Show me the money: How to complete a fundraising round in a post-Brexit vote world
In this post Brexit vote world, we’ve heard a lot about the forthcoming apocalypse but, thus far, the sky hasn’t fallen on our economic heads.
Sure, sterling has taken a pounding against the mighty dollar (less so against the rather feeble euro) but it seems tourism may have surged as a result, Arm is under offer (though people aren’t sure if that’s a good thing or a bad thing), some of the Brexit indicators are actually not too bad, and even my employer, Smart Pension, managed to raise a big round of post-referendum funding recently, from Legal & General Investment Management. Which was nice.
We were originally trying to close our round pre-referendum to completely cut out the risk of any Brexit related wobbles, but it soon became obvious that this was unrealistic.
Consequently, some nervous times ensued as the Leave votes started to outpace those for Remain. A 13 per cent drop in the L&G share price followed, with markets hitting all financial institutions regardless (and some rather worse). But we were greatly comforted when L&G insouciantly reported that it had planned for a 50-50 probability of a vote for the UK to leave the EU and it had a £5bn cash buffer just in case.
"We positioned our balance sheet accordingly to reduce risk for our customers and shareholders," it added. We never doubted it for a minute…
Things we learned
I’ve never been involved in an investment from such a large institution before and it’s been an interesting process.
It certainly takes a long time to navigate through the various committees. Three things stood out for me:
People really really care about the numbers and ongoing traction. Obviously this makes sense, but it certainly puts the pressure on and also serves to reduce appetite for risk during the process.
For example, if you shift resources from one focus to another, the impact of that on the metrics then needs to be explained.
Strategic fit with a strategic partner is key. Do our selling points and ambitions match with their stated objectives?
Spending a few hours reading the L&G annual report cover to cover allowed us to categorically confirm various assumptions – a big focus on digital and innovation, for example – and to be confident that we were going to align well as strategic partners.
It’s a truism, but successful business nearly always boils down to individuals and relationships and so it’s important to ensure that teams get on.
Are these people we can do business with (and do they feel the same)? A key reason the deal went successfully to completion, in my opinion, was the strong buy-in from the LGIM team, right to the very top. The teams clearly worked well together and got along, so the deal process went smoothly.
So that’s how we came to get our particular post Brexit deal over the line. It’s not as sexy as raising hundreds of millions every twenty minutes like Deliveroo, but we’re very happy with the outcome – and I have a nice new multi-coloured umbrella too…