The Network for Sophisticated Investors AUTUMN 2016
BREAKING THE MOULD HOW UK MANUFACTURER SUGRU IS EXPORTING ITS FIX-IT PHILOSOPHY TO THE US
FINTECH THE RISE OF THE ROBO-ADVISER
ORTHOGEM THE ‘FAST END’ OF MEDTECH INVESTMENT
Welcome Who says we don’t make things any more? We may not have the big, metalbashing manufacturers of old. But modern UK factory-owners are proving that Made in Britain is still a quality benchmark for customers, while also seeking to address some of the world’s bigger problems.
Sitting above the crowd with a minimum investment of £25,000. Take Sugru, with its factories in London (and, now, Mexico). It’s as proud of paying employees the London Living Wage as it is of the way its product helps to reduce waste.
Scott Haughton
Synergy Grill, meanwhile, has found a way to marry energy efficiency to superior quality – its grills even prevent the drain-clogging ‘fatbergs’ that have proven such a problem for utilities. These offer a promising vision of where UK manufacturing can grow in the future.
COO & Co-Founder
Manufacturing is not the only sector ripe for disruption. Financial services – the UK’s biggest industry – is in upheaval. Regulations, coupled with the rise of mobility, have prompted a boom in the number of fintech, regtech and insurtech start-ups – not to mention their valuations. Investors are rushing in, with global fintech investment in 2015 growing 75 per cent to $22.3bn. Which companies will emerge as winners? We talk to industry expert Paolo Sironi to find out.
CFO & Co-Founder
Nick Taylor
Oliver Woolley CEO & Co-Founder
Contents INVESTMENT OPPORTUNITY
5 HeadBox 8 Voxsmart 9 Lenditapp 10 Sugur 11 Synergy Grill 13 Aveqia 14 Orthogem
FEATURES
6 Fintech – the rise of the robo-adviser: Fintech start-ups are enjoying investor attention, but which ones will be sustainable? Paolo Sironi offers some insight.
12 What happens when you put a handful of active investors together? They cook and chat up a storm, as Envestors’ founders discovered in July.
The Network for Sophisticated Investors © Envestors Limited, 1 Lancaster Place, London WC2E 7ED. Envestors Limited is incorporated in England and Wales, registration number 07236828. Envestors Limited is authorised and regulated by the Financial Conduct Authority (FCA) in the United Kingdom.
envestors.envestry.com
COMPANY UPDATES
15 GoInStore, 365 Talent Portal, Savernake Capital and Billon
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Dates for your diaries Envestors Investment Presentation Lunch
Leeds Investor Show
When: November 8, 2016 Where: Coutts, 440 Strand, London WC2R 0QS Time: 11.45am – 2.30pm The event will feature four hand-picked companies, looking to raise equity investment of up to £5m. Each company has eight minutes to make their investment presentation and two minutes to answer investor questions. Full details about each of the companies will be sent to you the week before the event.
When: November 22, 2016 Where: Royal Armouries Hall, Royal Armouries Museum, Leeds Time: 9.30am The Leeds Investor Show offers private investors and traders a day packed with events and activities to help you achieve your trading and investment goals. Based around four, 60-minute investment workshops, with free seminars, live debates and interviews and panel sessions taking place throughout the day. Speak with AIM companies, attend useful investment workshops and listen to some excellent speakers, ranging from investment industry figures such Justin Urquhart-Stewart and Nicola Horlick to business psychologist Peter Fargus to veteran commentator Rodney Hobson.
The Investment Conference When: November 16, 2016 Where: RBS London HQ, NatWest Building, 250 Bishopsgate London Time: 9am – 5.30pm Organised by The Business Funding Show, this is an opportunity to meet over 25 top investment companies, all in one room and in one day, and share advice on how you can get equity funding. Leading crowdfunding platforms, business angels networks and venture capitalists will offer support to businesses from early to scale-up stages. Envestors is sponsoring and speaking at the event. To book visit: http://bit.ly/2eAKXZ8
Risk Warning Responsible Investing Please be aware that investments of this nature are
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is given, potential investors are strongly advised
high risks as well as the possibility of high rewards.
to take advice from a person authorised by the
Risks include a lack of liquidity (ie. the ability to sell
Financial Service and Markets Act 2000 (FSMA), who
your shares) and loss of investment. To help manage
specialises in advising on investments of this kind.
risk you should invest in a diversified portfolio. For full information as to the risks, please visit: envestors.envestry.com/risk-warning 4 ENVESTORS
INVESTMENT OPPORTUNITY
THE ONLINE MARKETPLACE FOR INSPIRING OFF-SITE SPACES
Company Name Website Sector Stage Year Started Location Funding Requirement Pre-money Valuation
HeadBox Limited envestors.envestry.com/deals/1073 Marketplace Early Revenue, Pre-profit 2015 London £1.1m (£712k pledged) EIS Approved £4m
Assigned Envestors Director: oliver@envestors.co.uk
The UK’s first online marketplace for inspiring meeting, off-site and event spaces. Andrew Needham was just looking for a place to meet when he had his ‘aha’ moment for HeadBox. His former company, an innovative research and social analytics consultancy, was looking for an inspiring place to work with a multinational client when it was met with a “really painful, manual and inefficient process that served up the same old spaces.” So the idea for HeadBox – “the Airbnb for creative, inspiring, offsite spaces” – took shape. Likening it to that icon of the sharing economy is bold, but apt. Like Airbnb, HeadBox directly matches people looking for unusual spaces (‘guests’) with the owners of those spaces (‘hosts’) through its online platform. It simplifies and speeds up the process of identifying, booking and paying for unique event venues, while allowing hosts to earn money from under-used space. Its vision is “to be the go-to platform for bringing people and inspiring spaces together, all in one place, to make brilliant things happen everywhere.”
That might be a casino or a 19th century operating theatre or the Everyman cinema in Bristol, if you’re using HeadBox. Says Needham: “We’re uncovering very cool places and looking to match the supply to different sectors. We’re getting people to think about space – and by extension, their meetings, off-sites and events – in a different way. We want to open up people’s imagination to the different applications and uses of space”
“Unashamedly B2B” For Needham – who sold his first business at university – this is one of HeadBox’s strengths: “You need to challenge the status quo, be innovative – have a challenger brand mentality.” At the same time, past ventures have taught him the importance of being focused, “not allowing yourself to be distracted by shiny things.” In HeadBox’s case, that means being “unashamedly B2B in focus” despite B2C interest.
Another strength is his team – “bright, clever, and hungry, but also including the ‘grey hairs’ who’ve got the experience and perspective you need.” Supportive and active investors from an initial fundraise of £1.2m include HeadBox chairman and former Unilever director Ralph Kugler, Martin McCourt (former Dyson CEO), and Aaron Simpson, the CEO of Quintessentially Group, and Andy Cosslett, former CEO of Inter Continental Hotel Group, among others.
If that sounds lofty, it is rooted in very real market demand. The UK events industry is worth an estimated £42.3bn, according to Eventbrite. But it has been slow to adapt to the increasingly powerful millennials, or digital natives, who will make up 75 per cent of the workforce by 2025. “You can’t book and pay in three clicks. You have to go back to hotels in the late 1990s to find such old-fashioned processes,” says Needham. “The millennial workforce is used to doing things themselves, so there’s a massive gap in what they want and what’s on offer.”
Event horizon
Corporates attuned to the need for innovative thinking, too, expect more from off-sites. Organisers are increasingly looking for “unconventional, intimate, extraordinary, or downright crazy places to hold their next event,” according to trend predictions from Genioso event magazine.
Among its fast growing addressable database of guests are big businesses including Diageo, L’Oreal, Santander, Unilever and Mediacom. Additional funds will accelerate its marketing activity to drive traffic, as well as to develop the platform and prepare it for overseas expansion.
Now generating revenue, the platform has overseen strong growth since its beta launch at the end of April 2015. Since then, traffic (unique users, unique sessions and page views) has more than doubled; bookings are 300 per cent up and conversion from enquiries to bookings is over 30 per cent. HeadBox has over 3,500 spaces in London, Manchester, Birmingham, Liverpool and Bristol, and is looking to expand aggressively across the rest of the UK and to major European and Asian cities.
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AUTOMATIC FOR THE PEOPLE: FINTECH GETS PERSONAL
Fintech investment is booming, but what’s fuelling it – and is it sustainable?
After the financial crisis of 2008, you’d often hear Winston Churchill’s words invoked: never let a good crisis go to waste.
Paolo Sironi explains why the future lies in roboadvisers and game playing.
Investors and multinationals have been pouring money into fintech start-ups – more than $50bn into 2,500 companies since 2010, according to figures from Accenture, the consultancy. In the first quarter of this year, global investment in fintech start-ups hit $5.3bn, a 67 per cent rise on last year. In Europe and Asia Pacific, investment nearly doubled.
Fintech entrepreneurs clearly took note. In the past few years, fintech has emerged as one of the strongest examples of what the WEF’s Klaus Schwab calls the Fourth Industrial Revolution, where technologies fuse with the ‘real’ world to impact economies and industries, “even challenging what it means to be human.”
While some talk about bubbles – citing the implosion of ‘unicorns’ such as the UK’s Powa – Accenture maintains the industry is levelling out and becoming more mainstream. In the past the set-up was one where new, digital Davids took on financial Goliaths, but fintech advocates now see scope for incumbents to align with disruptors and emerge with better ways of serving customers. “Disruption is already underway, though it
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FINTECH
technology at the sector. “What you sell to customers, the way you engage, must be different.” This is at the centre of what Sironi calls ‘goal-based’ investing, a philosophy that puts the individual investor at the heart of decision-making. Goal-based investing draws on behavioural psychology – what individuals want from their investments, how they hope to use their money, and when. “The true risk that individuals face is not market volatility but the probability of falling short of personal goals,” according to Sironi. Addressing this is the true game-changer, because it more accurately matches the advice to personal goals and ambitions over time.
might take the form of transforming existing firms more than putting them out of business,” is how Paolo Sironi puts it. An expert on quantitative financial analysis and digital technology for IBM, Sironi’s latest book, “FinTech Innovation”, offers a detailed, behindthe-scenes look at where fintech is going next. It charts the evolution of ‘robo-advisers’, and how goal-based investing and gamification will transform how we manage and invest our money in future.
Regulation is the main impetus for change. That has forced existing institutions to “think differently. Banks won’t continue to make money in the same way,” he says: “Greater transparency [of pricing] and a recognition of the need to put clients at the centre of their services is forcing banks to shift from distributors of products to the packaging and distribution of advice.”
“SIMULATED GAMES CAN HELP YOU FEEL PAIN AND GAIN IN A SAFE ENVIRONMENT. YOU CAN LEARN FROM HOW YOU BEHAVE IN THE GAME, AND SHAPE YOUR PORTFOLIO BASED ON THIS” Fintech is exploiting this position by offering simpler, cheaper ways for customers to invest, engaging them more and disintermediating the banks. In the last few years, that had led to a boom in ‘wealth-tech’ and robo-advisers (such as Nutmeg), but also peer-to-peer lending: “anywhere where disintermediation is possible.”
“We’re seeing personalisation converging with planning and advice” among digital, or robo-, advisers, which attempt to standardise that personalisation via technology, as Sironi explains. He sees customer demand as a major force for transformation: “Banks have become too complex. Trust has eroded. There is a need for change in order to help people manage money differently. Financial advice needs to become more transparent and truly independent, rather than pushing products.”
Banks may be big tech spenders, but they are often outdated, he adds. “If you’re a newcomer, you can build technology around need, so you can be more agile.” Robo advisers can offer a buffet of service levels, instead of using a standard questionnaire as their best guess of what a customer wants. As a result, they are increasingly targeting affluent customers. Now provision is based on the needs and the tech literacy of clients. “It doesn’t necessarily mean they appeal only to digital natives.” But it’s not just a question of throwing
But human beings are notoriously bad at identifying what will make them happy in future, as we’ve learned from psychologists such as Daniel Kahneman and Daniel Gilbert. What suits us today won’t always be a priority tomorrow. Sironi sees gamification as the third big trend to address this. Gamification, he says, is a way for institutions and investors to understand their own attitudes to risk. “If you don’t understand markets, you’ll be seduced by latest headlines. Simulated games can help you feel pain and gain in a ‘safe’ environment. You can learn from how you behave in the game, and shape your portfolio based on this,” he says. Banks already use war games for that purpose with corporate clients. Digital engagement of human planners will also help them improve profiling, and there could be more start-ups emerging to offer educational opportunities for institutions. AI capabilities allow the technology to ‘learn’ and teach individuals about their own tolerance for risk. The potential effect of these refinements? There could be less exuberance, as people learn to stay the course and seek out longer-term opportunities, rather than just following the market. It will be start-ups that can combine the ‘fin’ and the ‘tech’ to create something new that will stand out. “Disruption cannot last unless there’s a way of sustaining innovation,” says Sironi, citing how Apple morphed from a hardware producer into services and branding. Financial incumbents that survive will do so by creating alliances with new ventures that transform them from the inside. But the most disruptive quality of fintech is, ultimately, not that it’s automated. It’s not the digital element that makes start-ups transformational. It’s how they can enhance the personal.
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INVESTMENT OPPORTUNITY
MULTI-PLATFORM MOBILE COMPLIANCE FOR FINANCIAL FIRMS
Company Name Website Sector Stage Year Started Location Funding Requirement Pre-money Valuation
VoxSmart envestors.envestry.com/deals/1089 Fintech Revenue generating, pre-profit 2006 London £500k (£150k already secured) Pre-money £6.8m
Assigned Envestors Director: victoria.collin@envestors.co.uk
Carrier agnostic, multi-platform mobile compliance for the financial sector. How would you feel if you were liable for your employees’ behaviour as well as your own? That’s the question a recent VoxSmart blog-post put to readers. Regulation (the UK’s Senior Managers and Certification Regime) exists that makes managers at financial firms responsible for not just their own activity, but that of their employees. It’s the latest attempt to restore public trust in an industry that has ranked lowest on the annual Edelman Trust Barometer for the past four years.
Regulation has fuelled demand for better solutions to the compliance question, but so has a changing workforce. “We’re moving from desktop to digital working. But corporates have been extremely reactive. Our technology allows them to be pro-active.” Forecasts estimate that by 2020 there will be nine million corporateissued mobile devices in EU, US and APAC regulated financial firms. Today, the rise of mobile workers means most employees expect to be able to use their own, or several, devices as needed. Voice calls, too, are on their way out, with messaging the predominant means of communication. This is where VoxSmart software steals a march on competing technology: it believes it is the only global mobile carrier-agnostic and multi-platform service. Installing it requires no major infrastructural upheaval, and it seamlessly integrates into any user’s phone without disruption.
Beyond compliance
Oliver Blower
Under UK FCA regulations, financial firms should already record and retain client calls for at least six months. Upcoming MiFID II measures will extend that requirement to five years. Some 7,000 firms – from IFAs to stockbrokers to hedge funds – are set to be affected. But how do they monitor individual activity across a range of devices and in different countries? VoxSmart has developed award-winning technology to tackle the problem. It can capture, record, locate, store, analyse and report on all mobile communications and instant messaging, whatever the platform, channel or location.
Keeping up with the Millennials Its technology also addresses another problem facing the financial industry: “The banks all want to attract a mobile workforce,” says Oliver Blower, VoxSmart’s CEO and a former MD at Barclays Capital. “But they can’t until they solve the compliance problem.”
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In the past, there was a tendency among bank employees to ‘top drawer’ work phones in favour of personal devices if the recording technology got in the way. That meant their bosses would have no record of calls.
With an estimated nine million users worldwide for the technology, the business is looking to use funding to build out its operational and support model, developing an always-on service to match its global users. The business already has 4,500 users and global clients including Tullett Prebon Group and the Royal Bank of Canada. It is anticipating even greater uptake as the next regulatory deadlines approach. It is also looking at acquiring complementary businesses to improve service – it will be using funding to complete its acquisition of Hullo Mail, which will enhance VoxSmart’s back-end infrastructure. Beyond pure compliance, though, the business offers a means for institutions to make use of behavioural data to improve the way they do business. “First, the industry needs to capture clean data – not just all the data, because that’s a lot of noise,” says Blower. “We’re moving from Orwellian surveillance to a scenario where data and behaviour can be used to make people more productive.”
INVESTMENT OPPORTUNITY
DIGITAL WHITE-LABEL LOAN APPLICATION SYSTEM
Company Name Website Sector Stage Year Started Location Funding Requirement Pre-money Valuation
Lenditapp Group AG envestors.envestry.com/deals/1091 Fintech Early revenues - pre-profit 2014 Zug & New York £1.6m (US$1.2m pledged) (EIS eligible) Pre-money £6.2m (US$8.2m)
ups. He sold his first venture, a CD-Rom business card company, before the dotcom bubble burst – a coup he calls “pure luck” rather than prescience. High on success, his second business was a rude awakening – while not a disaster, it “limped along” and turned out to be “an elephant giving birth to a mouse. You get cocky out of business school,” says the Swiss-educated Schneider. “So to not have something not go our way – and for macro reasons – was a valuable lesson.”
Assigned Envestors Director: scott@envestors.co.uk
Tackling the last mile of small business funding with a digital white-label loan application system. In 2015, the British Business Bank estimated there was a £1bn ‘funding gap’ for small and medium-sized enterprises. A year later, that ‘valley of death’ remains, according to the Federation of Small Businesses. Access to finance remains a major challenge, even though small, private-sector businesses account for around 60 per cent of UK employment. SMEs have grown frustrated with laborious, often paper-based loan application process. “Pressure is building for banks to bridge the gap between what SMEs expect and what they are getting,” said a PwC report this year. That bridge is likely to come from digital services such as Lenditapp. Backed by Swisscom Ventures and New York’s Venture X, Lenditapp has streamlined loan applications with a universal, white label platform already in use. Its system replaces antiquated PDF processes with a digital and collaborative system that benefits both sides.
Enabling, not disrupting By automating and standardising the SME lending process, Lenditapp is looking to change the way financial institutions acquire, on-board and create loan packages. Its technology slashes the time for a lender to provide an SME loan from days to a few hours. SMEs benefit by getting access to fairly priced loans, banks and lenders cut costs and risk. The platform has processed over 16,000 loan applications representing more than US$750m of requested loan value during its first 18 months of initial operation in the US.
He also has a realistic attitude to funding. “Often, by the time you know what you’re doing, you’ve run out of money. So we let this business run for a year, and were guided by feedback to make changes.” These include an ancillary business to connect funders with lead generators. As a result, Lenditapp has won a major deal in the Swiss lending market by contracting with a large Swiss retail bank and moved its HQ to Switzerland. It is in discussion with two other Swiss banks as well as a German bank, and the 2016 sales budget is already underwritten by these commitments.
UK market promise Schneider sees a UK roll out as “an essential pivot point” for the business – particularly as SME lending in the UK begins to rise. According to Accenture, the consultancy, 2015 marked a turning of the tide: an estimated £8.5bn in revenues are up for grabs through 2020. There are also opportunities to grow in emerging markets, where smartphone use is massive: the system is adaptable to any market’s regulatory framework. Competitors exist, but “lending is a huge and fragmented market,” says Schneider, with no single winner likely to dominate. “The main US player is backed by Google,” he adds, “which gives you an idea of the importance of the market.” The diversity of the team’s expertise – in technology, financial services and start-ups – is also a major strength, with two member recently landing places on the coveted Kickstarter accelerator programme. The next round of investment will go towards financing growth, adding: “two or three additional verticals, show we have scalable growth and getting it to an even, stable and defensible position.”
The aim isn’t to upend existing loan institutions but to help them: “We’re not looking to disrupt but to enable,” says Markus Schneider, co-founder and a serial entrepreneur with a seasoned attitude to financing start-
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INVESTMENT OPPORTUNITY
WORLD’S FIRST MOULDABLE GLUE THAT TURNS INTO RUBBER
Company Name Website Sector Stage Year Started Location Funding Requirement Pre-money Valuation
FormFormForm (Sugru) envestors.envestry.com/deals/1011 Manufacturing Established, revenue generating Reg 2004, Launched 2010 London (UK) £1m (£460k pledged) (EIS eligible) £30m
“It’s an interesting space, especially if children are getting into screenbased toys and parents get nervous. Sugru is potentially an engaging, smart alternative. It intrigues them because it sticks to things. You can alter the conductivity of it.” The team is also looking for investment to expand into other DIY and home product areas such as stationary.
Assigned Envestors Director: scott@envestors.co.uk
In the tradition of 3M’s Post-it note, Sugru, the product, came about by happy accident in 2003, while the business’s growth since then has been the result of hard slog and strong guidance. Labelled as the world’s first mouldable glue that turns into rubber, Sugru (Irish for ‘play’) was initially a “smelly silicone caulk and waste wood dust from the wood”, in the words of inventor Jane Ni Dhulchaointigh. It looked like wood, but it bounced. And when Ni Dhulchaointigh took it home, she began to find a multitude of uses for it – modifying a knife handle, filling out a too-small sink plug. Fast-forward 16 years, and Sugru has over one million users in 160 countries. It is heat-resistant, stays malleable for 30 minutes, and has been used to patch jeans, repair broken sunglasses, to make glow-inthe-dark tent pegs and to improve the grip on an Arctic trekker’s ski poles. Visit sites such as Lifehacker and you’ll find articles on the “top DIY miracles you can accomplish with Sugru.” It has an active community of advocates who love to share their ideas on how to use it – 10 million fixes so far. Initially an e-commerce operation, it is now sold by the US big box retailer Target and is looking to expand into other DIY retailers there – Ace Hardware, the Container Store and Best Buy, among others. It has also expanded its manufacturing base – it is that rare thing, a British-based manufacturer – and now has a Mexican operation to serve the US market. The focus for the past few years has been on developing a child-safe version of the material. “We’ve got so many families using Sugru, we’d like for it to be used not just for DIY but for play,” says Ni Dhulchaointigh.
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An investment (of £3.5m) via Crowdcube last year “rocked the site” and has been used to grow the team and the US operation, and Ni Dhulchaointigh isn’t ruling out another crowdfunding round in future. But it requires investment in PR and marketing, whereas she sees the efforts of the 70-strong business better applied to selling Sugru into the likes of the UK’s B&Q, Maplin and Halfords, as well as to US retailers. “We’re not yet ready for channels the size of Walmart or Tesco, and we’ve got to get there without compromising on values or quality,” she adds. Initial investors have seen ninetimes growth at the last investment round share price. “We are definitely aiming for a slice of the DIY market, but our ultimate goal is to grow the whole pie. Fixing and making should be easy for anyone. We love our expert customers, but we also love getting new ones, who say, ‘I’m not a DIY-er, but I can use this’,” she says. Sugru’s board and advisors have proven a great source of support, and were there to help Ni Dhulchaointigh make tough calls, too – scaling back the sales team in 2013. “They’ve got objectivity and can sensecheck strategy, or where we aren’t thinking big enough,” she says. “They also help us develop the confidence to behave in that way – to recognise that we’re doing something in a category that has been slow to innovate.” Growth has been steady – 60 per cent year on year, “not quadrupling overnight” – a sustainable approach that ensures Sugru focuses on establishing the right channels and building the value of the business. It seems a long way from 2003. “When we started out, it wasn’t something people were interested in. We’re still ahead of the game, but it’s a bit like recycling. Now, it feels wrong to throw a tin can in the bin. It’s starting to feel wrong not to fix your trainers when they have a tiny hole. I think the throwaway mentality is becoming less acceptable.”
INVESTMENT OPPORTUNITY
INNOVATIVE UK-MADE KITCHEN GRILL
Company Name Active Foods Systems Limited Website envestors.envestry.com/deals/1043 Sector Commercial Grill Stage Revenue generating Year Started 2006 Location Cambridgeshire Funding Requirement Up to £600k (£453k pledged) Pre-money Valuation £2.7m (EIS eligible) Assigned Envestors Director: nick.taylor@envestors.co.uk
The innovative UK-made kitchen grill that is wowing restaurateurs and chefs alike. “Imagine a car that you could fill with 50 per cent water, but still drive away at twice the speed. Oh, and it washes itself into the bargain.” This is how Synergy Grill’s Justin Cadbury summarises the company’s invention, a multi-award-winning, patented kitchen grill that heats rapidly and uses 40 to 60 per cent less energy than standard grills. It’s a good analogy: the fat atomising grill, a “world first”, doesn’t require a fat tray. A ceramic base allows it to heat fast and stay hot for 20 minutes after it’s turned down. It cuts costs and energy use, has a rapid payback time, and turns fat to dust, so it doesn’t require cleaning. As a result, it’s the only kitchen equipment manufacturer to be an affinity partner to Thames Water, which regularly has to tackle problematic ‘fatbergs’ that clog restaurant drains. Chefs love it because it heats up quickly but the sides of the grill stay comparatively cool. But the main reason it’s a hit is because it makes food taste better. It’s been a good year for the business, which recently scooped the 2016 Innovation Award at The Takeaway & Restaurant Innovation Expo, having earlier won the Gold Innovation Award at the Commercial Kitchen Show. It adds these to a trophy cupboard of honours, not to mention glowing testimonials from chefs and restaurateurs including Tom Aiken, The Boisdale Group, Hawksmoor and the Firmdale Group. “Synergy grill has made a number of positive technology leaps in creating more even combustion, safety to the highest level, cutting gas bills in half, which not only saves money but gives us exemplary green credentials,” says Cadbury. It’s just a matter of seeing the company’s grill in action to turn sceptics into converts, he adds: “Seeing is believing.”
Steep learning curve Like many inventions, the idea was an initial flash of genius followed by years of refinement. The ‘eureka’ moment happened over a decade ago,
when Cadbury was running a gas company. His senior engineer, John Arnold, effectively developed fuel injection for gas by pre-mixing air into the gas and still managing to get a perfect flame. Instead of gas fires, asked Cadbury, why not use it to make grills? “We developed early working models in my workshop in Oxfordshire,” says Cadbury, a Sloan Fellow and veteran of start-ups and turnarounds. But, as Dyson would attest, you have to fail a lot before you succeed. Initial models “lit like a rocket” – Didcot fire brigade positively looked forward to those early tests, when they’d be sent packing with a freshly grilled burger. It’s been a “steep learning curve” admits Cadbury. An early partnership, while allowing the business to go into production, proved limiting, and the decision to manufacture units in Turkey was quickly canned so that the company could oversee quality control at home. Products are now made in the company’s factory in Cambridgeshire. Cadbury took a similar ‘quality control’ approach to building the company’s culture, hiring people not just for their skills but for their team spirit. “Creating a product that, on disruptive technology and energy consumption beats the mighty giants such as Electrolux, Middleby, and Lincat requires ruthless dedication,” Cadbury explains. “You also have to clear expensive certification hurdles. Over the period, we have probably invested £1m to develop an entire range of sizes which now can be sold across the world. By most company standards, it is a fairly small amount of money to create what is potentially a global product with applications across millions of restaurants, hotels and clubs and even private homes,” he adds.
Hot property Interest is catching fire: over 230 of the latest design have been sold, and it has sold to 34 multi-site operators with potential rollout to 700 sites. Current customers include restaurants and pub chains such as Wahaca, Bella Italia, Greene King, Peach Pub Group and McMullens. It has signed a major contract to become the selected grill for a restaurant group that has over 3,000 outlets and is in discussions with other large chains. But any of the estimated 100,000 UK restaurants or pubs that grills food could become a future customer. There is also potential for international expansion to South Africa and Australia. The company is “really motoring” now, selling around 30 grills a month. At the start of 2016, monthly turnover was £15,000. In September, sales approached £100,000. Close to reaching its target for investment, the business plans to develop the technology further into areas such as pizza ovens. It is also looking at developing a modified version for the consumer market, which it will sell via its subsidiary, The Natural Grill Company.
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How do you thank an angel? Whether they are sold-out entrepreneurs or senior executives, business angels rarely invest just for the money. They like to get involved in the businesses they are backing. That might be as a lead investor, chairman or trusted adviser, but angels are active investors. So when it came time to say thank-you, Envestors’ founders knew they’d have to come up with something hands on. “Every investment is a leap of faith. We have an incredible group of active investors. Some have committed over £1m and all are involved for more than the money,” says Scott Haughton. “We’d never really thanked them for their loyalty and support, so we were already on the lookout for things they might appreciate. But we wanted something a bit different from the run-of-the-mill corporate events. We wanted partners to want to come.” They’d heard great things from people who’d attended Aveqia taster evenings, so they decided to give it a whirl. One evening in July, 20 investors and their partners joined the founders at Aveqia’s space in London’s Farringdon – and rolled up their sleeves. Divided into teams, they set about preparing a three-course meal with the help of Aveqia’s Michelin-trained chefs (and a glass or two of wine). The night proved a huge hit: those who came along loved the experience, the food, the wine and, most of all, the company. “It makes sense that they’d get along. They are like-minded souls. But they don’t always have a chance to relax or chat at other events,” says Haughton. Of course, it was a great way to showcase Aveqia, which is looking for investment. But the main aim was simply to thank loyal Envestors members for their support. The night’s success has inspired Envestors to create more opportunities to meet: “Everyone got on so well, it made us realise we should do more.” Plans are already underway for more events for active investors, says Haughton: “Envestors Platinum Club events will provide the opportunity for our most active, private investor members to socialise and network with other active members at exclusive events planned throughout the year.”
al refreshing and origin t Thursday. A really las g ent nin fer eve dif le ab ny joy most en sations with ma Julia and I had the to have great conver y ilit ab ll wi an I . t, ne cep wi t yway) con ) and grea (well to us Brits an t attempts to ruin it! food (despite our bes t ea gr joy en to d people an e myself. take some guests ther absolutely have to
at Aveqia. that tremendous evening for u yo nk tha d ate bel I just wanted to say a s huge fun. far too much, and it wa k an dr and ate I and Emily
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a fantastic thank you also for and recipes and os ot ph itely look e fin th de l for people, I shal Thanks so much met some lovely d an n fu t ea gr evening! I had years! forward to next
INVESTMENT OPPORTUNITY
GOURMET COOKING AND DINING EXPERIENCES
Company Name Aveqia International Website https://envestors.envestry.com/deals/1027 Sector Restaurant/Catering Stage Established, Pre-profit Year Started 2012 Location London Funding Requirement £750k (EIS eligible) Pre-money Valuation £2.5m Assigned Envestors Director: Scott@envestors.co.uk
Vines got involved in the business a few years ago, initially as a consultant, then as CEO. Aveqia has been successful in the UK and garnered universally favourable reviews, but Berggren hadn’t anticipated how fierce the competition in the London market would be. That meant it didn’t take off as fast as he’d expected. Vines has been tightening up the London operation while forging new partnerships and developing Aveqia’s programme, and has added over 80 blue chip clients to the business in the past nine months.
The unique event business offering dining experiences hosted by Michelin star trained chefs. When it comes to corporate events, too many are “just a glass of champagne in a different tent,” as one ad exec puts it. Organisers are increasingly in search of something different for top clients. Aveqia’s business offers that alternative: a chance for corporate clients or employees to learn to cook a gourmet meal under the guidance of chefs trained in Michelin starred restaurants. It meets a growing demand among corporate event organisers and HR teams alike for more personalised, ‘experiential’ offerings, especially as millennials – known as the ‘experience’ generation – join the workplace.
There is competition from event days and cheaper operations such as L’Atelier des Chefs. But Aveqia is focused on FTSE companies and their employees, as well as high net worth individuals. It has successfully expanded the range of innovative gastronomic experiences in order to capitalise on this expanding market.
Founded by Sweden’s David Berggren, the idea grew out of his own experience as a chef in Capetown. Conversations with diners about recipes, ingredients and preparation techniques evolved into a series of home-cooking sessions with them. Berggren quickly recognised the appeal of the experience was more than just a group of people cooking or eating together.
“Corporations have a lot of different things they might be looking for in an event, so we want to create flexible options – a chef’s table, for example. HR directors might want to create imaginative team-building days, or use Aveqia as a way of promoting a wellness programme.”
He opened sites in Stockholm and Gothenburg before branching out to the UK, where he opened a state-of-the-art facility in the City of London.
The business has also forged strategic sponsorship and marketing partnerships with equipment specialists such as Gaggenau, Siemens and Bosch, and is working with commercial partners such as Compass and Sodexo to develop new programmes and events.
That site is a big draw. Aveqia’s impressive kitchen and dining studios have played host to celebrity chefs such as Michel Roux Jr and Michael Caines, not to mention industry demonstrations. It has been used for high-profile cooking events such as The Great British Bake Off heats. It is also perfectly placed to serve Aveqia’s target customers from the corporate world, and it already counts Goldman Sachs, Deloitte, Baker Tilly, Unilever, Nissan and Warner Bros, among its clients.
Word of mouth from marketing, corporate and media events has opened new doors for Aveqia. “We’ve got more weekend and consumer events such as a TimeOut partnership and our ‘single-mingle’ events that allow us to engage with consumers who might have come across us in a corporate setting,” says Vines. “That transition from a purely corporate business to one that capitalises on the consumer fascination with cooking and gastronomy is really compelling.”
But Aveqia’s USP is the calibre of chefs it employs – highly experienced but not the mercurial tantrum-throwers of TV, “Their aim is to share their passion and enable you,” as CEO Paul Vines puts it.
ENVESTORS 13
INVESTMENT OPPORTUNITY
INNOVATIVE SYNTHETIC BONE GRAFT MATERIAL
Company Name Website Sector Stage Year Started Location Funding Requirement Pre-money Valuation
Orthogem envestors.envestry.com/deals/977 Medtech Established 2001 Nottingham, UK £500,000 (£200k pledged) (EIS Eligible) £2.4m (first £250k at £1.2 valuation)
Assigned Envestors Director: Scott@envestors.co.uk
In entrepreneurial circles, it’s called the ‘pivot’, the moment when you switch focus – or junk the original business plan – in favour of the real opportunity. For Nottingham-based biologics company Orthogem, that pivot took a few years. Founded in 2001, it pioneered an innovative synthetic bone graft material called TriPore that was used largely in spinal surgery. But under-investment in the commercial side and a change in the market has led the business to shift gears. Surgeons began to demand something less fiddly than the granule formulation, so TriPore is now produced as a putty. As a business with existing sales and a strong reputation, that apparently simple shift has put Orthogem in a strong position to capitalise on 10 years of market experience. And it’s a potentially big market: an ageing population, obesity and a rising demand for minimally invasive procedures is fuelling the growth of the market. The bone graft industry is expected to grow at a compound annual growth rate of 4.5% from 2015 to 2023, when it could reach $3.48bn. With established sales already and investors including Oxford Technologies, Midven and New Wave, the business has raised some £1m since 2011 to fund product development. Now CEO Steve Lane, who spent 10 years at Baxter healthcare, is looking to ensure Orthogem capitalises on its lead. He has “made it his mission to reconnect with every shareholder” and get them excited about the company’s plans. The TriPore putty retains the unique and innovative structure that made the original product line so promising, but it’s easier to use. Feedback from a pilot study has been overwhelmingly positive. But Lane knows it takes more than a great product to break through: “You might think you have a great product, but you have to prove it. Clinical trials are time-
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consuming and can be costly. So you need to be realistic about your access to the market, and your pricing.” The business model is to use distributors, three out of five of which have already committed to ordering the new product line. Now the focus is on ensuring regulatory approval. The usual test uses sheep to gain the CE mark for use in the EU and in orthopaedic surgery, but a new model on rabbit spines is required to pass the US’s FDA requirements. The business has already done a small study using rabbits, with strong results – usually the results are 25 to 30 per cent fusion rate in 12 weeks, according to Lane. TriPore’s putty resulted in 50 per cent in eight weeks. This gave the business the confidence to invest in the R&D required for the new putty mixture, and it will be using investment to fund a full scale version of the spinal study for FDA approval. To assure regulatory approval, Orthogem uses consultants who can answer the questions that inevitably come up in applications. The expectation is that Orthogem’s new putty will have the CE mark (which is also recognised in Australia) by year end, and the orthopaedic (FDA) approval in 2017. With 60 per cent of the market based in the US, FDA approval is seen as essential for exit.
“It seems like a long time and a lot of money – an estimated £250,000 will go towards the additional spinal (FDA test) – but as a veteran of big healthcare, I like how quickly we’re doing things,” says Lane. “In general, the problem is that there is no ready-made regulatory path for clearance. That’s where non-executives Tom Buckland and Rick Thomas have been so helpful. They’ve created a path for us. Fund raising is going well with over £210,000 raised so far. “The company is already making sales and is a year away from break-even. For medtech, this is as close as investors can probably get to coming in at the ‘fast’ end,” adds Lane.
COMPANY UPDATES
Where are they now? We’re pleased to bring you exciting updates from Envestors companies:
Following the successful closing of £380,000 equity investment in May, and in light of signing up a number of new high-profile retail clients, including DFS, Maplin, Farfetch and Thomman (Europe’s largest online musical instrument retailer), GoInStore has secured a further £75,000 of equity, leaving a further £45,000 remaining for any interested investors. The company also has a strong sales pipeline including: Audi, Samsonite, Toyota, Honda, Marriott hotels, Taj hotels, Amazon and Walmart. GoInstore has been ranked 23rd out of 680 in Retail Insider magazine’s Digital Innovations Report 2016 and won the prestigious New Product Innovation Award from Frost & Sullivan. www.goinstore.com
Savernake Capital has successfully closed £1m in equity investment to date. The funds have helped to establish a hedge fund structure, which is expected to be launched in November this year. The set-up of the fund has been supported by a world-class board of directors and investors, whose experience encompasses fund management for Tiger Management, KiCap and De Putron, as well as a wealth of expertise in business strategy and investment funds from organisations such as KPMG, Barclays, Virgin Group, HSBC and BNP Paribas Fund Services. Savernake will be working with Saxo Bank as prime broker, Moore Stephens as auditor and Deutsche Bank as custodian for the fund. A further £500,000 equity is available within this round. www.savernakecapital.com
365 Talent Portal is a global community and a career hub for Microsoft enterprise technology consultants and the companies that need to hire them. The tech consultants register on 365 Talent Portal to gain access to specialist online training, technology updates and jobs. They upload their profile with their relevant skills, hiring preferences and availability. The hiring companies (which are Microsoft partners and end-users) search 365 Talent Portal to quickly find what they are looking for from thousands of highly skilled and vetted resources. Using criteria like product and industry experience, availability, location, salary/rate expectations, they can then contact candidates directly. For companies, 365 Talent Portal is a recruitment tool for specialized skills. For consultants, it’s a platform that helps them enhance their skills and stay on top of with the latest product releases and updates. 365 Talent Portal has already raised £50,000 using it’s own regulated funding platform powered by Envestors. It is looking for a further £100,000.
As Billon nears the end of its successful fund-raise, the company continues to succeed and evolve on multiple fronts: The corporate mass payout product has been transformed into a digital engagement tool, which has attracted a large cash loan provider. Reference client Philip Morris will soon complete its pilot phase and move to scale roll-out for 2017. Alior Bank in Poland is completing acceptance testing, and will soon be live. Blockchain is a priority for the bank in 2017. The FCA in the UK is accelerating the regulatory sandbox process, which may lead to receiving license approval earlier than expected. www.billoncash.com
www.365talentportal.com
ENVESTORS 15
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