Annabel Palmer meets Leon Blitz and Brad Fried, lifelong pals behind investment firm Grovepoint
MOST entrepreneurs start with an idea – be it reinventing the wheel or simply finding a way to do something better than anyone else out there. The hard part is then taking the first steps – shunning job security for months (or years) of uncertainty; seeking investors willing to back the idea; and finding a way to get the business noticed.
For Brad Fried and Leon Blitz, who co-founded investment firm Grovepoint in 2010, the reverse is true. “We decided after the credit crisis that it was a good time to start a firm. We didn’t know what, exactly, but we knew that how we did things was as important as what we did. We worked hard for months to establish the kind of business we would build, and knew that the idea itself would then come naturally.”
Indeed, they tell me repeatedly that Grovepoint is “open,” “collaborative,” and distinguishes itself with values of “straightforwardness” and “integrity”. It’s a important theme for Fried. In an article last summer, he wrote that UK banks are in an “era of retribution”. Referring to last year’s Commission on Banking Standards, he claimed its report needed to “make serious recommendations to help banks define their values; and to hold bank boards accountable as custodians of a healthy culture.”
THE ENTREPRENEURIAL ITCH
The duo have known one another for over 40 years, having grown up in the same neighbourhood in Cape Town. They have always had entrepreneurial impulses – while studying at university, for example, they started a business school to finance their educations. However, they each then devoted 20 years to large institutions – both trained as accountants at Arthur Andersen, before Blitz moved to Investec (eventually becoming head of its private banking arm in London); and Fried joined before being appointed chief executive of Investec Bank, responsible for its UK and European business.
Since its foundation, Grovepoint Capital has arranged, advised and structured investments with a total value of over $1bn (£620m) of investments, its staff numbers have quadrupled, and the company is now profitable. It is divided into three business units: principal investments; investment management (neither a hedge fund nor a manager of retail funds, this arm does “sophisticated investors portfolio management”); and it recently launched alternative credit – which seeks to provide bespoke secured corporate debt solutions.
The pair have been busy. Their first deal came in July 2011, when Grovepoint formed a partnership with Rubicon Partners and Investec Bank called RG Industries. Later that year, in a consortium with Snax 24 and Investec Bank, Grovepoint acquired the downstream assets of Total. And in 2012, Grovepoint Israel was founded to focus on solutions in agriculture, water, food, energy, and cleantech. More recently, together with two other affiliates, Grovepoint invested in KBC Bank Deutschland – “a pivotal moment for the firm.”
It is largely familiar territory for Blitz and Fried. They believe their skills and experience give them a competitive edge, meaning they are viewed as people who can do “highly-sophisticated structuring of complex transactions, where it’s not just about capital”. They have sustained their presence in the corporate world – Fried is a non-executive director at Investec (today a shareholder in Grovepoint) and of the Court of the Bank of England; Blitz holds non-executive directorships at a number of private companies.
Has this helped them penetrate the market? “We do have networks of people in New York and London who we trust and who trust us,” says Fried. A BLP solicitor, who had previously advised the pair on various matters at Investec, offered his support on day one, talking the founders through the process of starting a business. “It’s one thing running a business; it’s another to start one.” BLP was later called to act on Grovepoint’s first engagement.
The founders didn’t encounter any practical difficulties finding partners who wanted to back them. They sought and received investment at inception from five founder investors – the amount remains undisclosed.
But their skills and experience failed to prepare them for the two biggest adjustments they’ve had to make at Grovepoint: realising that, whatever the task, there was no one but them to do it; and learning that “independence comes with a price – the demand on our time and resources has been immense,” says Fried.
It’s been a big learning curve. When they started the business, they needed regulatory approval. A law firm was their first port-of-call, but when the quote they received was “well over £100,000,” they had a rethink. “There was no way we were going to blow the first amount of capital we had raised, so with the help of a consultant, we wrote our business plans and applications for licences. We got on top of things that, ordinarily, other people would have done for us,” says Blitz.
Both Blitz and Fried are passionate about the UK and London specifically. They tell me how grateful they are to be living in a city that has allowed them to build careers and a business with such ease. They don’t share the view that capital is too hard to come by, and “couldn’t dream of not being here”.
When I ask where the business is headed, I’m told size and number of staff isn’t important. “We want to be relevant,” Fried says. But like many entrepreneurs, the pair lack the ability to sit back and put their feet up. “We will never be comfortable. We will forever be thinking about what we can do next – the next staff hire, the next industry, the next geography. That won’t change until we hand the baton on,” says Blitz.
CV LEON BLITZ
Company name: Grovepoint Capital
Job title: Co-managing partner
Born: Cape Town
Lives: Belsize Park
Drinking: Single malt
Reading: Outwitting History, by Aaron Lansky
Favourite business book: The Lexus and the Olive Tree, by Thomas L Friedman
Talents: Running – I came in the top 30,000 in the New York Marathon
Heroes: Nelson Mandela
First ambition: To be an opera singer
Most likely to say: It’ll be alright
Least likely to say: I love that new Spurs strip
CV BRAD FRIED
Grovepoint Capital LLP turnover: £1.65m
Job title: Co-managing partner
Number of staff: 16
Born: Cape Town
Lives: St John’s Wood
Studiet: Commerce and accounting at the University of Cape Town, MBA at Wharton
Eating: Anything but sushi
Reading: The Man who Mistook his Wife for a Hat, by Oliver Sacks
Favourite business book: Dan Senor and Saul Singer’s Startup Nation
First ambition: To be a surgeon
Most likely to say: Life’s too short for this
Least likely to say: It just needed a new washer, I’ve fixed it