How a £ 2.5 billion UK seed fund has become the world's most prolific growth investor



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Stephen Welton, founder and CEO of BGF.

Stephen Welton, founder and CEO of BGF.BGF

– With the liquidity of the largest UK banks, BGF has invested £ 1.5 billion in 220 startups in just eight years,

– According to PitchBook, at the current investment rate, BGF is the most prolific growth investor in the world in terms of volume of operations,

– CEO Stephen Welton would also work to launch a mega British fund of 7.5 billion pounds, but he says Forbes that institutional investors and pension funds delay the launch.

Stephen Welton is a very busy man.

Until now, in 2018, his company, BGF, has invested on average in a company every week and has delivered more than half of a war chest worth 2.5 billion pounds ($ 3.2 billion) to 220 UK companies over the last eight years.

Millions of people were split between groups such as food giant Gousto, children's luggage maker Trunki and advertising technology group Unruly, later acquired by Rupert Murdoch's News Corp. for $ 115 million pounds sterling ($ 150 million) in 2015.

In the past few days alone, BGF, formerly the Business Growth Fund, has invested £ 6.3 million ($ 8.1 million) in the Molson construction group and an additional £ 10 million ($ 12.9 million). dollars) in the UK holiday park operator, Coppergreen Developments.

By some measuresWelton's current spending rate makes BGF the fastest growing investor in the world in terms of volume of operations.

His next act could be even bigger. Reports suggest BGF is on the cusp of partnering with the launch of a massive £ 7.5 billion (£ 9.8 billion) patient capital fund to place even larger bets that can reach £ 100 million ($ 129 million) on British companies.

None of this seems to baffle Welton.

Trunki is one of the growth companies in which BGF has invested.

Trunki is one of the growth companies in which BGF has invested.Trunki

Billion BGF

"We are a busy organization," laughing at breakfast in the trendy 57-year-old district of Soho, London.

This is not a typical middle ground for Welton, who has made his way into the world of private equity by founding JP Morgan's JP Morgan arm, worth $ 10 billion.

But today, Welton has spared PE in a life of startups and beginners, deploying the billions he had collected in 2011 from five of the biggest giants of UK finance: Barclays, Lloyds, Standard Chartered, RBS and HSBC.

BGF is not a "technology fund", its portfolio represents the entire UK economy, with investments in sectors such as oil and gas, retail, manufacturing and healthcare.

The idea is to give UK high-growth companies a long-term alternative to traditional venture capital or bank credit, two solutions that are inappropriate or inaccessible to many.

And unlike venture capital or bank loans, BGF does not have to pay dividends to its own investors. Instead, the returns it generates are reinvested by the Welton team.

In addition, the fund is virtually unprecedented.

Welton would work with the British Business Bank on its £ 7.5 billion patient capital fund.

Welton would work with the British Business Bank on its £ 7.5 billion patient capital fund.BGF

How to build the world's most prolific investor

"We have rethought everything about how we operate to operate on this scale," says Welton.

Each year, the team meets about 2,000 companies, makes about 200 proposals and completes about 50 deals, while the Welton team collects unprecedented data on all the companies it meets.

"For example, we have an upcoming investment in Cornwall," he says. We know them and talk to them for five years, which means we have data from meetings and calls for five years. monitors what is happening in their industry and with their competitors. "

BGF's bespoke database system currently covers more than 15,000 companies, and Welton says he sometimes plans to turn this technology into "a full-fledged business because it's so valuable and stimulates our business."

Another way for the company to work differently is to not "over-design" its investment process.

"If you only make one or two investments a year, you will want a report from market consultants, a management assessment, an environmental assessment. … Even before you know it, many private equity investors have become project managers. "

BGF, on the other hand, performs most of its due diligence activities internally, rather than relying on external consultants, and uses a standardized legal agreement for each company.

"We do not need to understand everything about a company, we do not need a full accounting report. … It's easy to generate a lot of paperwork, but the hardest thing to do, and I remember that at school, is to write a short essay.

Next Welton could prepare to pass on its BGF lessons to one of the most ambitious start-up financing projects ever made in Britain.

In March 2018, BGF made its second investment in Gousto's home food delivery service.

In March 2018, BGF made its second investment in Gousto's home food delivery service.Gousto

The mega UK fund

Brexit casts serious doubt on Britain's future financial landscape, especially as the European Investment Fund (EIF) seems to be calming down 700 million euros ($ 800 million) a year invested in start-up companies in the country, the question is who will fill the void?

"It's probably going to be a different relationship," says Welton. "EIF & rsqb; has been a big funder of the venture capital industry … The British Business Bank will undoubtedly fill this gap, but can it fix it completely?"

In response, the government has already reserves 2.5 billion pounds at the British Business Bank establish a new patient capital fund, with an additional $ 5 billion needed from the private sector.

BGF was reported for the first time by The Sunday Times negotiate to establish a partnership with the new fund, which is still working to raise funds from the private sector.

Welton's commitment is not surprising, he is summer vocal in his calls for a "mega UK fund" and initially advised the government on the establishment of the British Business Bank.

The hold-up with the new fund, says Welton, without giving a name, brought institutional capital to the table.

"I think it's more of a fundamental thing. I do not think it's related to Brexit. If you start with the big investors, and by that, I mean the pension funds, there is a long-term change to the bonds, so their equity holdings are drastically reduced. "

Welton's argument for these pension funds is that equities – including unlisted equities in which they have invested over the last eight years – are the only asset class that has a chance to reduce their deficits.

The £ 5 billion question is whether the biggest UK institutional investors will believe it and invest their money in the mega UK fund.

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Stephen Welton, founder and CEO of BGF.

Stephen Welton, founder and CEO of BGF.BGF

– With the liquidity of the largest UK banks, BGF has invested £ 1.5 billion in 220 startups in just eight years,

– According to PitchBook, at the current investment rate, BGF is the most prolific growth investor in the world in terms of volume of operations,

– CEO Stephen Welton would also work to launch a mega British fund of 7.5 billion pounds, but he says Forbes that institutional investors and pension funds delay the launch.

Stephen Welton is a very busy man.

Until now, in 2018, his company, BGF, has invested on average in a company every week and has delivered more than half of a war chest worth 2.5 billion pounds ($ 3.2 billion) to 220 UK companies over the last eight years.

Millions of people were split between groups such as food giant Gousto, children's luggage maker Trunki and advertising technology group Unruly, later acquired by Rupert Murdoch's News Corp. for $ 115 million pounds sterling ($ 150 million) in 2015.

In the past few days alone, BGF, formerly the Business Growth Fund, has invested £ 6.3 million ($ 8.1 million) in the Molson construction group and an additional £ 10 million ($ 12.9 million). dollars) in the UK holiday park operator, Coppergreen Developments.

According to some measures, Welton's current spending rate makes BGF the most prolific growth investor in the world in terms of transaction volume.

His next act could be even bigger. The reports suggest that BGF is about to join in the launch of a massive £ 7.5 billion ($ 9.8 billion) patient capital fund in order to place even more bets. up to £ 100 million ($ 129 million) on UK companies.

None of this seems to baffle Welton.

Trunki is one of the growth companies in which BGF has invested.

Trunki is one of the growth companies in which BGF has invested.Trunki

Billion BGF

"We are a busy organization," laughing at breakfast in the trendy 57-year-old district of Soho, London.

This is not a typical middle ground for Welton, who has made his way into the world of private equity by founding JP Morgan's JP Morgan arm, worth $ 10 billion.

But today, Welton has spared PE in a life of startups and beginners, deploying the billions he had collected in 2011 from five of the biggest giants of UK finance: Barclays, Lloyds, Standard Chartered, RBS and HSBC.

BGF is not a "technology fund", its portfolio is a cross-section of the UK economy, with investments in sectors such as oil and gas, retail, manufacturing and healthcare.

The idea is to give UK high-growth companies a long-term alternative to traditional venture capital or bank credit, two solutions that are inappropriate or inaccessible to many.

And unlike venture capital or bank loans, BGF does not have to pay dividends to its own investors. Instead, the returns it generates are reinvested by the Welton team.

In addition, the fund is virtually unprecedented.

Welton would work with the British Business Bank on its £ 7.5 billion patient capital fund.

Welton would work with the British Business Bank on its £ 7.5 billion patient capital fund.BGF

How to build the world's most prolific investor

"We have rethought everything about how we operate to operate on this scale," says Welton.

Each year, the team meets about 2,000 companies, makes about 200 proposals and completes about 50 deals, while the Welton team collects unprecedented data on all the companies it meets.

"For example, we have an upcoming investment in Cornwall," he says. We know them and talk to them for five years, which means we have data from meetings and calls for five years. monitors what is happening in their industry and with their competitors. "

BGF's bespoke database system currently covers more than 15,000 companies, and Welton says he sometimes plans to turn this technology into "a full-fledged business because it's so valuable and stimulates our business."

Another way for the company to work differently is to not "over-design" its investment process.

"If you only make one or two investments a year, you will want a report from market consultants, a management assessment, an environmental assessment. … Even before you know it, many private equity investors have become project managers. "

BGF, on the other hand, performs most of its due diligence activities internally, rather than relying on external consultants, and uses a standardized legal agreement for each company.

"We do not need to understand everything about a company, we do not need a full accounting report. … It's easy to generate a lot of paperwork, but the hardest thing to do, and I remember that at school, is to write a short essay.

Next Welton could prepare to pass on its BGF lessons to one of the most ambitious start-up financing projects ever made in Britain.

In March 2018, BGF made its second investment in Gousto's home food delivery service.

In March 2018, BGF made its second investment in Gousto's home food delivery service.Gousto

The mega UK fund

While Brexit is seriously questioning the future funding landscape of the UK, especially as the European Investment Fund (EIF) seems to be winding down its 700 million euros (800 million euros). dollars) per year invested in start-up companies in the country. fill the void?

"It's probably going to be a different relationship," says Welton. "[EIF] has been a big funder of the venture capital industry. … The British Business Bank will undoubtedly fill this gap, but can it remedy it completely? "

In response, the government has already set aside £ 2.5 billion for the British Business Bank to create a new patient capital fund, with an additional $ 5 billion needed from the private sector.

BGF was reported for the first time by The Sunday Times negotiate to establish a partnership with the new fund, which is still working to raise funds from the private sector.

Welton's commitment is not surprising, he called for a "mega UK fund" and initially advised the government to create the British Business Bank.

The hold-up with the new fund, says Welton, without giving a name, brought institutional capital to the table.

"I think it's more of a fundamental thing. I do not think it's related to Brexit. If you start with the big investors, and by that, I mean the pension funds, there is a long-term change to the bonds, so their equity holdings are drastically reduced. "

Welton's argument for these pension funds is that equities – including unlisted equities in which they have invested over the last eight years – are the only asset class that has a chance to reduce their deficits.

The £ 5 billion question is whether the biggest UK institutional investors will believe it and invest their money in the mega UK fund.