Latest Business Deals – Courtesy of GrowthBusiness.com

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ICAP buys PLUS-SX for £1

Inter-dealer broker ICAP has agreed to acquire junior stock exchange PLUS-SX for £1.

The deal, which has been completed on a cash-free, debt-free basis, follows an announcement earlier this week by PLUS-SX's parent, PLUS Markets Group, of its intention to wind down after several years of losses.

If the deal is approved by shareholders, it will offer a home to the 156 companies quoted on the market, which include football club Arsenal and Stieg Larsson publisher Quercus.

The transaction is subject to no insolvency proceedings having been started in relation to PLUS-SX. If the deal is not completed, PLUS-SX will be wound down as previously planned.

Unaudited accounts for the period to 30 June 2011 show losses of just over £1 million attributable to PLUS-SX. For the year to December 2010, losses were almost £5.7 million.

Malcolm Basing, interim chairman of PLUS Markets Group, says the deal is 'the best option for our shareholders and secures the future of the PLUS-quoted market'.

The two other subsidiaries of PLUS, trading platform provider PLUS-TS and derivatives exchange PLUS-DX, are still up for sale.

Software business WANdisco intends to join AIM this June in an IPO that will raise £10 million.

The Sheffield-headquartered company is looking to raise the amount through a placing at 10p a share via broker Panmure Gordon to fund its overseas growth programme.

The group specialises in software for the software development industry, for engineers and developers. Its Customers include telecoms giant AT&T, Japanese motoring heavyweight Honda and mobile phone manufacturer Motorola.

WANdisco uses a annual subscription model for its products, and reported that revenues rose from $3 million in 2010 to $3.9 million in 2011.

The company was founded by David Richards, Jim Campigli and Yeturu Aahlad, three IT veterans.

Richards, president and CEO of WANdisco comments, 'From our bases in Sheffield and Silicon Valley, we have successfully developed and sold solutions to some of the biggest challenges global software development teams currently face, helping them to speed up and simplify their development efforts in ways not previously thought possible.'

'Our intention to float on AIM is a statement of our confidence in WANdisco’s technology and of our belief in the opportunity open to our business. We have a clear strategy for growth and the funds raised through our proposed placing will help us deliver on that strategy, opening up new markets, new products and new possibilities both for WANdisco and its customers.'

Meridian Growth Capital and Ballpark Ventures are joining existing investor Beringea, who initially backed the business in 2008, in supporting the growth of Blis, a company that provides services for display advertising.
 
Established in 2004, the London and Sydney-based business supplies services to advertising agencies, brand advertisers and publishers. The new funding will allow Blis to build its technology and expand its operations into the US.
 
As part of the $1.4 million deal, Hal Philipp and his investment vehicle Meridian will take a position on the board.
 
Philipp invented and patented the capacitive touch-screen technology that is used in smartphones and consumer electronics. His company, Quantum Research Group, was sold to Atmel in 2008 for $130 million.
 
'The technology Blis is building is incredibly interesting. It has the potential to add a lot of value to advertisers, scale quickly and as such be a very disruptive force in the ecosystem,' Philips says.

Gregor Isbister, CEO at Blis, comments, 'Having Hal on board is an amazing asset to the team. The technology he developed has changed the face of our industry and reaches hundreds of millions of people every day.
 
'The experience Hal brings in building and expanding businesses and the expertise in technology and IP [intellectual property] is immense.'
 
Following the funding round, Isbister will continue in his role as CEO, with Kevin McGovern taking the role of COO as well as his existing position as CFO.

Smedvig Capital has realised its investment in Ocean Outdoor through a deal worth £35 million, a 4x return on its total outlay.

The London-based investor first invested £5.7 million in Ocean back in 2008, and obtained a majority stake through an input of capital to allow the business to grow in the market and focus on its digital offerings.

Ocean Outdoor provides out of home advertising and specialises in large format digital and iconic landmark locations. Upon taking a majority stake in the business, Smedvig brought in Tom Goddard, former CEO of the International Division of CBS Outdoor, as chairman.

Further new hiring came in the form of new CEO Tim Bleakley, a former UK managing director of CBS Outdoor, one of the world's largest media outdoor companies.

The deal sees LDC come on board as majority stakeholder, and will see the new private equity firm partner support further expansion as it pushes for 'a more central role as cross media digital audiences coverage'.

Johnny Hewett, chief executive of Smedvig Capital, comments, 'We are of course very pleased with the financial outturn of the Ocean investment making nearly 4x invested capital in four years.

Speaking to GrowthBusiness back in April, Hewett said that he was a firm believer in the role of an independent chair appointed jointly by management and their investor, a process which has been implemented at Ocean.

He added, 'A person with real experience and a track record in the relevant industry adds gravitas and opens doors for the business.'

Goddard says that securing the backing of LDC is a 'strong endorsement of the Ocean brand and team'.

Daniel Sasaki, managing director of LDC, adds, 'The Ocean team presented a compelling story of what has been achieved to date, together with their exciting plans for the future.'

This is an interesting book that gives an insight into the mechanisms of the brain. It explains why we think in certain ways, what the inhibitors to thought are and how we can start to manipulate our own thought processes to be more effective and powerful.

Unfortunately the conclusion you reach on reading the book is that it is going to take a long time and a lot of effort to improve your performance significantly. I can’t see myself waking up any time in the near future as the next Leonardo Da Vinci. That said, the book does have some real nuggets that I will be taking away and I have already started to apply to my working life.

The advice on how to break bad and lazy thinking habits is interesting, and I’ve already used it to good effect. Some of the concepts mentioned were already quite well known, such as abstract association to aid memory, but again it was useful to have a more in-depth understanding of them.

In summary, this is a thought-provoking read but from a business perspective I don’t see it having any meaningful impact on my cash flow or bottom line tomorrow.

As the Greek tragedy enters its final act, Athens' exit from the Euro is looking grimly inevitable.

The country that proudly calls itself the cradle of democracy has been badly let down by the democratic process.

This month’s inconclusive elections have left Greece in political limbo, and it could go bankrupt and crash out of the Euro as early as next month.

But as the bloody denouement begins, all we can know for sure is that the ripples of what happens in this proud nation on the edge of the Eurozone will be felt across Europe.

The Greek economy's small size and distance from the UK mean that few British companies are directly exposed to a Greek collapse, but Britain's banks are closely linked to the fortunes of the Eurozone through a network of loans.

Knock-on effect

The immediate impact of a Greek exit would be to make Greek banks go bust, but this would quickly cascade into bank defaults in other weak Eurozone countries like Spain and Portugal.

A Greek default will surely lead to international investors pulling their money out of the Eurozone, cutting a further swathe through the banks' balance sheets – including those of British banks.

The cause will be different, but the effect could be the same as, or even worse than, the 2008 credit crunch.

For Britain's struggling SME sector, the most immediate impact will be a sudden and potentially disastrous tightening of bank credit.

Despite the best efforts of Project Merlin, in many cases the banks are already unable or unwilling to lend, even to vibrant businesses.

Another credit crunch could force them to bring down the shutters on new lending, and even start clawing back existing lines of credit - for example by withdrawing overdraft facilities.

British companies that export to the Eurozone (of whom there are many as it's the UK's biggest international trading partner) will be doubly exposed as their European clients may suddenly start struggling to pay invoices.

This problem will be compounded by the likely fall in the value of the Euro - which will make British goods relatively more expensive.

The mere spectre of a Greek default sent the Euro to its lowest level against the Pound for three and a half years.

The net effect will be to put severe strain on the cashflow of many British businesses.

Round 2

Most worrying of all is the prospect of a second credit crunch. The last one in 2008, which began in the esoteric world of US sub-prime mortgages, soon spread to Britain and triggered the recession.

If the Eurozone crisis once again leaves banks unable to provide their traditional role as sources of finance, businesses will have to look elsewhere, to alternative finance providers like crowdfunding, private investors or invoice trading platforms.

Our experience shows that invoice trading is becoming particularly popular as a source of working capital.

Trading invoices online releases cash back into an SME’s business weeks or months before their customers eventually settle invoices.

By giving businesses earlier access to the money they’re owed, it improves cashflow and reduces a firm’s reliance on other sources of funding such as overdrafts, which are likely to become in ever shorter supply.

The banks are constrained by the pressures affecting the money markets – and if those markets seize up, so will their ability and appetite to lend.

As Britain braces itself for the fallout of a Greek default, Britain’s SMEs will need to prepare for the worst – and explore alternatives to the banks as sources of funding.

With the banks at risk of being sucked into a vortex of Eurozone chaos, alternative sources of finance will be thrust to the fore – and could play a vital role in helping SMEs cover their overheads, pay their bills and deliver the growth that will be UK Plc’s best defence against the gathering storm across the Channel.

Jon Moulton founded investment firm Better Capital in 2010, and has invested in turnarounds for more than 30 years. He is also an active angel investor, non-executive chairman of City broker FinnCap, and a member of the advisory board for the £2.4 billion UK Regional Growth Fund.

Jon Moulton founded investment firm Better Capital in 2010, and has invested in turnarounds for more than 30 years. He is also an active angel investor, non-executive chairman of City broker FinnCap, and a member of the advisory board for the £2.4 billion UK Regional Growth Fund.

Private equity heavyweights 3i have unveiled Simon Borrows as the firm's new chief executive, taking over from the departing Michael Queen.
 
Queen joined 3i in 1987 and spent time as managing partner of the firm's infrastructure business and global head of growth capital before taking up the reigns as chief executive in 2009.
 
Borrows moves over from his position as chief investment officer having joined the investor in October 2011. Prior to his role at 3i, Borrows was chairman of Greenhill & Co.
 
Queen stepped down from his role as chief executive in March after failing to deliver the 'aggressive approach' that shareholders wanted.
 
He initially came into his role tasked with reducing the company's financial risk and oversaw a shrinking in the firm's debt from £1.9 billion to £531 million between March 2009 and September 2011.
 
Borrows comments, 'Whilst there are clear challenges ahead, particularly in light of the current uncertain macro-economic environment, I am committed to improving the performance of 3i and maximising long-term shareholder value.’
 
For the year to date 31 March 2012, 3i has reported a gross portfolio return of £329 million, down from £601 million the previous year, and has seen its portfolio value slip from £4 billion to £3.2 billion.
 
Over the period the firm invested £646 million and realised £771 million, compared to £719 million and £609 million for the proceeding 12 months.
 
Adrian Montague, chairman of 3i, adds, '[Borrows] has already made a significant positive impact as chief investment officer, bringing a fresh focus and discipline to 3i's investment process.
 
'This has been a challenging year for 3i and the stability of the Eurozone remains central to the outlook. Whatever the environment, we have a clear set of measures to maximise shareholder value and the returns to our co-investors in our funds.'

Many things vary in life but some are nearly always the same. Knowing these virtually universal truths can save you a lot of time and needless brain energy.

You generally learn most of these by experience, but the trusting reader can avoid that expensive process – at least in respect of corporate turnaround – by reading on.

First of all understand turnarounds are companies on the decline; they are in or on the way to loss and they are eating cash. They also have to be capable of being turned around – some business models are clearly obsolete and cannot.

Typically a management team or owner will turn up looking for cash. They will tell you the problems are mostly external. They usually are not. A quick examination of the financial results of competitors will usually show the reality.

Unless the management is new to the company or the turnaround is caused entirely by external events (very rare!) it is a very good working rule that the top managers are not the means to sort the company out but in fact are the cause of the problems. In the memorable words of a former chief executive of one of my turnarounds, ‘I have never fired a man too soon’. Too true.

They will tell you that they only need say £5 million to sort it all out. It is invariably more and often a multiple of the alleged amount. In a recent case we were told £3 million and four days’ work revealed a need for nearly £50 million!

Always very sceptically and carefully check the cash needed. And then add a bit. Turnarounds are difficult enough without having to operate at the ragged edge of solvency with suppliers and staff in a constant state of anxiety.

You can very rapidly and very beneficially improve the morale of a troubled company by removing inept, or worse dishonest and greedy, management and at the same time getting rid of creditor pressure. It is genuinely gratifying to see the sudden arrival of confidence and an expectation of success rather than failure within a previously miserable and demotivated workforce. Improved performance invariably follows the improved mood.

Turnarounds are usually more urgent than management thinks. Their belief that they have three months to start to sort things out may not be shared by an exhausted bank or unpaid suppliers tiring of hassling for their money.

Then there is the last-minute irrational financier or buyer of the troubled business alleged to be about to sort it all out this week. Often they appear to be from immensely rich foreign climes. We call them the ‘Flying Carpet Solutions’. In the real world these normally turn out to be barely interested parties, totally unfunded chancers, interested competitors or vultures anxious to see the business fail. Fairy godmothers are rare in business.

All the time wasted in chasing the Flying Carpet is time for the business to get in a bigger mess. But desperate owners clutch at any straw and often all you can do is watch in despair.

Turnarounds are like most of life. Things that are unexpected often happen and, in a company that has been run by incompetent and/or dishonest people, they just happen more often. Indeed the theory that if it can go wrong, it will go wrong is not a theory when a company is in a mess, it’s guaranteed!

If you take one thing away with you – remember optimism is a state of error. 

The Growth Companies Barometer finds that there are 4,000 mid-sized small and medium-sized enterprises (SMEs) with high levels of growth across the UK.

In identifying 'high growth' companies, the Barometer has classified 4,000 businesses which have turnovers of between £2.5 million and £100 million, and have each expanded by at least 33 per cent in the last three years (see Table 1).

The BGF, which has to date made eight investments from its bank-backed £2.5 billion coffer, says the findings demonstrate the 'underlying resilience of UK entrepreneurialism.’

Further findings show that 25,533 UK companies with turnovers between £2.5 million and £100 million exist, with 16 per cent of those categorised as high growth.

The BGF finds that the most growth companies reside in London and the South East, but says that fast growing companies are currently found across all regions of the UK and in a diverse range of industries.

There are 8626 companies in London with a turnover between £2.5 million and £100 million, with 4332 in the South East.

Stephen Welton, CEO of the BGF, says that the findings show that in spite of market headwinds there is a 'steady base' of UK SMEs and fast growing UK companies that are continuing to thrive.

He adds, 'As growth capital investors in high growth companies, we are encouraged by the fact that there is a clear addressable market. However we are also mindful that there is room for improvement.

'The question for us is how to expand the number of high growth companies and help those that are already demonstrating that level of growth move further.'

Going forward the BGF hopes to make 25 investments this year, and 30-40 per annum in the years to come.

So far the fund has closed deals in the optical instruments, restaurant, telecoms and manufacturing sectors.

Research from the fifth annual American Express/CFO Research Global Business & Spending Monitor shows that 63 per cent of the world's chief financial officers (CFOs) have plans to invest more to grow over the next year.

However, CFOs in the UK are less likely to be as determined to pursue growth through spending, with 53 per cent saying that they will continue to keep a tight hold of purse strings.

When broken down geographically, 85 per cent of CFOs in India are predicting a return to 'modest' economic expansion, followed by the US (78 per cent) and Germany (73 per cent).

In the UK only one in four anticipate moving back to economic expansion in the coming year.

The findings show that of those planning to secure growth in the next year, many are planning to execute it by making M&A plays. Hiring is also on the rise, with the majority of those surveyed saying that they are planning to increase employee numbers.

Brendan Walsh, senior vice president for commercial payments solutions at American Express Services Europe, comments, 'With a backdrop of uncertainty and volatile economic conditions across Europe, this year's figures show a substantial drop in UK corporate confidence and willingness to take risks compared to 12 months ago.

Walsh says that in the 2011 survey, 56 per cent of UK respondents were anticipating economic growth that year, a figure which as now more than halved.

'We are seeing CFOs in the UK stepping gently on the brakes as they steer their companies carefully through this year to ensure they are well placed to reap the growth opportunities that await them in the future,' Walsh adds.

Research from the fifth annual American Express/CFO Research Global Business & Spending Monitor shows that 63 per cent of the world's chief financial officers (CFOs) have plans to invest more to grow over the next year.

However, CFOs in the UK are less likely to be as determined to pursue growth through spending, with 53 per cent saying that they will continue to keep a tight hold of purse strings.

When broken down geographically, 85 per cent of CFOs in India are predicting a return to 'modest' economic expansion, followed by the US (78 per cent) and Germany (73 per cent).

In the UK only one in four anticipate moving back to economic expansion in the coming year.

The findings show that of those planning to secure growth in the next year, many are planning to execute it by making M&A plays. Hiring is also on the rise, with the majority of those surveyed saying that they are planning to increase employee numbers.

Brendan Walsh, senior vice president for commercial payments solutions at American Express Services Europe, comments, 'With a backdrop of uncertainty and volatile economic conditions across Europe, this year's figures show a substantial drop in UK corporate confidence and willingness to take risks compared to 12 months ago.

Walsh says that in the 2011 survey, 56 per cent of UK respondents were anticipating economic growth that year, a figure which as now more than halved.

'We are seeing CFOs in the UK stepping gently on the brakes as they steer their companies carefully through this year to ensure they are well placed to reap the growth opportunities that await them in the future,' Walsh adds.

Following on from the recent rain deluge, most people are wishing for some summer sunshine.

If by some miracle, we are blessed with a fantastic sun-filled season, the C SEED 201 could come into its own. This ‘ultimate addition to a luxury home, hotel or smartly run business operation’ is a giant LED television built for outdoor use.

The sleek screen, designed by Porsche Design Studio in cooperation with C SEED Entertainment Systems, is 201 inches in width, waterproof, and designed to work in bright sunlight. It can appear from or disappear into the ground in seconds, like a rocket launcher in a James Bond movie.

Managing partner at C SEED Entertainment Systems, Edouardo Saint Julien-Wallsee declares, ‘We saw the need for outdoor home entertainment systems, and with the C SEED 201 we created a completely new product category – something that has never been seen before.’

This is not available from your local John Lewis or Dixons. Being 15 feet in height when fully extended, with a screen of 116 square feet, it needs to be custom-installed. The company wouldn’t talk prices, but warns that the giant screen will only be available ‘in limited numbers’. We’re guessing that’s not likely to be a problem.

Accountancy firm BDO has found that manufacturing businesses believe that words are not enough and that policy changes are not amounting to ‘concrete change’.
 
BDO's Manufacturing the Future study of 1,500 manufacturers and engineers finds that only 26 per cent of manufacturers say that the government is making the right noises to develop UK manufacturing. Furthermore, 51 per cent of those questioned are not confident that manufacturing will be a core sector of the UK economy in ten years' time.
 
Some 93 per cent value the government's message regarding manufacturing as being essential to the future of the UK economy, but do not see proposed legislation pledges as ultimately resulting in solid changes.
 
Tom Lawton, partner and national head of manufacturing at BDO, says, 'If there's one overriding message we're hearing form manufacturers, it's that words are not enough.
 
'Optimism for longer term economic growth is encouraging, but it's worrying that manufacturers don't envisage they'll have a significant role in achieving it - especially given the government's insistence on the sector's importance to the rebalancing of the economy.'

When questioned on changes they would like to see, manufacturers in the UK say that the sector cannot achieve a strong position in ten years' time if the focus remains on banks as sole funding providers.
 
Some 69 per cent are calling on the government to bring about an industrial bank specifically charged with backing the manufacturing sector.
 
Lawton believes that the UK needs to follow the likes of Germany, Japan and China which have built 'sustainable, long term manufacturing sectors at the centre of their economies'.
 
'The UK needs to do the same, or we risk losing our manufacturing base altogether,' he adds.

‘Choosing the correct domain name for your company can seem daunting, but it is critically important,’ says Phil Thomas, co-director of financial information website lse.co.uk.

The site, whose initials stand for London South East, bought its primary domain lse.co.uk back in 1998 direct from a domain registration company. Thomas comments, ‘The name was short, easy to remember, and importantly at the time, available.’

Danielle Tanner was coming from a different position when she set up online gift shop Bumbleberry Gifts. She says, ‘I was a bit pedantic when choosing my domain name as it was also going to be my business name – as an online business I couldn’t have one without the other.’

Following several brainstorming meetings, Tanner eventually came up with the name Bumbleberry and checked rigorously online that the name was unique within the gift and homeware sector.

‘After careful deliberation I decided to include ‘gifts’ – a hint to what we did, whilst also hoping to improve our search engine optimisation (SEO). I did a final search to check there were no others on the web and then decided to go for bumbleberrygifts.co.uk.’

Tanner used Mr Site to choose her domain name and build her website. CEO of Mr Site Clifford McDowell states, ‘She went for an address that’s not only branded but good for SEO.’ However, about a week after launching, Tanner was inundated with people telling her that an American bumbleberrygifts.com was now showing up on search listings.

McDowell describes this as unfortunate but explains there are ways around it. ‘We’ve registered two more domain names for her – www.bumbleberry-gifts.com and bumbleberry-gifts.co.uk. She can have the three domain names pointing to her main site, so potential customers will find it easier to find her company.’

Thomas remarks that lse.co.uk also has multiple domain names. ‘We purchased SharePrice.com through a domain brokerage from an individual in East Asia,’ he comments. ‘We chose the name as it was highly relevant and had the potential to rank well in search results.’

Domain names can cost anything from a few pounds to several million. Thomas notes that lse.co.uk has walked away from a number of domains as the price was simply too high. He advises businesses to keep a sense of proportion: ‘At the end of the day, a domain is only worth what someone is willing to pay for it.’

New territories

Businesses are not limited to .com and .co.uk when choosing a domain name. There are a host of other top-level domains (TLDs) available, which may offer the opportunity for companies to register URLs that complement their main website. One such is .tel, whose operator Telnames aims to provide companies with a no-frills, mobile-optimised web page displaying essential contact details and links to their main website. The company’s service costs £14.95 a year and is aimed at all businesses from pubs to professional services firms. For an example, see http://theploughappleton.tel/

Growth company investor Bridges Ventures has backed the development of cloud.IQ, a business located in London's tech hub.

The investment, which has been made through Bridges Ventures' Sustainable Growth Fund, is part of the firm’s commitment to support 'underserved areas', such as East London's Tech City where cloud.IQ is based.
 
Technology business cloud.IQ provides services that allow organisations to manage marketing communications across multiple channels such as phone, email, web and mobile. The business was spun-off from Ad.IQ, a mobile marketing agency.
 
Following the £2 million investment, cloud.IQ is planning to launch an off-the-shelf cloud-based version of its technology in June. The new product is geared towards small and medium-sized enterprises and not-for-profit oganisations.

James Critchley, co-founder and CEO of cloud.IQ, says that the old approach to digital marketing of using only email is no longer effective.
 
He adds, 'These days fewer than 12 per cent of emails are actually opened. Using our technology, firms have been able to increase their sales conversions by 10 per cent and client retention rates by 35 per cent.'
 
Critchley believes that being located in Tech City, close to similar companies, means that cloud.IQ can collaborate and learn from them.
 
Bridges Ventures currently has £275 million under management across its Bridges Sustainable Property Fund, CarePlaces Fund and Bridges Social Entrepreneurs Fund.
 
Alistair Tillen, investment director at Bridges Ventures, comments, 'cloud.IQ presents us with an exciting proposition to invest in proven technology in a large and growing market.
 
'Their technology has been rigorously tested over many years with some of the world's largest organisations.'

Milton Keynes-based BagThat has started what it expects to be a series of new funding rounds by teaming up with investment manager Oxford Capital.

BagThat, which is backed by high street retailers such as Samsung, Halfords and Brent Hoberman's mydeco.com, works by using social networking. Instead of being given a firm price, users can choose what they are willing to pay, bidding for it and then sharing the transaction. The more users that get involved in the bidding the lower the product price ultimately becomes.

The launch was linked to research from the company which found that 24 per cent of British consumers do more than half of their shopping online. The statistics also showed that, on average, UK shoppers do 32 per cent of their shopping online - increasing to 45 per cent when asked how much they believe they will do in future.

Oxford Capital partners has led the £2 million investment round, which is a first close, to aid BagThat with the development and marketing of its online shop. Additional investment from other institutional backers is planned, according to a statement.

David Mott, investment director at Oxford Capital, says that BagThat's offering 'stands out from the crowd'.

He adds, 'It has an innovative approach to online shopping, combining the best of auction buying and group purchasing power.

'Leading model and TV personality Jodie Kidd has signed up as brand ambassador which adds celebrity stardust to the launch.'

Andy Sutton, founder and chief executive of BagThat, says that Oxford Capital, which picked up the Investor of the Year gong at this years' New Energy Awards hosted by sister title Business XL, has done a 'terrific job' in helping the business build connections with new investors.

He says, 'They are great advocates for UK growth businesses and their management input and expertise in helping business to grow has been hugely valuable as we have worked together to develop and launch BagThat.

'BagThat started because we believe that social shopping is the future. We all take advantage of volume purchases - whether it's 3 for 2 offers of bulk buying - but rarely do we, as individual  consumers, benefit form volume purchases on quality, branded goods.'

BagThat gives 5 per cent of its net profits to charity, which in 2012 includes Malaria No More, The ForceSelect Foundation and The Phoenix Foundation.

Royal bank Coutts has found that 72 per cent of entrepreneurs do not believe that venture capital is the best way for a business to realise its growth potential.
 
Despite the finding that 69 per cent of entrepreneurs say venture capital cash will help deliver faster growth to a company, the majority doubt the sustainability of the experience. Only 19 per cent of those questioned say that it is a sustainable system.
 
Further findings show that nearly a quarter of entrepreneurs (25 per cent) admit that VC investment is likely to increase the chance of business failure with only 37 per cent believing that investors in the space are interested in, or understand, entrepreneurs.
 
However, of those that had worked with venture capitalists, 74 per cent say they have had a 'good relationship' with investors and only 13 per cent acknowledge that they regret the decision.

Andrew Haigh, executive director for client propositions at Coutts, says that there is no doubt that entrepreneurs see venture capital as an important source of finance associated with increased growth for business.
 
However, he adds, 'What our research shows is that when it comes to considering this source of finance, negative perceptions around the nature of venture capital and how to work effectively with these investors – which don't reflect the true experience of those who have done it – are likely to cloud the judgement of entrepreneurs and get in the way of approaching venture capital with a mindset which will deliver a successful deal.
 
'There is clearly an opportunity for more entrepreneurs to look again at this source of finance which could unlock future growth in their business.'
 
The research was based on qualitative findings from two separate focus group discussions with entrepreneurs and investors with experience in venture capital, and further research from a randomly selected sample of 244 entrepreneurs.
 
A further 12 in-depth individual interviews were carried out with those experienced in raising venture capital.

Nestled in the uber-conservative setting of London’s Saville Row, Index Ventures’ new London base is the backdrop for my meeting with Ben Holmes, partner at the firm.

The venture capital firm’s new operating suite on the fifth floor overlooks the 16th century men’s fashion retailer Gieves & Hawkes, a business sold to Chinese retailer Trinity Group on the day we meet.

Holmes’ journey to technology investor began by studying engineering at Oxford University, before taking up a management consultancy position in the late 1990s. At OC&C Strategy Consultants, Holmes was tasked with advising buy-out firms on tech acquisitions and become increasingly interested in the space.

Consumer internet is the sector Holmes has a particular passion for, and he believes it has the potential to keep producing rapid growth stories such as Skype, Spotify and Instagram.

However, the breakneck pace of innovation in the space often leads to a chicken-and-egg situation, Holmes adds, with only the seasoned investor knowing just when to dip their toes in.

‘It is a question of do you do you try and invest before you see something gain market traction, or do you chase it after?

‘My approach is to find businesses which have enough of those key validation points for you to feel there is some social momentum behind it, but that haven’t crossed the chasm in that valuations are too high for you to get in.’

When weighing up a potential investment Holmes is adamant that he prefers to see a particular area of strength, be it the management team, the product or the market appetite, shine though.

With social payments company iZettle, cited by Holmes as one of his most exciting recent deals, it was all about the product. Holmes and his team at Index led a €8.2 million (£6.7 million) investment in the Sweden-based business back in October alongside Creandum to allow it to expand into chip-card markets outside the Scandinavian nation.

The company’s technology allows users to take credit and debit card payments anytime, anywhere. However, Holmes says the team has not only created the underlying software, but also taken it to market and ‘packaged it up beautifully’ into a smartphone app.

Fearsome firepower

Index, which has offices in London, Geneva and San Francisco has three active funds. Its Index Ventures V fund makes both seed and venture investments and has €350 million to play with. In addition to that there’s the Ventures Growth II fund worth €500 million, which concentrates on more established businesses with typical deal sizes of €10 million and above, and a €150 million Ventures Life Sciences package.

Since its foundation in 1996 the firm has made 150 investments, including over 40 in the London area. It has also closed 35 seed deals in the last 24 months, since it entered the space, making it the most active tech investor in Europe.

Its most recent exits came about through the realisations of companies including RPX, Assistly and Gluster. However, the firm is best known for getting in on the ground floor of such household names as Skype, Last.fm, Playfish and Lovefilm and delivered impressive returns.

Rocking the banks

Another recent deal for Index, which has a global team of 50 people, is a fundraising for social lending platform Funding Circle through a £10 million growth capital outlay. The support provided to the 18-month-old company has come about through Index’s commitment to backing disruptive businesses.

‘We have done a number of investments which tap into this theme of disrupting financial services. Funding Circle is effectively disseminating the function of the high street bank,’ says Holmes.

Despite the noise that Holmes hears coming out of Number 10, he believes there is still a distinct issue with small business lending. It’s a sector he sees as ripe for disruption.

The investment in Funding Circle is akin to the one which Index made in bookmaker Betfair in its fledgling days, when the gambling business was rewriting the way that consumers make bets by allowing them to gamble against not only the bookmaker but also fellow punters.

But could the growth of crowdfunding present a threat to venture capital itself? Holmes thinks not, as the key parameter to venture funding is the risk involved.

‘We expect to lose money on many of the investments we make, consumers do not. They can access the VC class through personal investments like EIS, but that is generally a high net worth kind of thing.

‘For small businesses the premise on which they can raise money is that their models are very easy to understand.’

For a company like a bakery or restaurant, Holmes says, it is relatively straightforward for an armchair investor to look at the accounts and make a robust judgement. Of course, they cannot expect a spectacular upside in the long run.

Help not hindrance

According to Holmes, in order to encourage further investment in the tech sector, government involvement should be limited to facilitating rather than direct intervention.

He points out that VCs tend to find themselves ‘crowded out’ of markets where the powers that be have an equity interest. State investment drives up valuations, he adds, ultimately driving down the amount of early-stage investments that are made.

‘I think a few years ago it was on the political agenda and to be honest I am glad that it has dropped off. They are now rightly more focused on making incentives right for entrepreneurs and cutting red tape,’ he explains.

But government should also be a ‘great cheerleader’, in Holmes’s view, to attract investment and champion the success stories of different sectors.

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Having been at Index for ten years, Holmes has been at the vanguard of the social technology revolution, and has experienced the rapid growth of companies like Skype, which Index invested in, and Spotify.

Each year sees hundreds of proposals landing on his desk, but he points out that the quality is improving as entrepreneurs become increasingly resourceful.

‘The start-up capital available to help launches is falling quite rapidly, and is being driven down by the availability of open source and platforms like Facebook,’ he explains.

‘This means that entrepreneurs can achieve a lot without much capital. That is a great thing for us, as often the best proof of how they will perform is how well they have done without funding.’

Holmes is excited about the various technology hubs that are being built up in cities such as London, Stockholm, Berlin and Tel Aviv, and believes that many more people are seeing entrepreneurship as a way to build a career and lifestyle for themselves.

The Tech City movement in London’s East End is one which Index was involved with at a very early stage. The firm backed business card printing business Moo back in 2006 when the company bought up a big office building near to the Old Street roundabout and started to let out spare space to other start-up companies.

Holmes believes that the congregation of start-up technology firms in areas like Tech City has been a great help in putting technologists and marketers in touch with each other.

‘If I could contrast it with a few years ago when we had companies spread out all over Europe, now we have a big concentration of companies in London and it means that we can have events like chief technology officer meet-ups over breakfast,’ he adds.

Instant success

The explosion in valuations of social media businesses has recently come to public attention though the $1 billion acquisition of photo sharing service Instagram by Facebook, and Holmes has his own views on the transaction.

‘From my perspective, on some metrics, to pay that much for a company with no revenues seems very expensive. On the other hand, it is not illogical. Soon Facebook is going to be public with a market cap of somewhere between $80 billion and $120 billion, so to spend 1 per cent of its market cap on an acquisition of a very fast-growing company on a mobile platform is not that crazy.’

Raising expectations

The danger comes when start-up technology firms start to value themselves on the basis of the prices paid for industry front-runners.

‘A category leader may be valued very highly, but if you are not a leader then you cannot expect to be valued in the same way,’ he states.

Away from his commitments to Index, which also involves seven board roles at the likes of Just Eat, Mind Candy and Notonthehighstreet.com, Holmes is looking to master Swedish, which he says he is making slow progress on.

Holmes also has a personal blog which as well as keeping the world appraised of interesting developments inside the Index camp also allows people to keep up to date with his running efforts via the RunKeeper app. The latest post reveals that he ran 4.3 kilometres in just over 20 minutes 28 seconds, adding the comment, ‘Much quicker today, shows how lazy I was yesterday’.

It’s a fitting parallel to Holmes’ ambition and rapid ascent through Index Ventures, where he has become one of the most influential European technology investors at the tender age of 39.

Ben Holmes' vital statistics

Year of birth: 1973
Place of birth: Wellington, New Zealand
Family: Married with two sons aged four and two
Hobbies: Tennis, skiing
Best business decision: Backing online take-away business Just-Eat when other investors were scared off by the sector
Inspirations: Clive Sinclair and Daley Thompson

Managed data services business Six Degrees Group has continued with its acquisition strategy by acquiring complimentary UK companies.

Founder Alastair Mills set up the company after selling his previous venture, SpiriTel, to AIM-listed communications business Daisy Group for £27 million. Six Degrees was established through the acquisitions of data centre provider UKSolutions, technology business NetworkFlow and voice player Protel. Prior to its foundation Six Degrees raised £60 million of funding.
 
Its new acquisitions are for two London-based managed hosting and cloud providers, Firstserv and Serverstream. Both companies are ten years old and focus on the digital media sector of managed hosting and have customers including The Spectator and Port of London Authority.
 
Following the deals, which takes its cloud M&A count up to three, both Firstserv and Serverstream will be integrated into Six Degrees' managed data division and will provide a reported £3 million in hosting revenues.
 
Mills, CEO of Six Degrees, says that the company's goal for 2012 is to become one of the top five hosting and cloud providers in the UK.
 
Gordon Kenneway, managing director of Firstserv, comments, 'Our employees will now have access to a larger, geographically diverse hosting platform with best-in-class compute and storage resources, which is also a very exciting step for our customers.'
 
Back at its launch in October, Six Degrees and Mills said it wanted to capitalise on what it believes is a 'tipping point' in technology, with its research showing that workers see their own personal technology as better than that provided by employers.
 
However, Mills believes that UK plc is still stuck in the 1990s, with many employers 'disabling and controlling' when they should be 'enabling and empowering'.

Leisure Pass Group has linked up with Primary Capital to complete an MBO of the business, with Darran Evans leading the deal.

London-based Leisure Pass provides smart card-based multi-attraction tourist passes in locations including Paris, Berlin and London.

The deal, which is worth £35 million, sees the company link up with Primary Capital, a firm which specialises in MBOs. The company is currently developing ancillary products to further its customer offerings.

Evans comments, 'We are excited by the opportunities to expand our customer offering in existing and new markets as we look to continue our growth.'

Primary Capital, which has its head office in London has previously made investments in household names such as Paperchase, through a £30 million buy-out in July 2010, and YO! Sushi Group, which the firm sold to Quilvest Private Equity in March 2008 and generated a 6x return on its initial outlay. It has a sector focus directed at the consumer, leisure, business and support services, IT and industrial products areas.

Alex Parkinson, assistant director at Primary Capital, adds, 'Primary is excited by Leisure Pass' potential for growth both in its current core markets of London and Paris as well as via geographic expansion across Europe and further afield.'

As part of the deal both Parkinson and Rob Foreman, director at Primary Capital, will join the board of Leisure Pass as non-executive directors.

A new equity investment by ISIS is set to allow inov-8 to continue with its expansion into new markets and to further develop its new products.

The deal, which follows on from ISIS's backing of Happy Days and support of Autologic's MBO earlier in 2012, is for an undisclosed amount. North Pennines-based inov-8 has a focus on technical off-road running and was founded in 2003 by Wayne Edy.

The business began following the design of the mudroc 290 running shoe and took off when Melissa Moon, a mountain runner from New Zealand, wore the shoe to win the 2003 World Mountain Running Association Trophy.

Since then Robert Perkins was brought into the business in 2009 to aid with product development and marketing.

Edy says, '[ISIS'] expertise in working with dynamic, rapidly growing young businesses will be invaluable to the management team as we scale up our operations to meet growing international consumer demand.

'Finding an investment partner that understands the opportunities and potential created by new technology and innovative thinking in all areas of the business was crucial to accelerating our growth plans.'

As part of the transaction, Mark Advani and Adam Holloway, both partners at ISIS, will join the board of inov-8. Advani and Holloway were part of the board at cycling e-tailer Wiggle, a business which was sold to Bridgepoint in December 2011 for £180 million.

Advani adds, 'Inov-8 has an incredibly inspiring story so far. Wayne and Robert deserve immense credit for building the business from a singular racing product to a global brand of choice for committed athletes around the world.'

The board of PLUS Markets Group has given up its search for a new buyer and initiated an ‘orderly closure’.

On 3 February PLUS announced that it was starting a formal sales process to find a partner which would allow the company to continue operating its subsidiary operations: PLUS-SX, PLUS Trading Solutions and PLUS Derivatives Exchange.

In an update on 17 April, PLUS said that it had received a number of 'indicative proposals'. However, it said that none of the parties in question had been able to progress matters to a position whereby both sides were satisfied.

The PLUS Markets Group will now be wound down over a period of six months, during which time 'suitable alternatives' will be sought for PLUS-quoted companies. The market will continue to operate as normal in the meantime, according to a statement, with further announcements to be made during the process.

The company's cash balance sheet has now reached a level whereby, in the context of its regulatory status, it will now have to close.

Sharemark, an alternative trading platform, now intends to extend its offer of free admission to its service for PLUS companies until January 2013.

On the back of PLUS's initial formal sales process announcement, Sharemark began providing free access, claiming this would save companies £1,950 of admission costs. However, during the three month process, Sharemark did not manage to entice any PLUS-quoted companies to make the switch.

Sophie Murra, manager of Sharemark, comments, '[The] announcement leaves PLUS-quoted companies in a position where they now have to decide the options for shareholders and which market is most suited to their company.

'Unlike AIM, there is not a requirement to retain the services of an adviser in order to be traded on Sharemark and many will find this advantageous.'

Sharemark will now be running a seminar, on 27 June, to introduce Sharemark and explain how it operates.

London-based Livebookings has raised £15 million from a pool of venture capital firms including Balderton Capital and Wellington Partners.
 
Livebookings, a restaurant booking and marketing service, provides tools for restaurants to take bookings from personal websites and others as well as a customer database, email marketing campaigns and special offers promotions.
 
The fundraising, which is to be used to aid Livebookings' international growth, follows the announcement that the business had reported 'record sales numbers' for the first quarter of 2012. According to Livebookings, revenue grew by 34 per cent compared to the same period in 2011, while seated diners grew by 65 per cent to 3.8 million.
 
The latest funding round, which also involves Ekstranda, takes its total raised to £39 million through four separate rounds. In 2008 the company kicked off its funding efforts with a £6.5 million round, which was then added to in September 2009 by way of a £10 million allocation. Its third round, for £6 million, came in April 2011.
 
Colin Tenwick, CEO of Livebookings, comments, 'Over the last 18 months we have put in place the engines that drive growth by investing in the development of new products, building a larger sales force and implementing new customer support systems to facilitate the growing customer base.
 
'The market leading increase in dined covers, customers and revenue is testament to this strategy and the new funds will help us to increase our market leading position, deliver the most innovative products to the marketplace and drive even more incremental revenue for our customers.'
 
Away from its operational base in the UK, Livebookings is active in 23 countries, including the US.
 
Livebookings' latest funding round comes after Just-Eat, a business which aggregates take-away restaurants, gobbled down a £40 million third round funding led by Index Ventures.

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