By Hatty Stafford Charles, AngelNews
Stuart Veale of Beringea LLP
Founded in the 1980s, Beringea specialises in venture capital investment in a range of sectors including media, healthcare and clean technology. Beringea has offices in London, Detroit and Shanghai.
On the international picture
Our offices support each other as much as possible, with some shared investments. There is strong deal flow in both offices, with UK activity picking up noticeably in the last six months or so. SMEs (Small and Medium sized Enterprises) are increasingly coming through looking for investment in our range which is companies with a turnover of between £1m and £10m.
On areas to watch
I would single out three areas. Firstly, energy efficiency is a growing issue and anything which allows companies and organisations to reduce their energy use and carbon output is part of a growing market, for example one of our investee companies which has developed a system for large organisations to monitor energy use at socket level with remote switch off. The challenge will be to identify the winners and losers in the energy efficiency race. Secondly, digital media, particularly content. There is plenty of content online which people look at on their PC or laptop, but we are now seeing innovation and investment in taking that content to TV. Thirdly, there has been a lot of investment — possibly too much — in online selling, especially private sales organisations, which sell slow-moving, high-end stock directly to consumers.
On the economic climate
Our focus is on companies seeking to raise capital for expansion, for example into overseas markets, and these are usually successful companies with reasonable turnover. In the last few years such companies have been reluctant to take risks and have pulled their horns in, rather than follow the routes they might have taken in earlier years. 2009 was very quiet in this respect but over the last nine months we have seen growing confidence and expansion and we are optimistic that this trend will continue.
On how the government can encourage investment and innovation
Our funds operate under the VCT scheme and this needs to continue in order to encourage individuals to provide investment for small companies. Our main handicap is some of the restrictive criteria, for example that investee companies must have fewer than 50 employees, so that we can invest in the first round but not the second if they have grown successfully and come back for funds to expand further. With regard to innovation, Government must encourage innovation by making it really cost effective for large organisations to invest in Research and Development which will of course give returns over the longer term.
On the willingness of investors to invest
We are seeing a trend of more angel investors investing directly into companies and at the smaller end of our market we are often competing against syndicates of business angels. Generally, there has not been massive change in the amount of capital available for investment.
On the quality of deals/innovations
The quality of deals is improving and we are seeing better companies which are cash generative and have been cautious about investment now coming through, whereas a little earlier we were seeing companies which were less profitable. There is no doubt that in the last 12 months the climate has improved for small companies looking to expand.
On specialist markets
We operate an investment strategy where a significant proportion of our deals are in the specialised area of digital media with the rest covering a spread of sectors. There are pros and cons to both and at Beringea we feel that we have got it about right; we can be really knowledgeable about specialist issues and the market and that attracts more clients, whilst at the same time we are protected by fluctuations within a sector by having a good spread of investments. A broad approach also allows us to get a good overview of the economy as a whole.
On digital media
We have a wide variety of digital media investments and an area of particular interest is that of content. The first step is acquiring or creating excellent content and then the second step is to disseminate it and this latter stage has great exponential growth potential, such as one of our investments, which provide educational content to about 50% of UK primary schools. Management is also key in this industry, for example a digital design agency where the charisma and strength of the management is the key to its success.
Managing Director, Beringea LLP
Stuart Veale heads the London office of Beringea and sits on the investment committees of several of the firm's funds. In that capacity, he takes a lead role in investment sourcing, evaluation and execution activities. He also supports investments as a board member for a number of portfolio companies.
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