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Enabling innovation

Nick Sharp, Managing Director and Head of the Growth EIS Fund at Hambro Perks took time out from his busy week to talk to IFA Magazine about the company’s mission and ethos.

IFAM: Could you give us a quick overview of the business and a bit of background into the company track record? 

NS: Hambro Perks was first incorporated in 2013 and since then we’ve built a very good reputation and track record. Starting out as an early stage investor and incubator we are now an institution with around £500 million assets under management. We have a long track record of successful investing at seed and series A, though we have grown into a private markets and unlisted company investor utilising different pots of capital through which we’re able to invest in businesses at various stages of their development. We are able to invest from the very earliest pre-seed stage all the way through to helping companies that are ready to exit or list. We launched the first SPAC on the LSE at the end of 2021. We invest money into businesses across the UK and Europe and also have a venture fund in the Middle East.

IFAM: How would you describe the ethos and mission of Hambro Perks?

NS: It’s difficult to summarise into a single sentence, but I’d say we’re trying to enable innovation. When we’re investing at the very earliest stage, we’re backing founders and helping them to build their companies into very valuable global and enduring businesses. What we’re trying to do, ultimately, is enable that innovation from the very earliest stages through to category-defining global businesses that can operate at a massive scale.

IFAM: You are the founder and head of Hambro Perks’ Growth EIS Fund, so what do you believe makes this stand out? 

NS: Even though our EIS fund is relatively young, in the sense we’ve been going for about four years now, we are part of a large and very established institution, with a significant asset base. We are part of a financially strong business with significant expertise within it which we can utilise in seed funding and through the venture side. Because of our scale, we have a large network which is key in terms of finding, sourcing, and, crucially, winning deals. The EIS Fund will often co-invest alongside our institutional venture fund, and our ability to deploy larger amounts of capital enables us to win and lead deals. In addition, having a non-EIS fund alongside us means that we have the ability to continue backing great businesses even once they have grown beyond EIS eligibility. For us, the perfect journey is to find a business at early seed, take an assessed risk on a founding team, their product and the market, and help them build something valuable as we get to know that business over time. We have a strong thesis around following on and can invest again at seed and follow on at Series A, supporting the winners as they emerge. We will invest for the first time at series A, but we do prefer to find outstanding founding teams earlier than that. We have four areas of focus, fintech, digital health and wellness, consumer technologies and B2B SAAS and when we think about building a portfolio we are trying to diversify across stages and those verticals. The objective is to build for our investors a very balanced portfolio of about 12 companies, but without over-indexing into any particular stage or industry – we think that a degree of diversification is sensible in early stage investing.

IFAM: What does an ideal investment look like for Hambro Perks

NS: There are three things that we’re looking for; founders, product and market. The single most important of these in the early stages is the quality of the founders. We are looking for founders with the characteristics needed to build a really big business. Grit, humility, resilience, those kinds of characteristics are required if founders are to persevere through the difficult times because there will be some great lows, as well as hopefully in time some incredible highs. We have the experience to help at all stages, but our help is often most needed when things are not going well. In times of great stress we believe the support we can offer is of huge value, but ultimately it comes down to the founders.

The market the company is going after needs to be very large and we’re looking for global markets in areas that we understand – we avoid investing in things we don’t understand. There are markets that already exist, but a company may be developing a new or better product that will push aside existing solutions. Then there are those businesses that are trying to create an entirely new market. In terms of the product, even though we look to invest early and sometimes at the pre-revenue stage, we would still expect the product to be advanced, potentially with pilots lined up or a clearly defined route to market.

In terms of the journey of an investment, in an ideal world, we would lead an early round at pre- or early seed. We have a target ownership stake of somewhere around 10%. We will make that investment, join the Board, get to know that business really well. We are then in a prime position to understand how it is progressing against targets. If we are happy, we would look to make a further investment and if we can we would like to lead that. That process is repeated through to Series A and probably on average in any particular year we’re likely to be following-on in an existing portfolio company around about half the time. So, in any year, for example, say we make 12 investments, it’s likely that a number of those would be investments into companies that we’ve invested in before. And this gives us two things. First, a really deep understanding of the businesses, and secondly, proprietary deal flow, because we are already the lead investor in that company.

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