-profit organisation connecting tech and digital start-ups with mentors and investors in the North of England. With partners and supporters across the public and private sector, it’s clear that this organisation has made some significant impact, not least bringing £1m funds into their work from InnovateUK.

Tom’s final contribution was to share some insights from their work with Nesta analysing innovation testbeds and ‘living labs’ – he invited us to keep an eye out for the report which will be published in the next few weeks.

Rather cheekily, I asked Tom for some free consultancy before I let him sit down “what are the first steps we should take in the South West?” His answer was enlightening – we shouldn’t get too hung up on geography (Greater Bristol, Bristol and Bath, West of England, South West, the list goes on), and we should focus on building up and better connecting our angel community, particularly female investors and those from diverse backgrounds. He also invited us to think about the role of corporates – both in terms of corporate venturing and in developing their own culture of intrapreneurship. Finally, his plea was for us not to focus on availability of space but rather on availability of acceleration support for businesses (music to my ears!).

Nathan Morgan, Shaw & Co. Director of Scaleups

In what some would have described as a natural progression, Nathan Morgan took the stage to share insights from his work with the scaleup community and news of an innovative new programme - an accelerator if you will – the Funding Academy for local fast growth companies. As a boutique corporate finance firm, Shaw & Co. based in Bristol, help ambitious owner-managers to create, and ultimately release, value in their businesses while they grow, fund and exit. They work across the community of scaleup (helping companies get investment ready and secure Series A+), debt (or development capital) and mergers and acquisitions (exits).

Shaw & Co. is offering a free 5 month, fully funded programme which will include workshops and personalised support for a cohort of 5-10 peers. Their first cohort will begin in July and they are actively recruiting at the moment so if you are (or know companies that are), or will soon be looking to raise £1M+, expect to be generating £1m of run-rate revenue within six months and are growing at 20% + per annum (in turnover or staff numbers), you are welcome to contact Nathan – his details are in the slides linked below.

Nathan went on to share some reflections on the investment market more widely, highlighting that investors are being more selective than in previous years, that the region had a record breaking year in 2018 and is set to do the same in 2019 (partly thanks to Graphcore in Q4 2018 and Ovo Energy in Q1 2019). More widely across the UK VC deal volumes have slowed - not, according to Nathan, entirely due to the infamous B word – Brexit, as the global trend is for fewer, larger deals. He highlighted the extraordinary growth (6 fold) in Artificial Intelligence investments and his own observation of strengths in Tech and Saas M&A. As is reflected in our own region (and in-line with Tom’s recommendations) corporate and private venturing is on the rise (nearly 25% of all VC deals in Europe were by corporates in Q1 (a continued upward trend). There is still work to do in early stage investment (<£1M) where, in our region despite being home to 10% of UK Scaleups, the Southwest attracts only 5% of UK equity funding.

Henry Whorwood, Beauhurst - Head of Research & Consultancy

Our penultimate speaker of the session before we spent some quality time networking, was Henry Whorwood from our data partners at Beauhurst. He provided a whistlestop tour of the data on investment in our region – which is best experienced visually so please check out his slides. My personal favourites were his spotlight on the biggest funders in the region (my deal size) Amadeus Capital, Draper Espirit and Foundation Capital and the information about who has raised successfully in the West of England in Q1.

Henry also included some excerpts from their recent South West report and trailed a new piece of research they are undertaking to explore the correlation (or causation) between the location of investment deals and the location of universities in the UK/our region.

Download the South West report if you would like to receive the university analysis when it is released too.

Final thoughts

I rounded off the event with a quick update on those companies that are currently raising investment (and that know about these events) – there are 24 in total this quarter, with 6 raising £1m or more. If you’d like to know who they are (though we aren’t making investment recommendations here, just for info), they are listed on slides 66 – 68.

Based on the events over the last 10 days, what are the things that could truly accelerate the investment ecosystem locally?

There are a couple that I’d like to prioritise –

  • First, to drive forward the discussion about the creation of a regional investment fund of some sort. We’ve had a number of dinner discussions, and telephone conversations with funders who are open to creating a regional fund – how can we make this a reality? And challenge all our stakeholder groups to do more in this area?
  • Second, to deepen the free support, and breadth of acceleration support that is available for founders (and to an extent investors) to help to catalyse the investment process.
  • Third, building the community of angel investors – helping those that invest in London know about the opportunities on their doorstep, and helping those new to the art to understand it better.
  • We at Engine Shed are working with TechSPARK to create a new role, the Investment Activator, which we hope to have in post for Jan 2020 to help with this work.

To me, it is clear from the case studies elsewhere in the UK that it would be great to create a full team in time – does anyone want to help make SWInvest a reality?

Event Slides

*The QIB is only possible thanks to our generous sponsorship from TLT Solicitors, KPMG and Smith & Williamson and it is one small part of my work as Scaleup Enabler for the West of England. *