Andrew Sullivan talks to Hambro Perks about their team’s success, expertise and experience.
What is your firm’s approach?
Hambro Perks helps outstanding founders build world-changing businesses. We invest permanent, patient capital from our own balance sheet and this means we are aligned with the long-term goals and interests of our entrepreneurs.
We aim to take early risk in businesses, investing where we can add significant value through applying and sharing the expertise our team has built up over many decades’ combined experience.
We believe we are the destination of choice for the very best entrepreneurs, and they actively choose us to support them. The Hambro Perks Co-Investment EIS Fund enables individuals to co-invest alongside us at the earliest stages in a company’s journey, knowing that we have invested our own capital and that we have applied an institutional level of analysis and diligence.
What’s your firm’s USP?
We are active investors and seek to add value over and above the capital we invest. The fact that we invest our own shareholder capital, combined with an understanding that building a business is never easy and takes time, allows us to be patient in the support we provide.
Our shareholder base of successful, wealthy individuals, family offices and corporates is our single greatest asset – the expertise we are able to draw on is priceless. Our Co-Investment Fund enables individuals to invest alongside us in the same deals… and of course it’s worth pointing out that when Hambro Perks invests it doesn’t benefit from any EIS reliefs (being a company) but our individual coinvestors, if eligible to claim them, are buying the same deals 30% cheaper!
The UK appears to have a strong entrepreneurial culture – why?
One trend that has been strengthening for some time now is the migration of talent away from industries that used to attract the brightest people. This is happening both at the new graduate level, where banks, accountancy and law have lost their lustre, and among seasoned professionals who have excelled in their first career and are looking to apply their experience to new ventures.
We have backed young first time entrepreneurs with limited experience up to ex partners of huge global concerns. The willingness to take risk is nothing new in the UK, and we have always been among the greatest innovators, but whereas in the past we were perhaps too eager to sell early, the shift in mindset towards wanting to found, build and scale businesses rather than see our best inventions benefit others seems to be gathering momentum.
Views on the government’s changes to EIS?
We have always focused solely on growth, and used to find it disconcerting that there were those who pushed the spirit of the rules to combine tax breaks with a guaranteed return. We welcome and applaud the recent moves from the Government to focus on risk to capital to ensure that EIS reliefs go to those investors that are willing to take significant risks in funding early stage businesses. In the short term this is leading to negative headlines around the drop in total EIS investment, but over time it will only be a positive.
Could future government changes undermine the scheme’s effectiveness?
We would never want to second-guess future Government policy, but the Treasury’s work shows that the scheme’s impact over time is hugely beneficial to the economy as a whole. That’s not to say that a short-sighted Government couldn’t alter the scheme to reduce its effectiveness, but this would certainly be a negative for the economy.
How would you alter the schemes?
I would change the 3-year cliff edge rule for exits so that the loss of reliefs could be scaled according to the time that had passed since the investment was made. At the time of investment the risk was high and that is the point in time where EIS is crucial.
How can EIS investments continue to help diversify client portfolios?
The UK economy as a whole is performing reasonably well, however much of that growth is being driven by smaller, unlisted companies. As growing businesses stay private for longer it is increasingly hard for investors to access that growth through public equity portfolios. Investing in early stage businesses gives access to that growth.
There’s also the argument that great entrepreneurs will build incredible businesses whatever the economic backdrop. If a business offers an incredible new service, or makes an existing offering easier or cheaper to use, then that business will succeed. There is great benefit to exposure to this potential within a diversified portfolio.
Any clouds on the horizon?
It’s always possible to worry about the world, but really at our core we are looking to back outstanding founders and we have to be optimistic and open-minded. As long as the UK keeps backing entrepreneurs and helping them succeed, we think our best days are ahead.