The process of selection
Another key contributor to Newable’s low failure rate is their selection process. Being well-established, Newable’s networks with universities, accelerators, spin outs and seed funds is stellar. Sanjeev notes that the proprietary part of the group’s deal flow likely differentiates it from much of the industry, as ‘businesses come to us before anyone else, because they want access to our services.’ Newable’s advice team may help a business get into different territories or extend R&D and then approach the investment team.
The group’s full process of selection is scrupulous. It starts with analysts looking at the opportunities and providing an initial screening. This proposal goes to associate level and then they work in tandem to develop a deeper understanding of the company.
The process of investment
Newable’s investment team has a weekly pipeline meeting, when they discuss each of these opportunities that the analysts and associates are seeing. If a business makes it past the investment team then an investment director will ‘buddyup’ with a member of the investment committee.
The group’s investment committee is another important facet. It consists of six independent investment professionals who represent multiple later-stage funds, or other types of investment houses. Sanjeev explains ‘depending on the type of investment we’re looking at, we’ll match the experience of an individual committee member so they can help the Investment Director build the potential case for that business, and present it to the investment team and committee.’
One key challenge in 2020 was ensuring that Newable was supporting their portfolio companies throughout the pandemic and ensuring that they had sufficient runway. They facilitated this by the organisational structure already in place.
In today’s climate, it is clearly important for the group to maximise the financial runway when investing, to mitigate any potential issues around raising finance. ‘Whether it’s increasing the round size or looking at what levels we have to put into the business in terms of their overheads and their costs, these are the things we’ve been looking at a little bit more.’
Over the last year, medical technology has seen stunning successes amongst EIS firms. It’s been a big part of Newable’s fund and will continue to be. Sanjeev emphasises ‘there has been a lot of hype around medical technology but now we’re seeing some really good quality businesses here.’
Not getting complacent, Sanjeev concludes with a caution. ‘We’ve tightened our due diligence, especially at this moment in time. What we have noticed is that there is a lot of noise in the market with an increased number of companies looking to raise capital, so we have to ensure our due diligence is even more in-depth.’
Clearly, Newable are well-placed to thrive in the EIS market and are eager to continue capitalising on their considerable strengths and assets to identify, nurture and growing businesses into becoming future success stories.
About Sanjeev Gordhan
Sanjeev became Director of the Newable Ventures arm in May 2020. He is responsible for the strategic focus of the fund and angel network as well as its day to day management. Sanjeev started as an entrepreneur before going onto selling his own business, and spent five years as a Wealth Manager specialising in venture capital. He holds a diploma in Regulated Financial Planning and an MBA from CASS Business School.