Our Deep Dive webinar focused on the details of the £200m South West Investment Fund (SWIF).
We were joined by representatives of British Business Bank and the SWIF Fund Managers who discussed the details, including who and how to make an approach to the fund. As the fund administration is split between two geographies, our second event was aimed at businesses based in Bristol / Gloucestershire / Wiltshire / North Somerset.
For other areas of the South West, please watch the first part: https://youtu.be/883uwH1U5-U
Speakers:
Aaron Lawes, PKF Francis Clark
David Tindall, British Business Bank
Luke Matthews, Maven Capital Partners
David Goodall, FW Capital
Good afternoon everybody um welcome to today’s deep dive into the Southwest investment fund this is um today we’re covering area two which um covers Bristol Gloucester Wilshire and North Somerset and we’ve got some great guests along today to to kind of have a conversation around all all things to
The Southwest in investment fund um my name is Aaron um I’m a partner at France Clark um in the business advisory Department I’m also a Dorset LEP board member and a representative of the Southwest investment fund Advisory Group um to kick things off um Dave would you
Mind um please giving an overview of the of the Southwest investment fund and kind of and and a little bit about your role within the British Business Bank yeah sure Aon thanks for that um so firstly by way of introduction um I’m David hindel I work for the British
Business Bank um and um I’m part of the um Nations Investments funds team um and the team that’s responsible for um delivering the Southwest investment fund um I’m also joined today on the call by um Lizzie who is um is here um and she’ll help any difficult questions that
Sort of pop up or anything that had to sort of throughout the call um so it’s great to be invited along today um and um we’ve seen a lot of interest in the fund recently so we thought it’d be really useful to sort of just come along
And just sort of try and frame and um answer any questions in terms of what the fund can actually deliver to ummes Across the Southwest so I’ve got a few sh few slides that I’m going to just um talk to now um so on the first slide um just
Going to um cover in terms of um Who the British Business Bank are so we we are the UK’s Economic Development Bank and our aim is to be the invisible hand to help make Finance markets work better for smmes across the UK um both Ling myself myself were part
Of the vent Solutions team um and the vent Solutions team has a number of programs that deliver growth Finance toes um in in various different gues um one of those program some of those programs are the regional funds programs so we have got some existing um Regional
Funds in the way of MP me and cisf um so that’s Northern P fund Midlands engine fund and the commwell Ally investment fund that have targeted Regional financing across different areas of the UK um there we’ve now recently been awarded a mandate to run to deliver 1.61 billion of funding um across different
Parts of the UK and these are the next generation of the regional funds um of which Swift is one of them so just focusing in on that sort of that 1.6 billion pounds this is how it’s being cut up across the UK so you can see from this map we’ve now got funds
That cover the majority of the UK um we run a competitive process for appointing fund managers um and the 200 million pound Swift area that is shown in the sort of the bottom left hand side of that map um sort of represents the area that these funds
Cover um so Swift is made up of six funds um and it was the first of the this generation of regional funds to launch across the UK um and since launch we’ve subsequently launched um funds on live in all of the devolved region just all devolved administrations um and me2 and
M2 will be going live um sort of later this month so focusing in a bit further in terms of Swift um so we’ve there’s three types of funding that are available um so there’s smaller loans that are available for businesses that between 25,000 up to 100,000 um there’s larger
Loans um between 100,000 up to2 million and then there’s also Equity finance that is available for Investments up to5 million um these funds have got a five-year investment period so the funds will be sort of very active in the mar market for the next five years um sort
Helping to support businesses and drive that growth across the southwest and then there’ll be a period afterwards where they’ve got the ability to continue into Investments that they’ve already got um the funds are sector agnostic so they will um they will sort of um consider applications and inquir
From um businesses across Southwest that have sort of in any sector that they are operating in um the the aim of the funds is to um ultimately to try and drive economic growth and help support those businesses within the area to grow um you’ll note from the map um we’ve we’ve split the
Southwest because it is a large patch um into two different Geographic areas um and there’s different set for managers delivering sort of the north of the region compared to the south of the region region so um I’ll quickly just cover the south of the region um so there we’ve got um Swig Finance
Delivering smaller loans um the fsse group then got the mandate to deliver both the debt and the Equity Funds they they remain two separate funds um and I’m focusing on today and sort of the AUD the sort of for manage that you’ll hear from shortly um you’ve got FW
Capital delivering the um the large debt and Maven are delivering the um the equity investments in the north of the region um so hopefully that’s giv you a bit of an understanding of the fund and I’ll just pass back to Aon now so thank you for
That thanks Dave um so we’ve also got uh David goodle and Luke Matthews from um from FW uh capital and and Maven respectively um David David would you would you mind going first and just sort of um giving an overview about your role and kind of yeah what what’s it is that
You do yeah sure absolutely and uh thank thanks for the invitation on the call I’m great to be here this afternoon my name’s David Goodall I’m a fund manager with FW Capital which is the funding arm of the Development Bank of Wales um I’m responsible for the debt fund uh of1 199
Million pounds under the Southwest investment fund and we lend between 100,000 and2 million pounds um by way of competitively priced fixed rate loans typically between 12 months and five years duration in terms of geography has been mentioned um we’re working with smmes across B and north and Northeast
Sumerset Bristol gler and the whole of Wilshire and it’s a a geography that I’ve lived in and worked in my whole life so it’s a real privilege to be working with businesses across this area um since the launch of the fund here FW Capital we’ve received around a 100
Inquiries um and they’re coming directly sort of through direct approaches through contacts that we have uh via the website ites by FW capital and also the British Business Bank websites um they’re coming across the whole of the region uh and and actually the diversity of businesses that we’re talking to is
Is absolutely immense um from artificial intelligence uh quantum physics to I don’t know your manufacturing so the whole range which really does show the diversity of of business across the Southwest economy um we’re taking a very very personal approach to the inquiries we receive um we do some initial research
First really using the public s ources of information that are available to us and then typically we set up a teams call with the business to go through the fund in a little bit more detail find out more about the business and then we can tend to work out whether it’s one
For the fund or not if it is then we’ll ask for more financial information and typically that will then lead to a face-to-face meeting um and if it’s not one for us then we’ll still see if we can help in some way and and that may be a referral into Southwest Investment
Group for example example or indeed Maven because we do work very collaboratively and there’s been a lot of uh lead sharing if you like so where it may not be one for me I might pick up the phone to Luke and have a conversation with the client’s blessing
What we try and do is find the right home for the funding requirement of that particular business and I think that personal approach is working exceptionally well actually um and and I think that will lead to some transactions being done where they may have been referred into us but actually
The transaction may be done elsewhere um one the keys for us is to be as approachable as we possibly can be and to make the funding as personable and straightforward as possible we are able to move things through very quickly we have named points of contact within
The organization so I’ve used the word slick quite a lot I guess in terms of our process uh because we are a relatively small organization we do everything in house and actually I think that makes for a really smooth transaction um which is which is really good to
See in terms of the Dynamics of the businesses that we can typically take forward to the funding stage for the debt Finance piece they do tend to be a little bit more established um and have a track record of being profitable and able to service the debt that’s provided
The last thing we want to do is burden a business with debts where it may be a stretch for them to make the repayments what we want is the business to be concentrating on the growth opportunities that it has rather than worrying about making its repayments to us as the
Fun um we are a very commercial debt fund we’re not subsidized government debt at one end of the scale and we’re not Venture debt at the other we’re a very very commercial debt fund and I guess one of the key gaps that we fill um is where traditional lenders
When they’re looking at growth funding in a lot of cases they may be looking for some form of tangible security to actually secure that debt we at FW Capital don’t need that so we do a very robust uh element of due diligence ourselves on the business to make sure
That we’re happy with the risk that we’re taking because we don’t rely on Freehold tangible security uh for our debt so we just want to make sure we’re lending sensibly and commercially so as a result we are actually seeing referrals through from High Street Banks where the relationship
Team would love to provide the debt but actually due to the lack of a tangable asset they can’t so that’s where we can potentially help and indeed the first transaction that we’ve taken forward is exactly that it’s a fast growing profitable business in the center of Bristol great management team great
Growth opportunity the incumbent Bank was unable to support due to that lack of security they called us and we were able to move very quickly to put that funding in place so we did half a million to that business fiveyear Term Loan fixed rate of 7.75% uh and work very very very swiftly
To to make sure that happens successfully um the pipeline uh that we have has some great businesses across the whole diversity of sectors which is fantastic but we are looking to support more so what I would ask is that if you’ve got a growth requirement you’re looking just have an informal
Conversation please just pick up the phone very happy to have an informal conversation whatever stage you’re at because we can usually find a home for the business in in terms of its funding requirements um and very happy to have those disc sessions so I hope that gives
You a good overview of what we’re doing at FW capital and I’ll hand back over to to Aaron that’s great thank you very much um over to Luke yeah thanks Aaron and good afternoon everyone as David said delighted to be here um I’m Luke Matthews I’m a partner at Maven Capital
Partners uh for those who haven’t come across us before we are a national fund manager very much focused on smmes particularly the growth end of s inme um we manage a range of funds promly our vcts and Regional funds and of course per this call as of last year delighted
To be managing our element of Swift in the region um I’d very much Echo uh the sort of the the the theme of what David said there um you know we very much encourage people to come and talk to us I think people often assume there may be conditions or
Criteria that apply um and we’ll come on to some of those um but um nothing helps like an early conversation so people sometimes have fears um uh around needing co-investment are they too small are they too big when is equity appropriate all that sort of thing um
And we’ll be talking about a lot of that on this call but I would say you know come and have a conversation and just try and dispel that fear I think people sometimes get intimidated you know they come too soon or they’re not ready with the information and that will that will
Somehow be held against them that’s absolutely not the case we are a ultimately we are a as David has said you know we’re commercial fund looking for an appropriate return uh we’ll be assessing the risk and the potential rewards of Any Given investment but um we’re very flexible uh uh you know other
Than um some fairly obvious criteria around the regional aspect around certain excluded sectors and things there’s um there’s a lot that we can do um indeed we actively want to be investing across a range of sectors and right across the region so really do encourage you know wherever businesses
Are and whatever sectors they’re in you know we will be doing technology in Bristol we definitely not a Bristol Centric Tech fund um and as David has said you know if it’s not right for us we will try and signpost help refer in what whatever we can to to to help the
Businesses find the support we need typically we’ll be coming in for those businesses for which debt is not appropriate um they don’t have the cash flow the profitability to support debt they need Equity funding to do whatever it is that they’re looking to do and there will be an underlying growth story
To that business um uh and personally um again I’m a I’m a local guy born and bred in bath and living in Wilshire so I’m delighted to be focusing on uh on home patch um with this fund okay great um so so to to kick things off um could maybe maybe back to
Back to Dave in terms of the the sort of rationale for for for a regional fund and kind of what the what the sort of take Up’s been like say far for for Swift yeah sure sure so um why the Southwest um sort of the rationale for
The fund um I guess we we you know as as a an organization the British Business Bank would carry out a lot of research on a regular basis um and we recognize there is a gap in the market there are businesses out there that are able to
Grow but they aren’t able to access the funding that they need to be able to do that so these funds aim ultimately they aim to address that sort of that Gap in the market and try and make sure there is funding that is available and as kind
Of David alluded to too um they they you know they they may be S of very successful businesses but they just don’t fit the profile for mainstream High Street lenders and I guess this is where this These funds sort of really step into um hopefully being able to
Sort of fill that Gap and ultimately just help those businesses to thrive and to grow um and and equ sort of on the on the equity side sort of the the the research that we carried out it recognizes that the Southwest is very much underwe in terms of the amount of
Equity Investments um it’s traditionally very sort of London Centric um and you can you can almost draw on the map and it kind of just es up to Birmingham and sort of engulfs a bit of Manchester as well um but if you know you can kind of
Draw a couple of rings from a map sort of raiding out from London and they generally sort of head to those sort of those other areas so again it’s he’s trying to just make sure that the Southwest is receiving its fair share of equity Investments okay
Great um in terms of um sort of live live applicants or or s or funding that’s been um granted so far could could anyone provide some examples of sort of success stories or what what what industries you know typical businesses that have had funding and
Kind of what those rates are I I know David you get you gave an example out there in terms of that that but other other I suppose talking about Industries and businesses you know the type of businesses you help so far yeah sure in terms of sort of
Pipeline of transactions at the moment it’s across a real variety of actually which is which is brilliant and and what’s also great is it’s across the whole of the the north of the Southwest if you like um because we are really Keen just to make sure that we reach you
Know those parts of the north Southwest if you like that you know maybe maybe even more underrepresented in terms of funding um so sort of transactions that we’re working on and very Advanced on at this point we have a um a Hospitality business U which is based in North
Gloustershire uh we’re working on a uh a retail um clothing brand actually uh very Advanced with that one which is also based in in glosser we have a software consultancy firm we’re working with in uh in Bristol um we have a restaurant business also that we’re working on in bath um
So in in terms of the variety um it’s interesting because when when sometimes as a as I’m a corporate Banker by background actually and um when you look at some of these sectors um and you you look at the general news if you like around retail and
Hospitality and you know you hear a lot of information about how challenged they are actually are um and and I think that’s you know in some cases I’m sure you know that is absolutely factually correct but um I I I also think there are some significantly um
Profitable and and sort of you know businesses with with huge growth opportunity that may dispel that rumor or some of that fact because certainly those businesses that we’re working with um maybe largely due to the actual team of people the founders um the staff and the and the position they
Hold in the marketplace is leading them to be very very successful um and and what I think has been really interesting is the as I mentioned that the High Street banks have been working with us really collaboratively and we do see ourselves as um as a real sort of asset to them
Because ultimately we’re not trying to compete with them we don’t do foreign exchange or deposits or money transmission so we’re not a threat what we are to a High Street Bank is a real you know good source of potential alternative Finance so it’s a very friendly relationship that we have there
So you know a relationship director may have a fantastic client in their portfolio that they would love to support in one of these challenge sectors but they can’t for whatever reason so we encourag them just to pick up the phone to us to have that initial
Conversation to see what we can do so whilst they might seem challenged sectors there are absolutely winners in those sectors and it’s up to us to make sure that we work with them analyze and pick those really successful ones that you know need the funding and can achieve the growth faster with our
Funding than maybe they would be able to do otherwise so I hope that’s of use Luke I don’t know what you think and what you’re seeing at the moment yeah little like you said David we’ve seen a a real range um uh of of of of sectors
Of of types of opportunity and this is in terms of the the the main few or the the the best progress that we have in process in need of completed um got a travel and Leisure business in bath that’s obviously a key sector for the local area a food production business in
Wilshire in uh that’s towards east of the county um couple of cyber security businesses that’s obviously a a a really important um sector for the local region um one in particular I’m thinking of in Bristol one in gloucestershire um and we’re in process with a with a essentially Bristol located tech company
Along with a manufacturing sort of engineering business out in Porter head um towards the west of the region so that’s not a sort of confected mix of businesses that does just happen to be the spread of of of of the main ones we’ve got in process currently common
Themes there um quite a few of those wouldn’t be Eis VCT eligible so they can’t be serviced by those parts of the market they’ve outgrown the Angel communities some have had early stage funding or been in touch there but they’ve outgrown those capacities and they’re not debt ready you know they
They can’t support they can’t support a debt proposition so you know that’s where we’re finding that the the regional fund really can sort of plug the Gap those companies you know wouldn’t know where to go otherwise um so they’ve been really nice fits fits for the business um so yeah again just
Just several of those sectors I’d see as as key for the local for the local area um but uh but certainly seeing that real range coming through and also on a size basis you know we’re seeing everything from pre-revenue through to you know really establish businesses um we’ve got
To make it work for our for our check range of sort of at the minimum and 250 300K up to 5 million per company and probably a sweet spot of half a million to around two two and a half million um that that you know we we’re think of
That check size but otherwise we range in terms of that age and maturity of business as well okay Luke um could you just touch on the point about pre-revenue for for for for businesses looking to raise Equity yeah we we’ve had quite a few approaches from pre-revenue businesses
Or businesses that are if not technically pre-revenue in the very early stages or maybe they’ve had some grant funding or early proof of concept but they’re not into sort of proper commercial Revenue yet we are able to do those you know we’re not prohibited from doing those however there is an obvious
Lens to risk here um and and those businesses just statistically know they are the highest risk category we can encounter so um what we what we’re doing is appraising all the other factors which could give us the confidence to go ahead um around the management team the
Experience there the sort of proof of concept in the market what do they have to do to break through to material sales revenue um and and and what’s the cash burn cash investment going to be required to get there can they scale when they get there um in some cases to
Be candid you know the might be they’re not ready for institutional investment yet in some cases we may be able to do something um uh and and as with other businesses as with other opportunities that may be um co-investing as part of as part of a wider group although we can
Sole invest ourselves so in short we can do those early stage companies but we do have to be mindful of risk and we’ll be doing everything we can to assess the risk via these other means um the the the team the market traction and so on okay that’s great
Um yeah loads of questions come to come to my mind but um obviously if anyone does have any questions um feel free to please um add them to the add them to the message board and we we’ll address them as as as they come in um regarding
As you as you’ve got businesses across the region and obviously as these funds are quite region specific um presuma you’ve had inquiries through from businesses which may be looking to relocate the area or not quite in within the area could you could could um could
You kind of cover cover off that for me please yeah I’m happy to to to cover that you know ultimately this is a fund for the Southwest um so what we’re looking and probably one of the assd tests is to look at okay well if we support what is the benefits of the
Southwest economy clearly as as Davis said there are other funds similar funds with the same structure as Swift sort of across the rest of the UK um so funny enough I actually pointed uh a a business to to another fund actually uh literally this week where actually I
Think they just sort of SE seen Swift and thought right okay we we’ll have a look at that but they’re not based and they don’t have any trading here either so but there is another fund that can support them with that so you know we’ll definitely direct if it’s not a benefit
To the Southwest you know what we’re looking at as say is the acid test of what benefit is it going to bring to the Southwest economy so either they need to be based here or fundamentally do quite a bit of there business here um so that’s really the story that we would we
Would look for um I would say and not just because they’re on the call but actually our relationship with the British Business Bank is fantastic um so you know if there is something that we think oh do you know what this is a little bit marginal not quite sure um
Then we have a very sensible conversation between us to go right okay do we think this works uh if it works fantastic we’ll take it forward if if if it may not then right can we find another home for it so um I hope that helps
No yeah definitely and just to add on that Aaron we’ve certainly seen situations where for example companies are concerned that their registered office is in London or that they’ve done other things elsewhere that that’s okay that’s that’s absolutely fine you know we try and look through that and as
David had just said you know assess that that benefit to the region I think you can tend hopefully to sniff out the ones who are sort of you know it it’s it’s all a bit too flimsy they’ll they’ll take a desk a single desk and uh you
Know that’s it um you know that that we’re not looking for but these these features where things you know there’s a registered office or there’s some operations or the dev team is virtual all that sort of thing that that that that we can look through yeah that makes
Sense so yeah quite quite quite a material presence within the within the region is kind of what you’re looking for that make that that makes a lot of sense um when when businesses uh are looking to apply um obviously both both both you um You Luke and and David have
Sort of spoken about the application process and some of the information that that needed to be provided um how how in depth does how in depth does an applicant need to go with their financials and um and kind of how long would that process typically take yeah if you’re happy I’ll U I’ll
Kick off on that one um so initially we we have a very simple inquiry form uh Tes takes a minute to to complete and that gives a little bit about the company uh what it does how much it’s looking for and then how they want to be contacted um so that’s our starting
Point once we get that um we’ll then look at the company based on the public information that’s available you know look at the last couple of years financials from company’s house get a little bit of a feel for the company before then asking for a call a teams
Call um the teams call Will typically take about half an hour and we do that with every single business that applies that’s really important to to us to do that um if it’s a transaction we’re looking to take forward then yeah definitely we look for uh more in-depth
Financial information so the way that we’re tending to find it works best is the last a couple of years of finalized uh year end accounts um latest management information uh preferably profit and loss uh balance sheet and cash flow integrated if possible that’s the dream doesn’t always happen that way and we’ll
Work with whatever they’ve got um and then obviously what we’d love to have is a little bit of visibility about forecast again preferably integrated forecast but we know not everybody has it in that sort of style so you know we will handhold we will support and we will
Work what we don’t want to do is a company to incur cost where it’s not necessarily required um so the fir a probably good example is actually the first transaction that we we did they they didn’t really have a management account infrastructure in place actually so when we asked for that information it
Wasn’t readily available instinctively we knew that it was a company we wanted to support which which was fantastic but actually we then did have to ask for some more granular information that they maybe were producing now we didn’t ask for that lightly um we would only ever ask for
What we need um but actually what it meant was they needed to get some external support to provide that but that has been a real benefit to them because they are divisionalized and one of the things they didn’t have a real handle on was what elements of their business businesses were
Profitable what elements may not have been profitable and been and by going through a process of getting a proper Mi management information structure in place and putting some proper forecasts in place has given them actually some really good direction on areas of their business that they need to be focused on
Either to improve margins or to take forward future growth um so as I say typically that’s the sort of the level of information we would go for actually most companies that we’ve spoken to have got that um so I would say probably 80 80% of the companies that we’ve got have
Actually had that sort of information readily available um and and actually it’s been of a decent standard um the application form itself is is very straight forward we would only ask for an application form to be completed once we have a feel that there is a as a positive opportunity to take forward
With them because it does mean we undertake credit checks and that type of thing and they leave a footprint so you know if it’s something out and out we don’t think we can do then we wouldn’t ask them to go through that process um other than that there are three of us in
The team here at FW capser in the southwest so a couple of us would tend to be involved in each transaction so the business would know exactly who they’re talking to and we will just support them every step of the way to make it as straightforward as as we Poss
Possibly can for them um and I say that approach seems to be working really really well we’ve had some great feedback on that um so that’s the debt side how we operate Luke I don’t know on your side yeah we operate in a very similar manner um and and and very much
You know as you say d if a company has it already that’s fantastic integrated three statement models amazing if they don’t we can work with that we can help them help them get along the way and it really is about that business understanding point it’s it’s not about
Trying to finesse what last year’s account should have said it’s about have we really understood what’s going on with the business and as you play through and certainly with the equity Investments you know we say 99.9% of businesses won’t do their plan but it’s a mechanism we can talk about you know
What happens if sales are faster sales are slower we uplift this the investment in the overhead all of those Dynamics really come out when you’re having to put something down on paper and play it through so that’s what we’re trying to achieve and exactly like David you know
We’ve got a team of us here based based in um sat brist office today and and it’s us working through it with the companies it’s not a sort of computer says no type type analysis Dynamic it’s it’s you know we’ll be sitting down with the companies and working through
Whatever they’ve got by the time we come to the end of the investment process there’s probably a financial model and a set of forecasts that looks vaguely similar to a lots of others in terms of form and level of detail but what companies come to us with they might
Have hugely different starting points and and and we can help them we can help them through that process so that sounds good yeah that that kind of echo Echoes a lot of the information we we tend to see from see from clients and I I yeah the the free the freeway
Forecast is always the the hardest one for people to to understand and and also to get right definitely but um but in terms of decent management accounts yeah hopefully that’s that’s what most most people should be should be coming coming to from the start um what about um
Personal guarantees on some of the lanes as well yeah uh we because we don’t look at Freehold security um the type of security that we would tend to look for is uh you know a mortgage debenture which is sort of pretty typical for a lender to take uh from a from a company
Um just on that point we can co-invest alongside other funders so for example High Street Bank may be lending to a business already may have a mortgage debenture in place we’re happy to sit behind that uh in a subordinated position um so as I said security is
Just not as uh you know not the big end all for us we would take tend to take a personal guarantee um the level of that would absolutely be discussed with the uh with the people behind the business uh Can Can it can it impact pricing positively actually if there’s a
Personal guarantee in place um and but but but the the level would really be uh dictated by what sort of level of investment the the um shers may actually already have in the business um and um certainly for the first transaction we’ve done uh the personal guarantees
Are at actually at quite a nominal level quite a low level um just really a little bit of commitment from the from the directors there uh but in that case they have sort of pretty pretty strong shareholder loans in place already so we didn’t feel the need to to have high
Personal guarantees um so went at a very low level which the the director were we’re we’re actually very happy to to provide we’re very upfront about it um you know there are cases where I’ve had conversations where the first comment is we’re not giving personal guarantees and and that’s sort of the
Starting point if you like which is which is always quite an interesting one and you know for us um you know clearly each case is going to be looked at its own merits the majority of our cases would have a personal guarantee behind it um you we would explain the rational
For that um and it’s not necessarily you know the recourse to the assets as such it’s more that we tend to find that directors are more Cooperative um if if a business gets into a little bit of difficulty if there’s an element of a personal Guaranty in place and the
Directors will tend to be a little bit more Cooperative a bit more Hands-On um that’s a really General point and uh you know I always feel a little bit difficult in saying that but I guess the facts have been proved in that case that that that tends to be the end result to
To be a better result I hate talking about doomsday scenarios because that’s when it all comes into play isn’t it really but um we take it’s best to be open and honest about that at the start of the discussion which we would which we would always
Be I think um yeah I think I think I think you’re absolutely right I think clients always seem nervous when they when they want when they’re asked for a personal guarantee and what what it could potentially mean but ultimately you know if they if they’re ask if they’re trying to attract investment
Into their business they’ve got to believe in what they’re trying to do and I suppose you they’re they’re they’re in control of what the business is going to do and they need to show that they’re um they’re prepared to sort of to to back what they’re asking for really isn’t it
So it’s it’s only it’s think it’s it’s only reasonable really um but but yeah it’s important that people sort of realize that that that that is required um we we do we do have a question actually um for for Luke I think on behalf of Maven in terms of um does does
Maven work with innovate UK for for Grants and would you run would you work alongside other funders I suppose with that when when raising Equity yeah two two elements to that I mean certainly yes we do work alongside interet UK or or and if not you know in some case they
Have funding Dynamics and we have good relationships there and they refer things in but more generally a very large I couldn’t tell you off the top of my head but it’s a very large proportion of the portfolio have in some way engaged with innovate before had grant
Money or or or had funding I could think of several of the portfolio currently that that have that have been beneficiaries of innovate money or or participants in schemes so absolutely we’re happy to work alongside innovate or with companies that have had involvement with innovate and more generally happy to work alongside other
Funders um indeed in some situations that that’s really helpful to us to have that you know that conviction from someone else alongside and and indeed depth of pocket I’d say the one thing that we don’t seek to do a lot of is to be a very small part of very large
Fundraises that are syndicated amongst lots of funders I think that’s not really the purpose of why we’re here um and um uh uh you know that may be that may be the right solution for some companies and that’s great but that’s that’s not what we’re what we’re seeking
To do typically if we’re working with other parties it will be a small you know one two others I’m talking institutional funders if there are angels or a tale of friends and family investors maybe there’ll be more on the cap table but um in terms of sort of meaningful co-investment it’ll typically
Be a small number and will be a very significant part of that but um yeah very happy long- winded way of saying yes very to to do that eron um that’s fine that’s great um so there’s probably there’s probably a few people attend there’s probably a few people on the
Call who might be thinking of ideas or thinking of things in which they they they could um that they might be looking to get investment into their business could you provide some typical examples of obviously you’ve given a background around the businesses that you have funded but maybe around some of the
Things that they’ve actually used the money for so have they’ve been looking to buy assets acquire open new premises what what they actually been using the money to to actually do it’s it’s a real mix um so uh we’ve had one which is all around uh bringing on new staff uh
Expanding the team uh because level of demand for what they do was very very high and they didn’t have enough people to fulfill it um so just needed to bring on a new team and they they had plans and they probably could have done it over maybe a three-year period based on
Their current trading performance but the benefit of the Swift funding was that they could do it like now so they just real opportunity to take um and you they’ve probably been able to bring It Forward maybe two two years uh than they would have done if they’ just done it
Organically uh and that’s a real benefit to this fund right there’s no no question about that it just means these business can take it Forward faster we’ve got a business just opening a looking to open a new restaurant um so Capital Equipment staff getting that up and running um we’ve got a Hospitality
Business is actually developing extra rooms so sort of falls into a little bit of real estate but it’s for their own business um so that will attract more staff more guests more tourism into the location so again a real benefit to the the Southwest economy uh um we’ve got
One actually was a really interesting one that um we’ve had some initial discussions with we’re seeing next week actually um and the company’s just been acquired so we’re not involved in the actual funding of the acquisition that’s been done privately but the acquirers have actually seen this huge opportunity
That hasn’t been taken by the previous management team um and that again is capital that staff um they’re looking to do some overseas contracts um so you know huge range uh sort of w within that um we have a business that I’m smiling because it’s one I I’m really
Desperately wanting to support U and we’re just waiting for all their management information come to come through at the moment um they’ve promised it today and I’ve been looking at my email saying has it come in yet uh it’s of it’s just an amazing amazing story of two like young entrepreneurs in
Their in their like ear mid 20s I guess now um it’s one of these stories you hear about they were trading at school like Suites in the playground and then they went on to do you know various other things things and um they are theyve got such an amazing growth
Opportunity they’ve already grown substantially um but they’re looking to take on new premises looking to take more stock to fulfill what they need they need a new it infrastructure to make it all seamless and they’ve got so many different opportunities and for that one I think it’ll be trying to
Refine okay well what do they actually need how do we structure this in a way that actually is going to make this work for them um to enable them to take this growth forward but in a measured way they’re very measured people right I’ve got no concerns over the management team
They’ve done an amazing amazing job um but that’s a really really exciting one but just shows the breadth of what this fund actually can fund um there are so many different elements to it um so sorry I just went a bit excited then because I love this particular business
It’s right near my house as well and I think they’re cracking entrepreneurs and uh that is the beauty of this job actually you get to meet some amazing businesses and you starting to talk to them at an early stage you almost become sort of a friendly advisor to them
Because they start saying oh you know I’m looking at doing this what you reckon type of thing and I love that that’s a brilliant part of our role actually yeah that’s that’s good that’s a good bit David and I live quite close to each other I’m trying to figure out which
Business what business he’s talking about now start looking at Maps um I can certainly give you two two examples of of of things sort of two categories that have been coming up a lot one is around um manufacturing businesses and fmcg particularly food and beverage um there’s been definitely a sort of a
Cohort who are looking for that physical expansion and it’s investment in working capital it’s site expansion or site move I’ve got offers out on one at the moment which is it’s a great um a food and beverage business um which is outgrowing its premises it costs a lot to to to
Move up um do all the working capital adjustments to keep Supply going whilst they affect the move and that sort of thing and they’ll increase headcount so on so so there’s definitely that that sort of physical expansion bit the other bit particularly when we’re coming into technology businesses or Services
Businesses there’s a very common story around again expansion but it’s typically in headcount typically around sales and marketing um uh both in terms of outward spend you know PPC or whatever it might be but also definitely headcount and also internal functions you know often people or companies are upskilling their
Internal functions perhaps appointing a finance director they they’ve outsourced before but those sorts of things and growing up as as an organization and wanting help to do it so I think in general those are probably the two sort of types of case study that we see more
Than any other kind and and in terms of use of funds not to say other things wouldn’t be entertained but that’s that you know they they’re um they you know I can think of several I say we’re working through and those are those are those are very common common stories for us
That’s really that’s really helpful um that’s really helpful we we have we’ve had a question from an Andrew steer actually um it’s um it’s it’s aimed at it’s aimed at Luke but it might be it might be um so maybe Luke if you could cover it first but I think it’s I think
It’s also relevant for Dave as well in terms of the the actual fund itself for British Business Bank um I don’t know if you can see the question recal but yeah absolutely the type they’ve asked um what type of returns crit that that Equity might ask for and any exit time
Frames and and I guess for for Dave it’s then around um you know the actual fund itself and kind of uh how you know what what the future looks like for it I guess yeah certainly from our point of view um exit time frames um it’s a it’s a 10-year fund and
We’re I know we about nine and a half years to go um but we will assume for a given investment unless there’s a good reason to assume something else we’ll be modeling things over a typical 3 four five year Horizon that four to five year Horizon for an equity investment would
Be the norm and and and that’s what we’ll be modeling as I say absent any other consideration and that also doesn’t mean we’re necessarily tied into that if a business as frequently happens with the portfolio some businesses will going a tap on the shoulder um partway in maybe that’s attractive some
Businesses might take a bit longer I mean you know portfolio plans went out the window for all of us when covid hit so um you know the these things are flexible but we’ll assume you know 4ish years in terms of returns criteria then are Target again bit flexible there’s an
Element of risk reward going on um and you know the the food and beverage business I mentioned that’s moving site isn’t going to explosively grow to the same degree as some of the tech business we’re working with possibly it’s a little lower on the risk scale as well
Um so we’ll we’ll be taking that into account but as of you know if I can generalize though as a fund if I can see a two to three times return um on a on on average Investments that that’s good um we’ll be looking at a downside
Sensitivity where if we can credibly be getting our money back be at one point something times um and then on upside if if a credible set of positive circumstances come through being into that three to five times category you’ll appreciate I’m General generalizing hugely then that that that’s a that’s a
That that’s a a good triangulation of terms from an investment committee perspective obviously some things will do better and you know we accept there’ll be there’ll be a range within that but if we can average out to that sort of that sort of profile then that’s
That that’s okay from an equity point of view I’m sure David this is where you and I will differ a little bit in terms of uh in terms of the returns profiles um yeah so I’ll just take the point then about the wider fund um I
Guess following on from that and I think it’s important to almost step back a little bit here and look at the sort of the precess to the Southwest investment funds which was those so the non Powerhouse middle engine funds those funds were set up and they were sort of
The almost the test case for Swift and that that was kind of the spring board we used to get this funding from government so in total that was 700 million fun funding package of which um UK government effect contributed around the 200 million pound Mark so we’ve been
Able to go back and say look these funds are great they’ve delivered these sort of commercial outputs strong returns as well as another sort of a number of sort of jobs created and a whole raft of sort of economic benefits and off the back of that is how we got the 1.6 billion
Pounds so I suppose we then sort of cast that lens forward and we look at sft we’ve obviously we’ve pointed um the funds that we’ve s talked through from David and Luke representing today and you know we we we we drive to get good strong um commercial returns for the
Fund within the parameters that have been set out and ultimately the sort of the aim is is that these funds will almost become self-filling so that um without wanting to you know there’s only 50 minutes left so I’m not going to go into government accounting for how it all actually works
Because there just isn’t enough time for that but um we basically want these funds to deliver a strong Commercial Success so we can stand there and say look there’s a real need for these funds to to help support businesses in the southwest and we can sort of point to a
Whole load of businesses that have been supported and sort of economic output that has been driven and growth that has occurred as a result of these fun businesses that otherwise wouldn’t have been funded to grow and then off the back of that I guess the long you know
Sort of the crystal ball piece is that we’d look and as these funds sort of start to reach the end of their life either look to potentially request more money to extend them or come up with swift 2 so that’s the that’s kind of the we you know we’ve got to be looking
Reasonably ahead in terms of um the time scales for doing that but that is ultimately sort of from the banks perspective we want these funds to be a commercial success and for them to be a commercial success they then deliver all the economic outputs that help businesses grow along the
Way okay um no that’s that’s great is that is that the main sort of um would that be the main kind of register of success for the bank is there other is there other parameters that you’re looking at and yeah so we we um so in terms of sort of the parameters
That we’re looking at to measure success um we we will carry out analysis on the sort of economic valuations on these funds sort of a number of sort of inflection points throughout the life of the fund um obviously the the commercial commerciality is the one that’s very
Easy to measure because there are pound notes on the table and we can we can count them we will then through the evaluation process we will um sort of form a view about what other sort of outputs have been been um driven so in terms of things like this jobs created
Whether it’s sort of increasing exports there’s a whole raft of sort of measures that we’ll look at um and then sort of intertwined into that um the bank has got um ESG objectives as well and we’ll again we’ll look to um to how we’ve sort
Of how the fund help support those um I guess it’s important to to note that um it’s not um it’s not an the SG Focus fund so it’s not necessarily looking for those um objectiv as a sort of an investment criteria um and the I guess
The other thing as well is we we look to ensure that um there’s been the spread across the entirety of the region so um the fund managers they they’ve got targets that we’ve we’ve set them to make sure that the funding isn’t all going out for instance in Bristol you
Know we want to see the entirety um of businesses across the entirety of the supported um and sort of the the targets that manager’s got will hopefully help support drive that deployment and to make sure it’s getting into the right areas I think there’s there’s something
There if I can Aron just just um to touch on um is around the ESG side and and I think um uh we’ve seen a lot of opportunities it’s another sector that’s a strength of the region um we haven’t mentioned on this call yet today but we’ve seen a lot of opportunities around
Of circular economy and and and businesses that in some way have a lens to ESG outcomes as Davis said you know this isn’t an explicitly EST or impact fund but obviously we are thinking about these things and and just commercially there are great opportunities going on but also we see in particular with
Earlier stage companies um people saying sort of wanting to um knowing these issues are important but not really knowing how to address them or not really knowing what ESG means for their businesses and there another way as a fund manager and with a portfolio of businesses you know trying
To help them with that best practice and see you know how will ESG considerations affect them might that beer or anything from you know diversity within their employee base through to carbon policies or whatever it might be you know that that’s one of the areas where I think
Companies um uh do and can look to us to sort of help as part of our role as we work with them um through the investment the investment phase and then post investment as well um but it is a real strength of the local area I think absolutely ESD is becoming you
More and more more relevant it’s it’s featuring into kind of um all sorts of all sorts of all sorts of Industries businesses and major businesses have to have an ESG policy or looking at what suppliers they use and yeah their supply chain we’re we’re seeing it as well in
Terms of some of our audit tenders as a firm that um clients want to be that larger larger companies want to be audited by um companies with as you positive ESG credentials so um yeah it’s definitely something that’s I can see I can see that it it doesn’t that it’s
Needed for um to be considered in any application um does anyone have anything else that they’d like to they’d like to add I mean most of the most of the sort of topics I wanted to cover I think we’ve spoken about yeah the only thing I was going to
Mention um is is about Southwest Investment Group actually so um you know not represented on on the call um this afternoon but you you do play a pivotal role in delivery of the Southwest investment fund um so just to recap they will do debt up to 100,000 under
Southwest investment fund um they also administer the startup loan scheme and I I have to say I’ve been really impressed with them as a sort of corporate Banker by background um I wasn’t really ever quite aware of what they did um you know they are across the whole of the
Southwest and you know they they are really supporting some fantastic earlier stage businesses to to Really achieve ambition um so I just really wanted to give them a shout out um you know some sometimes um you know what I’ve I’ve actually sort of put some referrals into
Swig maybe where they are a little bit earlier stage maybe where they don’t have a sort of a track record of profitability as sort of turning a corner or indeed maybe they don’t want as much as a 100,00 which is what we do um and uh swig’s um sort of response and
Attitude to that has been fantastic um so you anybody on the call who doesn’t know about Swig uh I’m not on their payroll by the way but I should be maybe but I’ve been mly impressed with how they’ve dealt with some of these smaller earlier stage businesses so definitely
Advocate you’re having a look at that indeed there’s a Southwest investment fund. co.uk website um so that that gives a real good point to actually is to all our contact points who you can talk to about what but I know Luke and I you know very happy to have any any
Conversations we will make sure you we point you in the right direction at any stage absolutely an I’d Echo that and I’ll just add um people can work with more than one of us in the course of their life cycle in fact in a way that
Would be quite a nice thing to see businesses cycle through maybe start with a smaller um loan from Swig and then and then progress and you know um outgrow that and do something else and and that’s that that’s absolutely fine and on that theme something I I I should
Have said earlier with the early stage companies is that we can um follow on in fact we’re very keen to follow on so again companies sometimes are saying is now the right time or we what you know a good solutional around can sometimes be to take an amount what they need um and
We’re very happy to back businesses that then continue to grow and they might be further working capital needs or or what have you and it manages the dilution for the company our risk but allows us to support support the businesses as they grow so it’s just in that theme really
Of flexibility and sort of um you know that there’s an awful lot we can do but that’s another angle that we hadn’t yet mentioned on the call um you know this this is not a a a one-time opportunity whether that’s working with one of us fund managers or indeed money from a
Particular fund manager it can be repeated along the way very good point very good point and yeah that that and that that kind of Echoes the the main um aim of the fund doesn’t it really it’s all about growth so if you if if you start with a small
Start with a small initial loan and then and then recycle that into Equity then that that’s kind of the aim of the game really absolutely and that I think you know to how it’s been designed you know provided yeah it’s we can demonstrate the local the local Inc enough Regional
Presence enough Regional benefit um you know we we we we want to be supporting good growing businesses sounds terribly cheesy doesn’t it but sorry even even this week Luke um you know we’ve had we’ve had one of those situations this week actually where um you know a particular company
Has approached um me um and actually I can do some debt um which is which is great we put some terms out to them um but their their growth aspiration is very significant and their opportunity I think for growth is very significant so you know with their blessing I said look
You happy that you know I make an introduction to Luke at Maven uh because Equity isn’t needed for them today but actually you know having a discussion today about future Equity I think is very very beneficial for them uh because they may well need it over the next or
12 to 24 months um so I think that’s where the cooperation between the three fund managers in the north of the Southwest is really strong um and we can just make sure we’re looking ahead okay what might this company need in the future what’s the best type of way in
Which we can take that forward um so you know I think that’s sort of a good live example if you like of how that can how that can work yeah totally agree um Dave any any parting thoughts anything you want to cover off on behalf of British Business
Bank yeah sure I mean um I guess just to reiterate um I guess I’d encourage anybody that’s got sort any sort of incarnation they may be sort of interest in fing um to come through the the website so Southwest investment fund. co.uk um and if my my comm’s colleague
Was here should be kicking me in the ribs to to plug the LinkedIn feed as well um the sort we we will be hosting sort of a number of events ourselves as well across the Southwest over the course of the year um and they’re generally a great opportunity to meet
The likes of sort of Luke David and the other fun managers that we’ve got in swi Swig Finance in the smaller space and but also come and meet them and quite often those conversations um I’m I where i’ be told that s to take place over a
Coffee at an event quite often often um highly fruitful and they can sort of help sort of drive in any sort of specific questions and sort of resolve any issues and hopefully ultimately get some funding to work and um help some businesses to scout there so um I guess
Sort of get involved is almost the the call to action let’s say to um to everyone but yeah absolutely and never too early to to to start a conversation I think key things to take away okay great well um thank you very much for your time and thank you thank
You very much for everyone that’s um join joined in um and listened to listen to listen to this conversation so um we we’ll end it there and um thank you very much have a good afternoon