What’s your score in the investor’s handbook?
"We went to 20 banks who all said no. Then we went to 500 venture capital firms. Most didn't get back to us, while the rest also said 'no'. One said we scored zero out of five in the investors handbook. He said we were a dreadful investment opportunity, and he wouldn't touch us."
Those are the words of entrepreneur Richard Reed, co-founder of the Innocent drinks brand. Established in 2000, Innocent is now one of Europe's largest smoothie brands, with annual sales of more than £350m. Richard has been speaking to the BBC, and the recipe for his juicy business story – like many of our clients’ stories – involves a great idea, some sweet early success, a few slices of luck, some very tough times, and gallons of hard work.
And the end result? Richard and his co-founders sold the business to Coca Cola in 2013, for a figure “north of half a billion pounds”.
With the Innocent story, I’m particularly interested in the idea of that ‘investor’s handbook’ –as if there’s quick catch-all checklist and scoring system that tells investors what makes a good proposition, and what makes it “dreadful”. Although it might have looked like a long-shot on paper, Innocent did prove to be golden. In 2000, it was an opportunity to invest in what would become a market-leading, pioneering business, right at the start of a phenomenal growth cycle.
The saviour for London-based Innocent was an American private investor, Maurice Pinto, taken with the company’s growth potential, and prepared to put his hand in his pocket to fund that growth. It’s the same for our clients at BCMS. The best deals come with acquirers and investors who can be partners – who assess the full nature of the opportunity and think longer term. Yes, people buy people, and they buy future opportunity.
In truth, most experienced acquirers are naturally risk-averse, and need convincing to consider opportunities beyond their precise acquisition criteria, which typically involve size, location and area of operations. Once a good advisor has done this and arranged an initial meeting between buyer and vendor, we often see them hitting it off, sharing more and more detail gradually until both parties are satisfied with the cultural fit and mutual commitment to doing a deal. I’m not sure there’s much about that in many investors’ handbooks.
That’s why we look far and wide for these types of buyers – typically profiling 120+ potential acquirers, across the world. And that’s why – to take just a few recent examples – Vitec Group bought wireless cinematography pioneers RT Motion, US giant PSAV invested in event tech company Concise, or Lyceum Capital backed IoT specialist Wireless Innovation.
None of those organisations are simply poring over a checklist to tell them where their target business is today. They’re looking at where they can take their acquisitions tomorrow.