A note from the Director: in search of the Holy Grail?

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My last three newsletters have explained our thinking behind our project themes: Growth, Innovation, and Inclusion. I want to explore some ideas, now, around the intersection of these.

Imagine a Venn diagram and consider the overlap of Growth and Innovation, we could put a regional investment fund, couldn’t we? This was the topic of a dinner we hosted here the other week, sponsored by TLT Solicitors and chaired by our friend, Sir Robin Saxby. A large fund based in Bristol & Bath that invests in growth tech businesses would, the consensus was, fuel growth – and in the process fund new innovation – on the basis that a lot of innovation comes out of the R&D activities of SMEs, and that having a good, dare I say, easy, flow of local investment capital should bring new innovations out of the woodwork as well as bring businesses to the area.

Arguably, a local fund should not restrict itself to only investing locally but being based here, with local roots, should level the playing field – rather than trot off to London or San Francisco every five minutes. There is no point trying to emulate Silicon Valley, but to pour some more fuel on the local ‘fire’ would surely be a good thing?

Hang on a minute, hasn’t this happened before? Local funds (state supported or otherwise) starting up in the area? Where are they now? Perhaps we need a different model – something different from the 2% annual management fee and a 20% carry that funds the fund manager (and his or her yacht?). Of course I’m being a little facetious, but is there a different way? A more values-driven approach? An approach that perhaps brings this notion of a regional fund into the intersection of all three of our themes? i.e. an innovative fund that enables more inclusive growth.

Anyone who has listened to me whine about the myth of the unicorn will know that I believe that the profitability and thus likely sustainability of a business is better than chasing an inflated valuation and quick exit. I know, I’ve been through that process in an earlier life.

McKinsey proved that businesses with more diverse workforces become more profitable and while the classic mix of an investment portfolio aspires to have some stellar valuations, if we can increase the profitability and therefore predictability of investment returns (even yield!), that has to be an advantage. Ergo, an investment fund that actively encourages its investments to develop a more diverse workforce would be a real source of value-add.

Add in some board and director development and you’ve created an increased chance of sustainability – in my humble opinion, of course.

Is that the holy grail? A values-driven investment fund, that only takes a management fee that covers its costs, stimulates inclusive growth, and then uses its carry to drive further growth, innovation, and inclusion projects? Or I have I just been wearing the Engine Shed-tinted glasses for too long and it’s just pie in the proverbial sky?

What do you think?

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