The Network for Sophisticated Investors SPRING 2017
WHERE NEXT? THE PROSPECTS AND PITFALLS OF ANGEL INVESTING
BREW ROMANCE BRANDS REUNITED REVIVES BELOVED BEER FOR THE THE CRAFT GENERATION
FROM GARBAGE TO GOLD RENOVARE’S REVOLUTIONARY ‘CLEAN’ FUEL BREAKTHROUGH
TOUR DE FORCE DESTIA BRINGS HIGH-END TRAVEL TO THE MASSES
Contents INVESTMENT OPPORTUNITIES
5 3radical 6 Kaleao 7 FUBAR 10 Destia 11 Renovare 12 Brands ReUnited 13 NUTMEG AND HIVE 16 Sense 17 Fertility Focus
FEATURES
8 The Wisdom of (Your) Crowds A new digital platform, Envestry, combines the benefits of crowdfunding with the rigour of more formal networks. We ask three investors how they plan to use the ‘network of networks’.
14 The Voice of an Angel Will ‘macro’ events such as Brexit and the uncertainty of a Trump administration dampen enthusiasm among angels? Not likely, according to our panel of experts. The angel community’s challenges are a lot closer to home.
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
18 Simply Cook
Risk Warning Responsible Investing Please be aware that investments of this nature are
Before investing in a project about which information
not for everyone. Investment in new business carries
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 ENVESTORS 3
INVESTMENT OPPORTUNITY
Welcome We know that investing through the Envestors network brings its own rewards. But sometimes it’s right to acknowledge our most active investors, the regular dealmakers who keep the opportunities flowing. But how best to show our appreciation? We tested the waters last year by holding an evening of cordon bleu cooking for a handful of investors and their partners. For us, it was simply a chance to thank them for their support. For those who attended, we hoped it would be a fun, unique night out, an opportunity to meet with like-minded people, drink a glass or two, and get a free cooking lesson from a Michelin-star trained chef. The night proved such a success that we felt inspired to do something more regularly. So we’ve created the Platinum Members Club for Envestors to keep the thanks – and the fun – flowing.
Sitting above the crowd with a minimum investment of £25,000.
Club membership will be offered by invitation only to Envestors’ most active investors. The number will be limited to an annual intake of 100, which will be reviewed yearly. Not only will it be a chance to hold more social gatherings throughout the year, it will give members access to certain privileges:
Scott Haughton COO & Co-Founder
Personal relationships At the heart of the Platinum Members Club from Envestors is the personal attention that its members will receive from the Envestors team. For those who prefer to deal with an individual, we will offer Platinum members the option of a dedicated contact.
Nick Taylor CFO & Co-Founder
Early notification of investment opportunities Envestors will grant Platinum members early access to its upcoming deals, and will give them the opportunity to lead an investment round, gaining close access to the company and playing a pivotal role in helping that business succeed.
Oliver Woolley CEO & Co-Founder
When: March 28, 2017 Where: Bridgewater Hall, Manchester Time: 08:30am to 5pm The majority of equity investment still takes place in London and the south east. But the government has committed to creating a ‘Northern Powerhouse’ and UKBAA wants to lend its support and ensure there is a connected supply of finance for growth businesses, from start-up through to scale-up across all the UK’s regions. Visit: http://nis2017.ukbaaevents.org.uk for details and reservations.
Strategic partner benefits Our partnership with the Luxury Network also allows us to offer Platinum members access to preferential rates, exclusive offers, and exciting events from brands including McLaren, Sunseeker and Moet Hennessy. We will invite individuals within the Platinum Members Club to attend these events on an ad-hoc basis.
Learning to Fly – How to Invest Like a Business Angel
Envestors Investment Presentation Lunch
When: April 4, 2017 Where: Moore Stephens, London, EC1A 4AB Time: 4pm to 7pm Aimed at those new to angel investing with Envestors, this seminar will include tips from experts and investors within the industry that will help offer insight into the world of investing. After the seminar you will hear from two or three 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. Details on the presenting companies will be sent to you the week before the seminar.
When: April 27, 2017 Where: Nabarro, London, EC2Y 5AL Time: 11.45am to 2.30pm
Visit: https://envestors.envestry.com/events
Company Name Website Sector Stage Year Started Location Funding Requirement Pre-money Valuation
3radical Limited envestors.envestry.com/deals/1241 IT/Software Early revenues, pre-profit 2011 Bristol £2m (£1m already pledged) EIS eligible £8m
To arrange a meeting, contact: scott@envestors.co.uk
Dates for your diaries Northern Investment Summit
THE AWARD-WINNING DIGITAL PLATFORM FOR ENGAGING CUSTOMERS AND EMPLOYEES
Discover new investment opportunities as a group of hand-picked companies make their investment presentations to potential backers. Most of our selected companies are eligible under the Enterprise Investment Scheme. To see highlights from past presentations, visit: http://bit.ly/2lR3jKp To attend, visit: https://envestors.envestry.com/ events
Brands are endlessly looking for ways to engage more directly with consumers and employees. Whether you’re looking to shift products or attract and retain scarce talent to your business, the challenge is to stay relevant to rapidly shifting tastes, all the while ensuring you get a return on your investment. 3radical’s interactive digital experience platform goes a long way to simplifying that challenge. Called Voco, it can be used by businesses to tailor and disseminate real-time, interactive digital experiences via whatever channels they find most effective. Capitalising on gamification mechanics already used in a simple way in loyalty schemes, Voco encourages more user engagement by offering them rewards, discounts or competition entries to those who interact. Brands can choose different approaches to suit their purpose: location-based offers to attract footfall to British Land shopping malls, or online scratch cards, offers and quizzes linked to the 2015 Rugby World Cup to attract families to Zizzi restaurants. Sales, which began in 2014, have reached over £1m on an annualised basis with the majority coming from subscription software licenses. Brands such as Mitchells & Butlers, Azzuri Group, DBS Bank and Anytime Fitness are among its global clients. Dell South East Asia won an award for its 3radical-powered awareness-raising campaign.
with whom they continue to work. They took their time to build and trial the Voco platform into a “robust, scalable model” that is adaptable and easy to implement before launching it commercially. “We looked at what we’d achieved at Alterian and decided to focus on reaching a bigger proportion of the audience using software and analytics, because that is our expertise.” Harnessing changing consumer expectations, 3radical Voco is ‘mobile first’: this allows the business to interact in real time with highly targeted communications that capitalise on context and location. “Perhaps most important, we created a platform for brands to create stories using interactive content that consumers choose to follow,” adds Eldridge. “You have to let people choose their own story, rather than hammering yours. People decide how to go on it, accessing brand rewards in different ways, but it’s a case of letting the consumer take the journey.” The business has operations in Australia and Singapore, as well as the UK, and has already delivered interactive content to over one million consumers – with substantial uplifts in response rates compared to traditional communication methods. There are multiple routes to continued growth on top of current activities – one of them being expansion ‘sideways’ into employee engagement promotions . Another fledgling application, citizen engagement, is being rolled out in Singapore schools. 3radical’s team also includes two nonexecs with considerable networks: Bite PR founder and Agent3 CEO Clive Armitage and former Perot Systems consultant and Loneworker Solutions CEO George Stavrinidis. “We know the approach works in the markets where we already operate. So we plan to expand sales and put a team on the ground in the US. We’ve already got someone building a sales pipeline there. That’s where potential acquirers are, too,” he says. “We’re lucky in that we have background and expertise in both marketing and technology. But it’s a fast-moving market.”
Founded by David Eldridge and Mike Talbot in 2011, 3radical sits at the intersection of industries where the pair has been building successful ventures for many years. Their last business, marketing analytics software firm Alterian, a market leader in the US and UK with over 1,500 enterprise clients, sold for just over $100m. It also left Eldridge and Talbot with an extensive network of contacts, customers, employees and business partners David Eldridge
4 ENVESTORS
ENVESTORS 5
INVESTMENT OPPORTUNITY
INVESTMENT OPPORTUNITY
DISRUPTIVE DIGITAL MEDIA ENTERTAINMENT BRAND
INNOVATIVE LOW-ENERGY, HIGH DENSITY IT INFRASTRUCTURE
Company Name Website Sector Stage Year Started Location Funding Requirement Pre-money Valuation
KALEAO Limited envestors.envestry.com/deals/1288 IT/ SAAS Pre-revenue 2015 UK €3,500,000 (EIS eligible) €14,640,000
To arrange a meeting, contact: scott@envestors.co.uk
There has been an explosion of connected devices and people accessing services in the cloud. We’ve already reached what Deloitte, the consultancy, calls ‘peak smartphone’.
cut the integration costs,” says Goodacre, a former ARM director and a professor of computer architectures at the University of Manchester. While competitors such as Nutanix have size on their side, Kaleao steals a march by ‘baking in’ convergence at both the hardware and software levels. KMAX has over 10 times the computing density of the traditional solutions, but uses less than a quarter of the power when delivering the same system performance. Given that global ICT already uses around 10 per cent of the world’s electricity, the energy savings are significant. Businesses using Kaleao’s servers benefit from across-the-board efficiency improvements, without having to overcome any of the compatibility or scale-up obstacles. Co-founded by CEO Giampietro Tecchiolli, a former CTO of Eurotech, a professor of computer architecture and a member of the IEEE Computer Society, Goodacre, and CMO Greg Nicoloso, who is a former board member at Eurotech Group, Kaleao plans to use investment to finance production of the next generation model of KMAX.
Research by Gartner estimates that by 2020, there will be at least 25 billion devices connected to the internet – all needing servers. Others put that number closer to 50. With ever greater connectivity comes a need for more – and more powerful – IT systems. Kaleao’s solution has been to shrink the problem by creating a server platform that saves on space, costs and energy consumption, without sacrificing performance or capability.
What Kaleao has built is a flexible, pre-defined, very powerful appliance that can run any number of services “without the need for a new building to house your servers,” as CTO John Goodacre puts it.
“The way of the world has been tech siloes that keep storage, networking and computing separate. The industry is moving to re-connect these areas in order to do away with the need for different skill sets, and to
6 ENVESTORS
FUBAR Radio envestors.envestry.com/deals/1003 Digital Media Early Stage 2012 London £500k (EIS previously granted) £2.75m
To arrange a meeting, contact: oliver@envestors.co.uk
Is this a sign of things to come, asked The Guardian when it covered FUBAR Radio during its launch year of 2014. Describing itself as a “disruptive media entertainment brand”, FUBAR has hit upon a formula for reaching a lucrative but elusive audience that hasn’t been well served by traditional media channels.
brands to create “organic, custom content” for a valuable, but hard-toreach age group. Sometimes brands come to FUBAR – Unilever saw a piece about Pot Noodle sandwiches with one of their presenters from the Rizzle Kicks and approached the company as a result. It also re-purposes content for social media, which means popular clips go viral and may be carried by partners including Comedy Central, The Express, Daily Star, The Mail online, OK!, among others. Many of the early acts appearing on FUBAR came from Smith’s own contact with comedians and musicians as a successful TV producer. Having built a £5m subsidiary for ITV that pioneered music and comedy formats, Smith went on to create two further multi-media start-ups. While helping to lay the foundations for T4 in the 1990s, he saw a change in how music and comedy were being presented to younger people, and recognised that these would become the ‘influencers’ for a generation still largely overlooked by mainstream broadcasting.
A digital, on-demand station, FUBAR’s audience download a free app to gain access to ad-free, uncensored sports, comedy, current affairs and music shows. The content is available at any time, anywhere, on any device – though 70 per cent access it via smartphone – and is widely shared on social media platforms.
The benefit for organisations is less cost – not just in hardware, but in skills – and faster, more efficient services, whether you’re a Web content provider, an enterprise data centre or a cloud service provider.
Organisations are already moving towards greater convergence of IT infrastructure in order to integrate operations and do away with costly, over-complex siloes. Kaleao’s KMAX server platform has all the plus-points of ‘hyperconvergence’ in an integrated software solution, but extends the benefits to the hardware platform, too. It also benefits from its more distinct, ‘composability’ aspects – it uses ARM processors, not Intel, and is fully compatible with Linux-based open-source software.
Company Name Website Sector Stage Year Started Location Funding Requirement Pre-money Valuation
This will allow for greater modularization and extend the company’s reach of current server markets while moving Kaleao into data analytics, scientific computing and other machine learning and AI applications. Exit plans remain fluid: there is plenty of scope for acquisition in the converged infrastructures market (HP Enterprise recently purchased hyperconvergence specialist SimpliVity for $650m). There is also potential for an IPO, or “we can build it up into a big business,” says Goodacre. “We already have customers lining up and have a roadmap for multiple generations of product, so there is potential for the company to expand and scale very quickly.”
In the past year, it has captured a monthly average audience of over 6.5 million adults, most of whom are aged 18-34. Until FUBAR, says founder Duncan Smith, there was “very little light and shade for a young demographic.” There may be thousands of online and digital radio stations, but “most are music based and of those that are talk-based, you have to invest time to know what you’re getting from each of them”, and few target this demographic specifically. Inspired by the success of Howard Stern on the US satellite radio station SiriusXm and his own work with upand-coming musicians and comedians, Smith realised there was room for more fun and mischief in UK talk radio. FUBAR differentiates itself through the breadth and fruitiness of its content. It falls outside regulator OFCOM’s jurisdiction, so it can air “irreverent, edgy” post-watershed live shows with celebrities such as Katie Price, which often find their way into the press. Instead of ad spots, it finances programming through sponsorship or product placement, working with
Apple has signed formal terms with FUBAR that set the company apart as a “Preferred Podcast Provider”, listing it among the world’s top three English-speaking stations in comedy. This effectively puts the station on a par with the BBC in the way that its podcasts appear on the landing pages of iTunes. An April 2016 partnership with Viacom’s Comedy Central TV channel has further boosted revenue and its reach beyond the UK. It is planning to use investment to further raise awareness and scale-up sales and marketing to achieve forecast sales of £1.7m in 2017/18. It is also looking to bring its app and Web development in-house, and increase its programming hours with new shows in various formats. Ideally, says Smith, it would be a strategic investment from someone who has experience of building brands in non-traditional media.
ENVESTORS 7
ENVESTRY
The Wisdom of (Your) Crowds
In 2014, Envestors was looking for a way to enable sophisticated investors and highgrowth businesses to meet, interact and finance growth online. Finding nothing to fit the bill, it capitalised on 10 years of experience designing and building its own website. The result was the Envestry platform.
ENVESTRY
The sophisticated investor
Poorly prepared pitches mean investors like Secret Millionaire Mike Greene end up “kissing a lot of frogs”. “A lot of the time, I’m asked to go and see a company that wants investment, but they don’t have financials and other details to send me, so I end up in a meeting where all I’m seeing is raw enthusiasm. When I eventually get the details, the fundamentals aren’t there, and I’ve wasted my time and theirs.” Greene is often asked to recommend companies looking for funding, making him something of an informal matchmaker. But no-one wants to be the matchmaker known for pairing investors with frogs. For Greene, Envestry is a chance to “formalise what had started to become a financial dating agency. I wouldn’t have considered taking it to the next level otherwise.” The simplicity of the platform is a big selling point “It’s like driving. I know why I want to go from A to B. I know how to get there.
Now the platform can be licensed and white labelled, allowing companies to curate investment opportunities and offer them to their own network of private investors, while Envestors takes care of FCA compliance. The Envestry platform has 39 licensees and over 5,000 investors, giving it the potential to become the network of networks.
The format was designed to be as user-friendly as possible. “I can change the look and feel as I want. If you’re a company looking for investment, there’s a simple template to fill out. I can review the submission, interview the company then register a deal and put it live if I think it’s appropriate for my network.” All the information potential investors need is already uploaded before Greene presents the opportunities to his network. That means he’s not only making a return with his investoropportunity matchmaking, he’s confident no one will kiss any frogs.
For Sir Martin Broughton of Sports Investment Partners (SIP), its newly launched Envestry platform is a means of showcasing sports-related businesses to a wider audience. It also bridges a gap for early-stage sportsrelated ventures not quite ready for SIP’s larger-value deals. “There are a lot of people out there who’d be interested in investing, but may not have access,” says Sir Martin, a ‘City grandee’ and former chairman of BA, Liverpool FC and the CBI, among others. “We liked the idea of a sports vertical, where we combine our commercial and industry expertise with Envestors’ financial due diligence.” SIP, an investment consultancy, has hitherto focused large, established businesses such as Arena Group, which leases infrastructure for events worldwide, or Supponor, which uses augmented reality to localise perimeter advertising at matches. “We always want one of the team to sit on the board,” says Sir Martin. “We’ll only invest where we can add value.”
For smaller ventures, it may be the first time they’re thinking about board composition, he adds. “It’s a journey for new businesses. This is where they learn how to communicate with investors. I’d like to think this helps with a more realistic valuation expectation down the road.”
The entrepreneur
A Suit That Fits sells more bespoke suits every year than every tailor on Savile Row. Not all crowdfunding sites are created equal. In 2015, David Hathiramani, CEO of A Suit That Fits (ASTF), raised £876,700 on a website that, in his own words, “didn’t give you much control”. Instead, it used every opportunity to target Hathiramani’s customers (whom he’d persuaded to join the site) with competing deals. The company’s customers – “suit-wearing people” – were a good fit for a funding platform. “They fit the crowdfunding demographic.” Unfortunately, that also made them poachable. So when, in 2016, ASTF was ready for more investment, Hathiramani sought out a platform with more control.
“We’re not dissimilar to A Suit That Fits,” says Envestors’ Woolley. “We don’t expect the client to adapt to fit the platform. Envestry users have much more control over the process than they have elsewhere.” They also don’t give away valuable customer data, but instead gain access to information that is not available on other platforms. “We could see in real time which one of our investors had logged on,” says Hathiramani, “so we could track if an event or piece of marketing led to an investment.” Like Greene, he also valued the ease of set up. “The whole thing only took a couple of weeks [to set up]. It’s been built to be easy enough to use if you’re not such a technical person, but comprehensive enough to allow you to do almost anything you can think of – and as an Envestry platform user, you get a personal service from the guys at Envestors,” he says. And the tools don’t vanish when the funding round closes, either. “Companies that use Envestry have the tool there for further funding rounds,” says Woolley. “They can use it as an investor relations portal to keep their shareholders and investors informed. Then if they want to do further funding, they’ve got everything in place to switch it on and make it happen.”
Despite decades of experience on blue chip boards, Sir Martin has yet to join an SIP board. That’s a conscious choice. “At Arena, they were convinced I should be the chair. But I felt [SIP partner] Matthew would be a better fit. It took quite a lot of persuading. [But] I’ve never chaired a business of this size. “I’d probably be better now than four or five years ago. I’ve got more accustomed to issues that might come up.”
It also puts powerful features in the hands of companies wanting to raise money from their own communities. They don’t have to give a third-party their customer lists or worry about sending potential investors to a site filled with rival deals. “Envestry is run by people who really understand the DNA of investing,” says Modwenna Rees-Mogg, whose Pluralists investors’ club is an early adopter.
8 ENVESTORS
It was with active investors such as Greene in mind that Envestors built the platform. “We designed it so Mike could do what he’s expert at – finding opportunities – while drawing on our expertise in running a network,” says CEO Oliver Woolley.
The blue chip chairman
“We’re hoping to have a role in SIP/Envestry investees, so we can keep tabs on them,” says Sir Martin.
“We built the Envestry platform to make it possible for organisations to run their own networks,” says Oliver Woolley, CEO of Envestors. “When your platform has been built by people who’ve been in your shoes, you know it’s going to have all the features you need.”
Here, we ask three more Envestry users for their take on the platform.
I want a car that will do the job without me having to understand how the engine works. Envestry is like that car – it’ll take me where I want to go. I’ve got Envestors making sure the engine is running correctly. And if I can use the technology, you know it’s pretty straightforward.”
Mike Greene
SIP’s Envestry deals may face yet another set of issues. It’s not uncommon for new business founders to have an inflated idea of a company’s worth. “Bringing them back to reality is one of our roles,” says Sir Martin. “People are spending time starting their businesses, recruiting into fledgling companies that have yet to earn money or find a market for their products. I’m impressed by the energy and the new ideas. But it’s important to focus.”
David Hathiramani
ENVESTORS 9
INVESTMENT OPPORTUNITY
INVESTMENT OPPORTUNITY
A GROUNDBREAKING WAY TO TURN BIODEGRADEABLE WASTE INTO FUEL – TODAY
A DIGITAL PLATFORM FOR BUILDING YOUR OWN ADVENTURE HOLIDAY
Company Name Website Sector Stage Year Started Location Funding Requirement Pre-money Valuation
Destia envestors.envestry.com/deals/1177 Travel Pre-revenue, pre-profit 2014 Cirencester £500,000 (EIS eligible) £750,000
To arrange a meeting, contact: nick.taylor@envestors.co.uk
If you’ve ever tried to book a holiday, you’ll know it’s largely a case of WYSIWYG – what you see is what you get. Destia aims to change that acronym to one more fitting of the era of mass customisation and customer co-creation – WYWIWYG. Justin Wateridge
Destia is an online holiday-creation platform that will allow customers to design, build, cost and book adventure or travel holidays themselves. By saving travellers money – potentially some 10 per cent in the UK and up to 25 per cent in North America – it could open up the market to a wider group with wanderlust. It also addresses the growing demand from what market researcher Ibis calls a “much more sophisticated clientele” in search of unique adventures and more flexible itineraries. A disruptive model that takes a fundamentally different approach to holiday-booking, the company represents a “natural next step” for tour operators, according to co-founder Nicholas Laing, who has some 27 years of experience to draw on. “We know this is where the market is moving.” Laing founded Steppes Travel, a specialist in high-end, tailor-made travel, in 1989 and grew it from a team of three to a thriving operator with 40 employees. He says: “The traditional approach to booking sub-contracts to a third party in, say, India. But Net-savvy, 50-something consumers are
10 ENVESTORS
increasingly doing their own research online, then approaching destination management companies (DMCs) directly. The DMCs aren’t always geared up to deal with such requests.” So Destia bridges the divide: travellers build their own itinerary, but have access to a large, existing database of hotels and activities that is curated by Laing and his team and based on their industry contacts, knowledge and experience. Booking through Destia, as opposed to directly, assures clients protection under EU/UK law. The platform targets any English-speaking traveller looking to organise complex itineraries through tour operators (rather than hotel breaks), a sector estimated to be worth some £1.6bn in the UK and £23bn in the US. The management team – Laing, former Abercrombie and Kent UK boss Justin Wateridge, and Bashar Al-Ash, who ran the premier inbound agency in Syria for 15 years – has raised £198,000 and is looking to use the next round of investment to refine the final MVP and build the management team. It will then look to raise another £2m to expand quickly and take advantage of the way the market is moving. The concept has already been tried by others such as Evaneos, but Destia sees itself as a ‘fast follower’ that differentiates itself in an important way: other platforms hand off responsibility to a local agent, which may not welcome the business if they have language barriers or limited staff. “Destia is different: our USP is the itinerary builder. Other models place the onus for itinerary design on the DMC – and that is the very thing they are not equipped to handle.”
Company Name Renovare Fuels Limited Website envestors.envestry.com/deals/1143 Sector Energy Stage Pre-revenue Year Started 2015 Location London Funding Requirement £1.7m (£636k secured), EIS eligible Pre-money Valuation £6.8m To arrange a meeting, contact: scott@envestors.co.uk
It’s rare you hear phrases such as ‘world first’ and ‘immediately implementable’ in the same sentence when talking about sustainable technology, but “every now and then you find something that is truly disruptive”, says sector veteran Matthew Stone of waste-to-fuel innovator Renovare. In recent US trials, Renovare successfully converted landfill gas into diesel fuel with no fossil fuel additives. “The value is that it can be used right away. The infrastructure exists to produce and use it – and unlike, say, hydrogen, no engine modifications are needed,” says Stone, chairman of Renovare and a director of the US-based Cleantech Holdings, which develops and commercialises clean technology.
the end product is cheaper, cleaner high grade [like Premium petrol] fuel. It is transformative.” The potential savings to UK industry, too, could be considerable: some companies spend “tens of millions” on outsourced waste disposal, notes Stone. Larger operations, meanwhile, could take advantage of the storage or sale possibilities and diversify into fuel. Sites could also open up job opportunities in the UK. Renovare’s revolutionary process was developed and trialled in Florida over a period of eight years, with support from NASA and the Florida Energy Consortium, but London-based Renovare owns the exclusive license to the technology in Europe, Africa and Asia. The UK operation includes Stone, successful serial entrepreneur Kevin Godlington, the CEO, and Devin Walker, CTO and an award-winning biofuels analyst and process developer. The team is currently in discussion with utility and waste management companies to identify a suitable site to start production, with plans to use the bulk of the proposed £1.76m investment to cover engineering and manufacturing costs. Bio-energy is currently the largest source of renewable energy in the UK at 72 per cent (wind-power contributes 20 per cent.) And landfill gas is the second largest source of bio-energy. Even if recent accusations of government indifference to climate change measures are justified, Stone is sanguine: “Energy [production] is already changing. Anti-environment rhetoric won’t reverse what is already happening. Our technology is independently, fiscally viable and can be produced at a lower cost than not only other renewable fuels but also traditional fossil fuels. As long as we’re treated fairly, we’re fine to operate on a level playing field.”
Renovare’s patented process turns environmentally harmful (non-food) waste gas from homes and industry into petrol or diesel fuel. In doing so, it produces energy from waste more efficiently and more profitably than any existing technology – fuel can be produced at under 25p per litre. The technology’s energy recovery rate is almost 90 per cent. By-products of the process (flue gas and water) can be used to power anaerobic digestion (AD) plants, making facilities self-sufficient. The company’s breakthrough could hardly come at a better time for supporters of renewable energy and the ‘circular’ economy: last year the DECC announced plans to wean AD sites off government subsidies, which could make smaller plants unviable and thwart plans for larger ones. “The industry is in limbo,” says Stone. “From now on, new, large-scale plants will no longer be subsidised. But there are still fuel targets that have not been met. We have an independent, economically sound solution where
ENVESTORS 11
INVESTMENT OPPORTUNITY
INVESTMENT OPPORTUNITY
REUNITING CONSUMERS WITH MUCH LOVED HERITAGE BRANDS
Company Name Website Sector Stage Year Started Location Funding Requirement Pre-money Valuation
Brands Reunited envestors.envestry.com/deals/1186 FMCG £480,000 Revenue to Feb 17 2014 London Up to £1,000,000 (EIS eligible) £2.3m
SUPER DELICIOUS SUPER NUTRITIOUS SUPER YOGURT
palates as well as updating the look and feel of the products, making sure they are available in the right formats. “Owning brands that still exist in the fabric of our society is a massive advantage over new entrants, while being able to reinvent the products without a legacy business means we can focus on the future without alienating the old, declining consumer base.”
With all that choice comes a dilemma: how do brands differentiate themselves to less knowledgeable consumers? According to research company Mintel, 24 to 44-year-olds, craft beer’s core consumers, can be intimidated by what’s on offer and look for a “gateway” brand that introduces them to artisan ales. The founders of Brands Reunited have a solution: they have acquired the rights to re-launch heritage beer brands such as Watneys (once the UK’s favourite) and Home Ales. In doing so, they make ‘craft’ accessible to new consumers, while tapping into global affection and awareness of familiar names – a fan base that can be “quite fanatical”, according to CEO Nick Whitehurst. The old brands are not just repackaged, though: “The danger would be to get caught up in nostalgia,” says Whitehurst, who has worked in the brewing industry, as a pub owner, and a partner at whynot!, a marketing agency for the likes of Heineken and Pernod Ricard. “The aim is to build on much-loved heritage brands, but to do so in an original way.” So Brands Reunited has created new recipes for modern
12 ENVESTORS
NUTMEG AND HIVE envestors.envestry.com/deals/1213 Consumer Early stage – early revenues, pre-profit 2016 London, UK £1m
To arrange a meeting, contact: robert.gordon@envestors.co.uk
To arrange a meeting, contact: nick.taylor@envestors.co.uk
Britain’s brewing industry is undergoing a revolution, with craft beer leading the way. The market is already worth some £1bn, and in double digit growth. In January 2016 alone, 15 new breweries joined the Society of Independent Brewers, with artisan labels now stocked by local supermarkets and served in thousands of pubs across the country.
Company Name Website Sector Stage Year Started Location Funding Requirement
Their business model is different, too. Brands Reunited partners with credible local brewers and outsources the logistics to keep costs lean. Using established routes to market not open to most new brewers allows the company to focus sales and building up its brand strengths. Only once the brands are established will it look to buy or build a brewery, in order to unlock the margin benefits that this brings. Once funding has completed, Brands Reunited has agreed to take over Oldershaw Brewery, its partner in the Midlands, bringing in Oldershaw’s managing partner, Kathy Britton, as operations director. Brands Reunited also numbers MD Emma Turner among its team. Turner started at Courage Brewery and was most recently both Category and Trading Director at FMCG giant United Biscuits. Brands Reunited has already successfully licensed four brands from Heineken UK, with two in the market and two in development. It has also secured local and regional listings for the brands and begun advertising for Watneys online. Longer term, it foresees launching six brands and owning four breweries. It’s a competitive market, but there is still space for growth, with market penetration at just 20 per cent. Turner likens it to the coffee market of the 1990s: “Beer marketing is going through a transition. Consumers care about provenance and the story behind the brewery. They are willing to pay a little more for a pint with personality.” Consolidation is also starting to take place, she adds, with craft beer brands increasingly attractive as acquisition targets. (SABMiller bought London craft brewer Meantime for £120m in 2015.) “There are a number of credible exit opportunities for the right brands and businesses, which is something that really appealed to us and helped us to shape the business in the way we have. It’s a really exciting time and we are determined to play our part and build a great business.”
Britons love their yogurt. The total value of the UK yogurt market is estimated at £1.9bn and is dominated by brands such as Müller, Activia, Rachel’s and Yeo Valley. But while consumers may regard it as their ‘healthy’ sweet, the truth is a little more sour: researchers have found that one market-leader’s pots contain virtually all of a child’s daily sugar allowance. Gram for gram, leading brand yogurt pots contain more sugar than a Coke, according to NUTMEG AND HIVE founder Steven Hegarty. So when Hegarty left his job as SABMiller’s commercial director of super premium brands to “do something healthier and more meaningful”, he opted to enter an apparently crowded market with something completely new: a genuinely healthy brand of yogurt.
Consumers are increasingly seeking out healthy, minimally processed foods, according to a 2015 Nielsen report, and are willing to pay a premium for health attributes. NUTMEG AND HIVE’S stockists reflect its premium status: it has listings in Harrods, Selfridges, Whole Foods, Sourced Market and As Nature Intended, among others, and it supplies many offices such as Google and Freshfields. For Hegarty and co-founder Janett Lozano, a former brand planner for the likes of Ogilvy Advertising, these high-end stockists are a vital step to building the brand’s reputation and lending credibility to the business as it grows. “In many of the outlets in which the yogurts are listed, NUTMEG AND HIVE outsells its competition. Many consumers say it’s the best yogurt they have ever tasted.” Likewise, it is scaling up at a measured pace on the product side, focusing on perfecting three flavours of its Super Yogurt, with Hegarty predicting further innovations by the end of the year. “We’re taking it carefully and getting the product and positioning right,” he says. “It can be a big mistake to go too big too soon.” The market is not short of nominal competitors, but there are process and investment hurdles that would make it difficult for existing competitors to copy the N and H formula. There is also an advantage to being new: “The large, existing players lack the DNA to build brands at a grass-roots level. Ultimately, like many large multinationals, they have learned that it’s more effective to buy rather than build a new brand from scratch.”
“Obesity is out of control and consumers are voicing their frustration with their wallets. But so-called ‘healthy’ yogurts are failing to deliver. Consumers find that they taste artificial and are full of synthetic ingredients,” he says. “There was a clear and unmet need in the market for natural, healthy yogurt that tastes delicious.” A premium brand that launched in January 2016, NUTMEG AND HIVE prides itself on providing “outstanding” quality products made from its base in London. That means using “100 per cent natural ingredients”: cold-pressed whole fruit and blossom honey, with no additives, flavourings, colouring or processed sugars. “Our aim was to make each pot delicious but also nutritionally dense,” says Hegarty. That may add a little to the cost, but the company has identified a booming sub-category of young professionals for whom ‘healthy indulgence’ is worth a little more.
ENVESTORS 13
ANGEL INVESTING
ANGEL INVESTING
Divyang Mistry
THE VOICE OF AN ANGEL
An entrepreneur and PWC alumnus, Mistry began looking at angel investment about eight years ago. Initially, I was a bit unfocused, but I soon determined that the best fit for me were scalable, B2B businesses – I’m not as comfortable with B2C. I also wanted to be more hands-on. I still see angel investing as a niche thing – the vast majority wouldn’t necessarily know about it. But in the last four or five years, returns on other forms of investment have been so poor, people are looking to diversify. There are loads more entrepreneurs coming through, though I see crowdfunding as a mixed blessing: you need to work harder, be very dynamic and capture investors’ imagination. You have to spin it, and there is a danger the financial sense of the business may not add up.
At the start of this year, predictions were that start-ups and small, private companies were in for a rocky 12 months. But how much do ‘macro’ events and uncertainty influence the activities of business angels? Four experts share their views.
Jenny Tooth
It took me six years to make my first two investments. Past performance is an indication of what they’ve done, but it doesn’t always follow that a second-time founder will be a success: maybe they were just lucky with their first idea. I’ve seen that happen before. Often, there is one individual who keeps it all together – a problemsolver who binds everyone together and keeps them on track. But there’s no specific formula that you can apply to determine an investment’s success from the outset. Sometimes it’s easier to tell if something is not going to work, if there are obvious flaws in the management team. The difference is so great between a team that is firing on all cylinders and one that is in disarray.
CEO, UK Business Angels Association A number of factors have transformed the landscape since the financial crisis. We have a new wall of capital, investors with a lot more enthusiasm, and a new wave of start-ups. Fintech is booming, furthering the development of new interfaces. This makes for an exciting market. There has been an influx of like-minded people forming syndicates of different types. Angels more closely interface with VCs and PE, and there is a wider range of venture money flowing in from multiple sources. It’s also become a more visible market. People are happy to say they are looking for funding; investors are more explicit about where they want to commit capital. There is so much choice, with potential deals coming to you via various channels, from LinkedIn to syndicates to crowdfunding platforms, there is a danger of becoming inundated. With all that noise, how do you find quality deals? Curated deal-flow becomes more important than ever. One downside, possibly, is inexperience – in accelerators and equity crowdfunders, this can sometimes result in extremely high valuations. One of the big issues for angels is in finding flexible entrepreneurs who understand the value of the capital they want to access. We need clear ground rules and a framework for founders and investors – we’re developing an e-learning programme to tackle this. Another big challenge is how we build scale-up capital for the longer term. We’re very conscious that angels can be involved in a deal for a long time – and that 60 per cent of their deals will fail. It takes 10 to 12 years to build a great company, but further up the line, there is a lack of scale-up, patient capital. Regional discrepancies also need addressing. Investment is largely centred around London and the south-east, with a bit in Scotland. But it’s less accessible in other parts of the UK, so we’re looking at ways of stimulating more risk-capital visibility in order to build a more effective ecosystem around the country. The other big issue we want to tackle is diversity – or the lack of it. Women make up around 14 per cent of the visible investment community. Our aim is to reach at least 30 per cent. There are existing networks, but we need more awareness, role models and education.
14 ENVESTORS
It also meets a need for people who want more control over their money.
So that’s where I do my due diligence. You have to dig deeper, look at the drive of the individuals involved and really probe whether their hearts are in it. When I started out, angel investment wasn’t as established as it is now, but I’d never invest without meeting the people involved.
I am always involved – it’s the best way to add value. Many new businesses lack the expertise of an FD, so it’s a win, as I have a background in finance. In the end, it’s a selfish thing, but there’s an element of altruism: when I get involved in a business or I want to influence the investment, to see it succeed. Founders are very driven people, so you can’t be too prescriptive or you’ll clash. But Envestors will make them aware of any gaps in what they are offering, and that’s where it adds value. I’m not a fan of political meddling in business, and overall, I don’t see macro-economic issues influencing entrepreneurs unduly – you’re usually so small you’re head-down, concentrating. On the investment side, there is a big gap for businesses that fall between angels and VCs, so we need to close that, perhaps pooling funds more so that they grow themselves. It’s important to talk to other investors about the issues they’re having so that you can stay informed.
Martin Rai A chartered accountant with a background as director of both multinationals and start-ups, Rai was the FD-founder of Powwownow and is currently FD and advisor to three small companies. I invest in three private companies with around £1m turnover each, where I’m also a director. I then have four or five angel investments, so I’m quite at home in the sector. But I wouldn’t call myself a guru. Years ago I thought that high-tech was everything, but I’ve since discovered there are other industries that are interesting. At the moment, my investments are varied: a manufacturing company, a fishing accessories business and a tech company among them. I’ve come to realise that product matters, but primarily, it’s about the people. You can get swept away by enthusiasm for a sector or product, but if the people aren’t right, it doesn’t matter how brilliant a business looks. What I look for are people with vitality and vision, who will stick with something. It may sound obvious, but unfortunately, it’s not always what you find in new businesses.
I think potential investors should be perfectly frank about any issues they foresee being a problem. There’s no reason why you shouldn’t raise questions that may help that company, whether you invest in it or not. Because the worst thing for a growing business is a problem that’s left to fester.
Tony Goodwin Chairman and CEO of Antal International, a management and recruitment specialist, and an experienced angel investor. My early investments eight years ago were very diversified. But I found I didn’t know enough about the key performance indicators. I now gravitate to business services and to technology that I understand. About 75 per cent of my investments tend to focus around sectors I know well, then the remainder are less specialised, just for fun and interest. I like simple, straightforward businesses. I know there are fabulous algorithmic innovations out there, but unless the result is blindingly simple, I steer away. We’re seeing a lot of great ideas emerging, but some have no idea about how to build a business. Everyone’s an entrepreneur today. I’m all for that. But a lot are ill-equipped, ill-prepared chancers. More and more are being rebuffed. They must be more prepared. You quickly identify what will work when you see hundreds. That said, you’re not going to get it right every time. As for potential growth areas, edtech looks promising. I’m investing in what could be a ground-breaking educational platform, something that seeks to raise standards across the board and take the postcode lottery out of schooling. I’m also more globally-minded because of Antal’s international reach – as an internationalist, it’s an investment criterion. I believe now is the time to invest in Russia, and Asia Pacific. International business expansion opportunities have never been better. Geopolitics will always play a part, but as an entrepreneur, you look for your own niches and opportunities. And if everyone is flying this way, you should be flying the other way.
ENVESTORS 15
INVESTMENT OPPORTUNITY
INVESTMENT OPPORTUNITY
A FRESH TAKE ON FOOD SUPPLEMENTS FOR EVERYDAY INDULGENCE
Company Name Website Sector Stage Year Started Location Funding Requirement Pre-money Valuation
Sense Products envestors.envestry.com/deals/1108 Consumer / Retail Early stage – early revenues, pre-profit 2012 (trading in 2016) London, UK £350,000 (£100,000 secured) £780,000
To arrange a meeting, contact: nick.taylor@envestors.co.uk
It all started with a hangover. After a particularly boozy rugby international, City lawyer Jonathan Ebsworth found himself scouring the internet for something – anything – to alleviate “a storming” hangover. During his search, he began exchanging messages with a US scientist who eventually sent Ebsworth his own personal, natural formulation. Pestle and mortar at the ready, Ebsworth gave it a try – and was astonished to find that it worked. That experience proved the catalyst for Sense Products. Ebsworth began researching the potential market for food supplements, and noticed a gap: where were the natural, clearly-labelled products for real-life health concerns – over-indulgence, smoking, or general fatigue? “If you go into a health store, it’s easy to become bamboozled by supplements. How do you know what works? I saw a need for a ‘self-selecting’ lifestyle range of products – something you didn’t need a PhD to buy,” says Ebsworth. Sense for a Night Out – the post-hangover supplement – was the inaugural and focus product. “But I didn’t want a one-product, gimmicky company,” he adds. Engaging nutritionist Dimitra Sentelidou, who is now Sense’s general manager, the company developed four further products to target specific issues, including a potent multivitamin for busy city dwellers (Sense for City Living), and (uniquely) a product aimed at smokers: Sense for nicotine lovers. There is also a product to reduce cholesterol levels and one for weight management. “Each product has its own defined market,” says Ebsworth, “and is packaged clearly, to speak to people indulging in life’s temptations.”
THE PREGNANCY MONITOR THAT BOASTS 99% ACCURACY
The company has tapped into a growth market. UK vitamin and supplements sales reached some £421m in 2016 and user numbers are rising. Just under half of Britons (46 per cent) already take a vitamin or supplement daily, according to Mintel, the research firm, which identifies targeted “demographically-positioned” products as particularly promising. As a business, Sense has remained pretty lean so far – funded by friends and family, and with “sweat equity” offered to people who’ve worked for no or low pay. It is looking to use its investment to start marketing the business in earnest, and add more people and product extensions. Richard Green, a former chairman of August Equity and the BVCA, is a cornerstone investor and joins the board as a non-executive, adding to a team that also includes Sentelidou, Mark Bird, a veteran of the supplements and pharma industries, and commercial/brand head Sam Whiteley, an FMCG specialist who will put together a brand proposal for multiples in the UK and worldwide. So far, Sense has focused on selling to independent chemists and health stores, as well as Wholefoods Market, with multiples and overseas markets in its sights in the medium to long term. It also sells its products online via its own website, and through Amazon. Ebsworth is realistic about sales figures (“I expect them to go up and down, rather than in a straight line, throughout the year”), but ultimately foresees each product generating some £3m–£5m a year. The business is not without competitors – Vitabiotics (which sells Wellwoman and Wellman multivitamins), Solgar and New Nordic among them. “It’s a busy market,” acknowledges Ebsworth. “That’s a pro and a con. But ours is a premium product and we are opening up to new customers. Two of our five products are innovators, all of them are best in class and we’re protecting ourselves currently through trademarks, including the UK mark for ‘Sense’. We think that innovation will shine through and define the brand, as well as lending itself to new products. We are looking to create a new lifestyle category.”
Company Name Fertility Focus Website envestors.envestry.com/deals/1242 Sector Healthcare (Consumer) Stage Revenue Generating / Pre-profit Year Started 2005 Location Warwick Funding Requirement £250,000 (EIS Eligible) Pre-money Valuation £6.48m To arrange a meeting, contact: oliver@envestors.co.uk
16 ENVESTORS
“I can’t believe that I have been left to think that I don’t ever ovulate because six or so blood tests say so, when in fact maybe it’s because the time was never taken to monitor me more closely to find out what my body is doing,” writes another. “However, now with OvuSense I have the chance to do that on my own!”
It’s been called a “game changer”: a device that can genuinely help women who are struggling to get pregnant. Recently voted “best for fertility” by The Times, the OvuSense real-time fertility monitor comprises an internal sensor and healthcare app that helps women accurately predict when they are going to ovulate, potentially doubling their chances of getting pregnant. A patented device with clinical proof, the OvuSense monitor can give up to 24 hours’ advance notice of ovulation and detect the exact date of ovulation with 99 per cent accuracy. The ability to predict ovulation in real time makes it unique in a booming market for fertility monitoring devices. “It’s a crowded market, so we set out to make OvuSense completely different – a Class 2 registered medical device backed by an extensive portfolio of patents and clinical trials,” says CEO Robert Milnes, who has over 25 years’ experience developing and launching ground breaking medtech at Roche, Oxford Instruments and Huntleigh Healthcare. Easy to use and inexpensive, OvuSense is aimed at women who want to better understand their cycles in order to conceive - a potential market of 12 million users in the US and Europe, with a total market value of some £2bn a year. Testimonials are glowing:
The supplements business may seem a long way from corporate law, but Ebsworth had an early advocate in his mother, a biologist and botanist who “believes there is something on this earth for every ailment”.
about it. It’s so much easier and a lot less stressful than anything I’ve already tried (OPKs, BBT, Persona and Clearblue fertility monitor). I feel more in control as I know exactly what is going in my cycles now.”
“I love this machine and this app,” says one. “OvuSense would be my first recommendation to anyone who is TTC (trying to conceive) or just thinking
The third generation OvuSense product launched in 2016 as an affordable sensor starter kit with monthly subscription, and already has over 1,000 users in the UK and US. Women wear the small sensor overnight to measure their core body temperature, then download the data in the morning, which is encrypted by the OvuSense app and stored securely in the cloud. The App allows users to track ovulation patterns that they can choose to share with their doctor and partner as they try to pinpoint the best time to conceive. The core temperature measurement, alongside the ongoing monitoring provided by the app, allows women with fertility issues to get a clearer picture of their cycle over time. The company has gained significant traction with its user base with glowing feedback, and has an increasing interest from clinicians, who it is now targeting for additional recommendations. The company, which has operations in both the US and UK, has already raised £7.5m so far and will use the final investment to accelerate the growth of the OvuSense user base in Europe and North America.
ENVESTORS 17
INVESTMENT OPPORTUNITY
VENTURE-BACKED ECOMMERCE SUBSCRIPTION BUSINESS
Company Name Website Sector Stage Year Started Location Funding Requirement Pre-money Valuation
Simply Cook envestors.envestry.com/deals/1142 Food Early revenues - pre-profit 2013 London £1.2m secured (EIS eligible) £8m
To arrange a meeting, contact: scott@envestors.co.uk
Home delivered, ready meal startups have been investor darlings, not least because the the market for prepared meals overall grew by £37m last year. But former VC and Simply Cook founder Oli Ashness noticed a discrepancy: venture firms were backing meal-delivery businesses that were beyond the reach of the majority of UK households.
Using an online subscription service, Simply Cook delivers four flavour pots and 20-minute recipes, to which customers add a few items of fresh food to cook themselves. The formula has a lot of virtues: recipes are quick, but allow would-be cooks a chance to expand their repertoire; flavours such as Bibimbap are unusual enough that you probably wouldn’t make them yourself; they have a longer shelf-life than ready meals; and boxes fit through the mailbox. With younger consumers increasingly drawn to more exotic, spicy flavourings, according to Kantar Worldpanel, Simply Cook proved a winning recipe. The business has grown quickly to amass 20,000 active customers who’ve enjoyed over two million meals, with marketing done using Facebook, large partnerships and affiliates. One advocate thanked the business for “changing my (evening meal cooking) life.” Some customers use Simply Cook as an alternative to takeaways, others so that they can learn to cook or to try new flavours, but Ashness sees its affordability and easy-to-use service as key. By learning more about customers, the business plans to personalise the service further and encourage them to try new dishes.
At Nabarro we’ve been closely involved with young growing companies and their investors for many years. No matter how complex the situation, we’ll offer you plain, unequivocal advice – not pages of jargon.
While many food delivery companies cost £40-£60 a week, the median spend on groceries in the UK is £50. So Ashness developed a business that sells you the flavour and allows you to do the rest. “We’re totally different. Our flavour ingredients cost just £2.25 a week and plug into the way people already shop,” says Ashness. “We’re a natural continuation of brands such as Old El Paso, Schwartz, or Dolmio.”
Ashness grew up around the food industry – his family ran food-related companies – and has ambitions to make Simply Cook the online leader in flavour and recipe discovery. The business had already secured funding of £1.6m from a number of industry experienced investors, including Episode 1, which had previously backed Zoopla, Betfair and LoveFilm. Simply Cook has now closed a further £1.2m from existing shareholders, Maxfield Capital and members of the Envestors Private Investor Network. Given how simple the model is, there is potential to for the business to expand globally and Ashness and his team are looking to test the international prospects for Simply Cook this year.
18 ENVESTORS
Helping young companies raise finance We’re focused on the needs of the entrepreneur community, so we’ve developed handy products that make the legal aspects of your business as straightforward as possible. We are renowned for our positive, practical approach and for providing a friendly, accessible, business-savvy service.
Contact John Finnemore on +44 (0)20 7524 6432 j.finnemore@nabarro.com www.nabarro.com
Fuelling your momentum.
To find out more, please contact:
Commercial, financial and taxation advice for growing businesses and their owners.
Guy Rigby, Partner, Head of Entrepreneurial Services 020 7131 8213 guy.rigby@smithandwilliamson.com
At Smith & Williamson, we work with founders and management teams providing end-to-end services to meet all your financial needs. With a dedicated entrepreneurs group that truly understands the complexities of growing businesses, whether it’s raising finance, navigating complex tax issues, expanding globally or seeking an exit, we will be there to support you on your journey from vision to exit‌ and beyond. smithandwilliamson.com
Smith & Williamson LLP regulated by the Institute of Chartered Accountants In England and Wales for a range of investment business activities. A member of Nexia International.