Growth Capital Ventures is bringing new and exciting investment opportunities to a wider range of investors.
Fintech firm Growth Capital Ventures has been leading its own quiet revolution in the north east of England identifying and structuring investment opportunities that have the potential to deliver market-beating returns to investors alongside wider positive social and environmental benefits.
GCV received over £1m in investment from Scottish based Maven Capital Partners, in order to strengthen its team, develop new technology and to make growth focused investing more accessible and rewarding.
Co-founder Norm Peterson explained: “We are delighted with the backing we’ve received from Maven, they are one of the UK’s leading private equity firms and alternative asset managers. There’s a strong strategic fit and we are exploring opportunities where our investors can co-invest alongside Maven and other institutional investors into high growth businesses and property related projects.”
Maven’s investment has allowed the GCV team to focus on identifying and structuring investment opportunities for its growing investor base and develop the co-investor model further whilst expanding its geographical reach.
Peterson added: “Our investor network is expanding and we have introduced some interesting investment opportunities to our members over the past year. We identify opportunities which have the potential to deliver significant investment growth, precisely because they are helping to solve pressing long-term challenges.
“We then look to co-invest into these deals alongside institutional investors and other professional investors, including venture capital funds, private equity firms, angel networks, family offices and high net worth individuals. We are keen to expand our relationships in Scotland and co-invest into deals.”
Earlier this year GCV worked with Atom bank, one of the UK’s leading digital challenger banks, to close a £16m investment round to support continued growth and expansion. “Over 40 members of the GCV Investor Network invested £1m into Atom, alongside one of Europe’s leading hedge funds,” he added. “There was a lot of interest, the offer was oversubscribed within a few days with GCV members investing between £10,000 and up to six-figure sums.”
Peterson points to Atom’s business model as one of the reasons for the positive interest from its investor network: “Our investors are drawn to disruptive businesses, those that can really make a positive difference. Atom is a perfect example of a business using technology to create and maintain a competitive advantage, challenging and changing the way things are done in the banking sector.”
“They are based in the north east of England, not London. There’s a good reason for that. Atom doesn’t need to be. Like Scotland, the north east has some amazingly talented people and Atom has managed to tap into that talent pool.
“Atom has created over 300 high-quality jobs and they are not competing for talent in a London market that will be even more challenging as technology giants Apple, Google and Facebook plough billions of pounds into the capital.
“Atom has focused on creating a business with a lower cost base than their traditional banking competitors. A technology and digital focus mean Atom are not burdened by the cost of high street branches or legacy IT systems.
“This translates to huge cost savings when compared with a traditional bank. More importantly, this lower cost base means Atom can provide better mortgage rates for borrowers and better interest rates for savers.”
Technology plays an important part in GCV’s business too. GCV launched its online investment platform GrowthFunders to open up growth focused investing to a wider online investor base. GrowthFunders allows suitably qualified retail or everyday investors to invest alongside its network of institutional and professional investors through its FCA regulated platform.
“Co-investment is a core part of our approach,” Peterson explains. “We want to make it simple for everyday investors to participate in growth-focused investment opportunities and build a diversified portfolio. Investing online means members can review investment opportunities at a time that’s convenient for them and invest into carefully selected investment opportunities, many of which offer generous tax reliefs designed to minimise downside risk and maximise potential returns.”
Whilst future expansion plans are heavily technology focused, with GCV launching a property focused peer-to-peer lending platform in Q1 2018, the team recognises the importance of a personal service when dealing with investor members.
Jordan Dargue, head of investor relations, explains: “Our investor base is quite diverse. We have our online investor members investing between £1,000 and £10,000 into single deal, whereas our offline investors are investing between £10,000 and £250,000.
“Either way, a personalised service, tailored to suit our investors, is extremely important. Whether that’s online or offline we want to make sure our members enjoy the experience of co-investing into exciting businesses and property development projects.
“Like Atom bank, we’re based in the north east of England and, at the moment, the north east doesn’t have a strong and structured group of angel networks. Our north east based members are keen to change that, so we’ve recently launched G Ventures, the first of our regionally focused offline investor networks.”
The G Ventures Investor Club is an exclusive group of high net worth individuals who will meet monthly and will be briefed on new investment opportunities in which they can invest anything from £10,000 to £250,000, perhaps five or six times a year.
With the first network established in the Tees Valley, GCV plans to roll out the concept in 2018, with G Ventures Investor Clubs planned for Scotland and the rest of the UK.
She added: “Our members tend to be entrepreneurs themselves, and they are keen to back the next generation of entrepreneurs, they are also keen to diversify and get involved in property related deals. The common theme is that the investment opportunities can demonstrate the potential to deliver better risk-adjusted returns than typical mainstream investment products.
“Typically, our investors are looking for property deals that target a minimum 1.5 times return on capital and when investing into early stage and later stage businesses they are looking for 3 to 10 times money return.
“Financial returns are the primary driver of investment. Many of our business investment opportunities make use of tax efficient structures including Enterprise Investment Scheme (EIS).
“EIS offers a number of benefits to our investors, including income tax relief of 30% on the ingoing investment, no capital gains on profits and qualifies for business property relief and relief from inheritance tax. Whilst the tax benefits help to minimise downside risk and maximise potential upside, many of our members are also looking for investments which capture their imaginations and provide opportunities to invest in businesses or projects that can make a positive difference.”
Future plans include an increase in property related investment opportunities. Peterson explains: “There are real problems with housing delivery across the UK. We are not building enough of the right homes in the right locations. This lack of supply has been compounded by lack of finance for the smaller regional housebuilders which were wiped out in the credit crunch.
“Our investors have recognised this problem. We are identifying investment opportunities and structuring funding solutions in order to develop smaller, high-quality housing schemes in desirable locations. There is an underserved market and a real opportunity for our investors to make a positive impact, alongside a healthy financial return.”
GCV’s investment team have been busy identifying and structuring investment opportunities over the past few months.
“We have a strong pipeline of innovative businesses looking for capital to grow and some very interesting residential development projects that we are busy assessing at the moment,” he continued. “We have a steady stream of innovative businesses and property entrepreneurs applying for funding.”
Quality deal flow is an important part of the process and The GCV team assess between 10 and 20 deals every week.
Peterson explains: “We see a lot of investment opportunities but only take forward a small number where we feel we can add real value. We work very closely with the entrepreneurs we support. In many cases, particularly earlier stage businesses, the entrepreneur has a solid idea and needs help to prepare and present the business as a robust investment opportunity.
“It can be the same for a property project. We look for an opportunity where we can see something different, an angle where we can add value. On property development projects it might be an option to improve the layout of a scheme and enhance sales values. Whereas an early stage business we might work with the founders to enhance the business model and revenue model.”
The GCV investment team are now completing a funding round for Intelligence Fusion (IF), an early stage technology business.
GCV has supported the company which operates in the security and intelligence sector for the last 18 months, structuring and completing an initial proof of concept round, all the way through to the current EIS eligible seed round. IF demonstrates how GCV incubates and nurtures companies with high growth potential.
The seed round is currently overfunding, passing its initial target of £400,000 and is now well on the way to raising £500,000 of investment. The company has already gained traction with early sales to key customers and has been well received by GCV’s co-investor network.
Peterson says: “We are delighted IF has overfunded and is set to raise up to £500,000 from a combination of institutional, professional and online investors. The investment was anchored by members of the GCV investor network which unlocked commitment from an institutional investor. We then partnered with the one UK’s leading crowdfunding platforms, to open this opportunity up to their network too”.
Michael McCabe, founder and CEO of IF, said: “The support received from the team at GCV has been invaluable. The team have been involved across many areas, helping to prepare the investment documents and arranging introductions to their investor network.
“The team have coordinated the online and offline campaigns and have been instrumental in helping this investment round exceed the initial target. I’m delighted we have raised capital from a diverse investor base.
“Having a combination of institutional money and investment from professional business angels together with online investors is a very powerful solution for us. I’m looking forward to working with the GCV team as we enter our next phase of growth.”
And co-investment is a core part of GCV’s investment and funding strategy moving forward.
Peterson concludes: “We’re working with institutional investors and angel networks who already have a strong presence in Scotland, but there’s more we can do. We have a growing investor network and our members like the co-investment approach.
“It is a catalyst to increase the number of deals we do and will help to support more innovative businesses and property entrepreneurs. We are keen to build relationships with both potential investors and entrepreneurs across Scotland and the rest of the UK.”