TWO things matter hugely when it comes to selecting a business for investment,” says Patrick Reeve, the founder and managing partner of Albion Ventures, a venture capital firm. “The business needs to offer an interesting market opportunity and the entrepreneur heading it up has to be someone who is very bright and adaptable.” But what exactly does Reeve think is an “interesting” market opportunity? Every entrepreneur thinks his business is interesting. He explains: “There’s no formula for weighing up the different factors affecting the choice to invest. You have to look at each business on a case-by-case basis.” He talks us through his choices, using three recent examples.
HIGH RISK: DEXELA
What: Dexela develops technology that detects breast cancer. It was different from the existing technology because it used low-dose X-rays to create three-dimensional images.
Attraction: “It had something unique in a market that needed to change. The chief executive was bright, adaptable and understood where we were coming from because he had worked in finance before.”
Reservation: “It was a pre-revenue business. Very rarely do venture capital folk invest in things that have not yet proved they can sell. Also, the inventor parts of the business were not right for us and we had to get rid of them.
In fact, apart from a handful of non-executive directors and the aforementioned chief executive, we had to restructure the whole business.”
MEDIUM RISK: RADNOR HOUSE SCHOOL
What: Radnor House School is a new co-educational independent school for students aged 7-18 in Twickenham. It has specialist science labs, an art suite, music school and all-weather play area. It already has over 130 pupils, greatly exceeding Reeve’s target expectations.
Attraction: “There was a considerable market in the area for a private school. There weren’t many of them, and it is a wealthy area. We also got the building at a good price, so we now have a strong freehold asset.”
Reservation: “It was a start-up, so we never quite knew whether people would actually sign their kids up. Also, we’d never been in the market before.”
LOW RISK: HOLIDAY INN EXPRESS, STANSTED
What: Albion Ventures invested £9.5m to fund the construction of the 254-bedroom Holiday Inn Express at Stansted Airport.
Attraction: “It was an obvious market. There weren’t any budget hotels around the airport at the time.”
Reservation: “Since we did the construction and bought the land, it was a very big initial investment.”
CV | PATRICK REEVE
Company name: Albion Ventures
Company turnover: £230m under management
Number of staff: 25
Exit history: 43 exits over 15 years. “The average multiple is 1.6 x cost and our best so far has been 10.5 x cost.”
Job title: Managing partner
Studied: French and Spanish, New College, Oxford
Drinking: White Burgundy
Reading: Tristram Shandy
Idol: Marcus Aurelius
Talents: “Not trying to do anything too quickly.”
Favourite business book: William Pitt the Younger: A Biography by William Hague
Awards: Albion Ventures was named Venture Capital Trust of the Year, 2009, Venture Capital Trust Manager of the Year 2009 and Healthcare Investor of the Year 2011
Motto: “Vina liques et spatio brevi spem longam reseces.” Translation: Be wise, strain the wine, and scale back your long hopes to a short period.
First ambition: “Sadly, doing approximately what I’m doing now.”