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Investor Spotlight: James Codling, VentureFounders

In Planning growth, Raising finance, Rapidly scaling - 3 months ago - 6 min

Investor Spotlight: James Codling, VentureFounders

Every month we talk to an Investor from our network, who invest in early-stage businesses seeking to raise up to £10m in equity and debt finance. This month we spoke to James Codling, Co-Founder and Managing Director of VentureFounders.

James oversees all aspects of the business with a particular focus on sourcing, vetting and advising companies looking to raise finance. He co-founded VentureFounders in 2014, giving entrepreneurs access to finance, and investors the opportunity to co-invest in British businesses, alongside leading institutional and Angel investors. James holds a MEng degree in Electrical Engineering from the University of Birmingham. He has over 18 years Private Equity experience, having started his career at J.P. Morgan. He was an Investment Director at Montagu Private Equity and held directorships in a number of their portfolio companies. James is a founder of the award-winning Carmelita wines as well as nFiniti, a regulatory payment technology.

Could you tell us a little bit more about yourself and VentureFounders?

VentureFounders is a leading UK equity investment platform, providing sophisticated, High Net Worth clients with access to highly-curated and structured investment opportunities, in early stage venture transactions, on a deal-by-deal basis.

Coming from a career in Private Equity and being an active Angel Investor, I saw first-hand the challenges faced by UK early-stage businesses, notably in accessing capital, particularly as they go from start-up to scale-up. The UK has the potential to produce the next generation of global tech leaders, but this funding gap is a serious limiting factor.

I set up VentureFounders in 2014 to address these challenges head on. I wanted to create a platform offering best in class skill-set and mindset talent from the world of Private Equity, combined with a market leading technology platform to meet the needs of today’s sophisticated HNW investor community.

VentureFounders has one of the highest funding success rates in the industry at over 90% and we are also an official partner of the London Co-Investment Fund, a £25m fund raised from the Mayor of London’s Growing Places Fund. The London Co-Investment Fund co-invests with VentureFounders in London-based, high growth, tech, science and digital start-ups.

Since our launch, we have supported 27 ambitious scale-up businesses, which have raised in excess of £90m through the platform. During 2017 alone, we made investments in 11 new businesses and supported 15 of our existing portfolio clients with follow-on funding rounds.

How big is your portfolio? And how much do you typically invest?

In the 4 years since our launch we have built up a portfolio of 27 investments and supported those companies with 30 follow-on funding rounds. We specialise in investing in disruptive B2B and B2B2C technology companies which are past proof of concept and have demonstrable revenue traction. We look for businesses which are operating in large markets, have recurring and diversified revenue streams, high switching cost, the ability to demonstrate concrete applications of new technologies, have a defendable product positioning in the market, the potential to export internationally and the ability to serve large corporates. Our typical investment size is about £500k to £1m in funding rounds that range between £750k to £4.0m.

We invest in the people as much as the company itself.

What are the top three things you look at when considering a new investment?

A strong and experienced management team is imperative for us; we invest in the people as much as the company itself. We believe that understanding the motivations and drivers of the executive team in early-stage businesses is critical to delivering a strong return for our investors. We consider the whole picture from the outset; exploring the market opportunities, scalability of the business and, ultimately, potential exit strategies.

Are there any companies you’d like to highlight that you’ve worked with?

We have a high-quality portfolio which includes some of the UK’s leading tech success stories, such as Hopster, DueDil and Brightpearl.

Hopster is one of the UK’s highest grossing apps for children. As a subscription-based service, the company aims to help each child learn through the stories they love, across tablet, smartphone and connected TV. The product combines premium TV shows (including Peppa Pig, Thomas & Friends and Teletubbies), learning videos, games, books and music in a single, ad-free app. The company was founded by Nick Walters (ex Viacom/Nickelodeon) and has Sony as a strategic investor.

DueDil, led by CEO Justin Fitzpatrick, is one of the largest sources of private company information worldwide. The company links data sets to deliver insights into private customers via its intuitive web platform and API. Other notable backers of the company include Notion Capital, Oak Investment Partners and Passion Capital.

Brightpearl is a single platform that delivers integrated accounting and real time inventory management to automate the back office for retailers in-store, online and in-warehouse. It is 100% focussed on the retail sector and deploys in half the time of generic solutions, for example NetSuite, Quickbooks & Sage. Brightpearl is a truly international business with operations across Europe and the US.

Any companies that got away that you wish you’d backed?

We see a large number of businesses each year and can only take a small selection to our investor base. We have developed strict investment criteria which fit with our business model and aims. Ultimately, there are businesses that we reviewed, saw potential in but rejected, which have gone on to see great success. They weren’t right for us, at the time, but it’s great to hear of them doing well; any success in the industry is a success for all.

What are the big red flags for you when reviewing investment propositions?

I don’t like to say this, but with founder led businesses you can usually tell within a few minutes of meeting the team whether you expect to see any red flags. Skill shortages within the executive team, limited depth or breadth of experience and misalignment of interest are all things which would concern us.

What I wish I could tell every founder…

Having founded three businesses myself since 2009, I can totally empathise with the entrepreneurs I meet and I certainly feel their pain! It can be a very lonely and difficult place running your own business, particularly one that is going on a scale-up journey with everything that entails. Perseverance is key and you have to understand and adapt to the pressures that will be placed upon you as your company grows from having just a few employees to hopefully tens, if not hundreds more. The challenges of taking in external capital, developing and driving your business plan, building a team and adapting your business to changing market conditions are exhilarating, but sometimes quite scary!

What do you see as the next industry to be disrupted?

I think that a large number of industries are still open to disruption and we are only seeing the tip of the iceberg in terms of how technology will change the way we do almost everything. We will certainly see disruptive technologies make a deeper penetration into the markets they are trying to disrupt, opening up new revenue streams and tackling some of the outdated work practices and legacy systems within the incumbents.

FinTech is a great example of this. It’s a huge and varied market but, so far, the ‘disruptive’ players have really only gone after the perceived ‘sexy’ parts of financial services, leaving many of the critical elements and infrastructure untouched from this disruptive trend.

I also think that it is inevitable we will see greater consolidation and exits to trade to give the disruptive players the scale that they need. Venture has a rather nasty habit of following trends and pouring large amounts of capital towards the ‘next big thing’. When you strip away all the noise, this can actually be quite unhelpful for those industries being disrupted and the businesses that are leading the charge, particularly when the results don’t necessarily meet the expectations!

How should a business seeking finance approach you?

A direct approach is unusual for us. More often we proactively originate deals and the team keeps an ear close to the ground for interesting opportunities. We partner with the wider venture community and secure the deals we are excited by.

If you are thinking about raising investment for your business and want to understand your options, get some free guidance from one of our team team today on 08081 722350 or drop us an email: G.Enquiries@uk.gt.com