ANNUAL REVIEW 2017/18

Transcription

1 ANNUAL REVIEW 2017/18

2 CONTENTS 03 IN MEMBERSHIP 04 NUMBERS Our members come from across UK private equity and venture capital A YEAR OF CHANGE Tim Hames discusses the last year and his plans for the BVCA s future 09 A VOICE IN THE INDUSTRY 12 POLICY ENGAGEMENT We represent the industry to government and across the investment community We play a leading role in shaping policy and engaging with regulators 18 BRINGING INDUSTRY THE 23 TOGETHER Our range of events helps to foster close relationships amongst the industry SOCIALLY RESPONSIBLE We promote sustainability, diversity and transparency for our members 28 PROFESSIONAL DEVELOPMENT 31 ANALYSING THE INDUSTRY Our training courses help develop the next generation of the industry Research and analysis is at the heart of what the BVCA does 2/33

3 ABOUT US Membership in numbers Our members include venture capital and private equity firms, as well as institutional investors, professional advisers, service providers and international associations. The current total membership is 732, including 317 GPs and 135 LPs. We re growing fast, too. In , we added new members 61 new GPs and 22 new LPs 10 family offices 3/33

4 INTERVIEW A year of change It s been another busy year of growth and expansion at the BVCA, says Director General Tim Hames hat have been the big trends for the industry this year? W Since the Brexit result was known, there s been a lot of speculation about what impact it might have. The truth is, it s been quite a patchy outcome depending on what sort of fund you are, where you invest, and who your investors are. There have undoubtedly been some funds with very euro-centric investor bases, but which are wholly UK-focused, particularly those with interests in the consumer and retail sectors, who have found it a challenging year. It s been a good year to be big, because you re getting bigger still, and it s been quite a good year to be small and boutique, particularly if you have a technology focus. There s enormous appetite and interest around artificial intelligence and machine learning, cyber security, the internet of things, medtech, and education technology. There s a general fascination out there amongst investors and managers alike about potentially transformative technologies. Are the traditional roles within the industry changing? Once upon a time, the worlds of the entrepreneur, manager and angel were really quite separate. Now there 4/33

5 INTERVIEW are so many people who work at member firms of the BVCA who are also investing privately as angel investors. That s been encouraged by the tax regime in Britain (through EIS and VCT schemes). It s rare for a month to go by without somebody from overseas knocking on my door and asking to go through these sorts of schemes and how transplantable they might be in their own countries. They re seen as a successful way of attracting high net-worth individuals to invest in activities that otherwise would be difficult to find anyone to take on. What have been the biggest achievements for the BVCA in the last 12 months? In policy terms, what was potentially the biggest challenge, but turned out to be the most satisfying outcome, was the Patient Capital Review. It is something that we encouraged the Government to look at and it was I m definitely more in the glass half-full camp. There is a middle position between out-and-out passporting and simply falling back on equivalence, which is a parachute with only one string. unclear at the start of the exercise what sort of beast it might be. In fact, we were very pleased with what they came up with, which is a new 2.5 billion fund administered by the British Business Bank (BBB) over 10 years. It will hopefully invest in areas that are harder work, such as life sciences. It s a very welcome form of capital that will slightly balance the market up. What should BVCA members be aware of in the coming 12 months, especially with Brexit looming? With passporting seemingly off the table, are you confident of a deal that suits the industry? I m definitely more in the glass halffull camp. There is a middle position between out-and-out passporting (it s difficult to duplicate if you re not a full member of the EU) and simply falling back on equivalence, which is a parachute with only one string. To my mind there is a middle position, something akin to an ESTA-style visa rather than a passport. For most funds that will be perfectly adequate. Relatively few are actively marketing in all 27 Member States; you re probably talking about half a dozen markets at most. The UK is a big hub for foreign direct investment (FDI) and was the second largest recipient of FDI (in 2016). It s also the third largest source of FDI for other people, so it s not a one-way street. 5/33

6 INTERVIEW The area I m most interested in is the continued evolution of the BBB, on the assumption that the European Investment Fund becomes a less relevant player to UK-focused funds. The Government have made a pledge in their manifesto to repatriate those resources, but I want them to do so without unnecessary rules and restrictions on how it s done. I want the BBB to have the freest possible hand to look at the landscape and see where the short-term blockages are and position themselves to intervene. I want it to be a very flexible friend. This year has also seen a push to attract pension funds to invest in venture capital. Why have UK pension funds seen venture capital as too risky in the past? Is venture capital risky? Clearly, if you re going to take minority stakes in very young companies and in some cases completely pioneer new technologies, that is riskier than a more mainstream option. But it s equally true that if your ambition is to achieve extraordinary returns, then you re not going to do that by buying shares in Marks & Spencer. To use a baseball analogy, Babe Ruth is remembered for the fact that he scored more homeruns than any player of his generation, but he also had the highest percentage of strikeouts of any player of his generation. He either whacked the ball out of the stadium or he missed it; there was no halfway house. To a degree, a venture investor has to appreciate that that s the way things go in our industry. However, for the last five years the most satisfying thing for me during my term has been the ratio of homeruns-to-strikes has moved quite strongly in venture s favour. 6/33

7 INTERVIEW Since you became Director General in 2013, the number of events the BVCA organises has rapidly increased. Why are they so important to the membership? Since I became Director General in May 2013, the membership has not only increased but also diversified; we ve become a much more eventsdriven organisation. The year before I became Director General we had 27 events. This coming year we ll probably do about 120 events, a third of which will be outside of London. That s very important to me. One of my overriding principles is that the B in BVCA should stand for British, not Berkeley Square (much though I like Berkeley Square!). We opened a Manchester office in Manchester has a booming private equity sector. In some measures it s the second biggest private equity centre in Europe, let alone the UK. It s an incredibly vibrant community there. We re seeing overseas GPs setting up shop in Manchester and bypassing London altogether. They re saying, Why do I want to be the 297th private equity firm in Mayfair when I can make much more of a splash when I arrive on day one in Manchester as one of the top five firms?. One of my overriding principals is that the B in BVCA should stand for British, not Berkeley Square! 7/33

8 INTERVIEW This year s High Growth Conference was a great success. We had nearly 400 people attend, a good third of whom were entrepreneurs. It s very much their event, they are the stars of the show. In the past we didn t put much weight on the entrepreneurs because they weren t our members, they re our members members. But that s not an argument for trying to assist the process of them trying to understand the world of private equity and venture capital better. The Summit is coming up soon. What do you hope will be the big discussion points? This year we want to reflect the fact that both GPs and LPs are having a big debate around strategy. A lot more money has come into the industry in the last five years, which is a good thing. But different people are responding to that in different ways. There are some members saying they re sticking with traditional private equity. Others are saying they ve got bigger and so will have a big main fund, plus a smaller, more bespoke fund that invests in smaller companies and edgier technologies that they wouldn t use the main fund for. You ve got others who are saying their investors would like to provide them with a number of different funds. They re becoming complex asset managers. That strategic debate is not fully in the public domain. LPs are having a very similar debate. They re discussing whether to carry on exclusively investing through funds, or through the ever-increasing amount of co-investment strategies, or maybe direct investing. What do you want to have achieved for the BVCA in 12 months time? There are three things. Firstly, we ve taken the number of LP members from 35 five years ago to about 140 now. I d quite like to get closer to 175. Secondly, I think we re going to have to think even more imaginatively around the venture and growth capital space about designing new events to suit the fact that there s so much more interest than there used to be. Thirdly, I think we can do more outside of London. We need to think about places that are less obvious. Places like Southampton, Cardiff, Reading, Glasgow. We need to start thinking in a more tiered fashion. A big area I m interested in is Belfast, which is a really interesting place for the medtech industry. Sunderland is a real player in software design, but there s not a lot of private capital near it, so they have to come to London. In Dundee, gaming design is huge because historically, the university has the highest number of computer graduates of any university; Plymouth leads the way in maritime technology. There s more we can do to show it s not just about London. 8/33

9 POLICY A voice for the industry We are proud to act as a voice for the private equity and venture capital industry, representing our members to government and the wider investment community 9/33

10 POLICY Promoting growth and trust We promote growth and trust in UK businesses both at home and abroad he BVCA believes in promoting growth through a number T of initiatives: Patient Capital - we are working with the British Business Bank and HM Treasury on funding for the UK venture and growth capital industry, and supporting for venture capital tax schemes With Brexit negotiations on-going, we have continued dialogue with the Government and regulators on access to talent, fundraising, the future relationship with the EU and changes to our members business models as a consequence of Brexit We have continued dialogue with the Government and regulators about the future relationship with the EU Corporate governance working with the Government on policy aimed at promoting good corporate governance in UK business following the Government s acknowledgement of the Walker Guidelines as a good industry initiative. 10/33

11 POLICY Around the world We are promoting the industry internationally with the Department for International Trade, with trips made to: Japan France Germany Italy Spain Ireland We also continue to run our European Private Equity Forums that connect firms from across Europe with institutional investors globally. These have included gatherings in: Middle East: Dubai Abu Dhabi US: Boston New York Austin San Francisco 11/33

12 POLICY Policy engagement We have played a major role in shaping policy and engaging with regulators both at home and abroad In the last year There have been over 20 formal submissions to Government and other stakeholders: Financial Reporting Council Financial Conduct Authority HM Revenue & Customs Department for Business Energy & Industrial Strategy International Accounting Standards Board (IASB) HM Treasury Department for Work & Pensions OECD British Business Bank European Commission European Banking Authority We deal with a number of issues, both in the UK and Europe, including... UK: Corporate governance reform Patient Capital Review The impact of restrictions on carried forward losses on GPs Limited Partnership law reform and partnership taxation National Security and Infrastructure Investment review Pension scheme reform Insolvency proposals and turnarounds Valuation of private companies Reporting on energy schemes Carried interest and profit fragmentation Tax rules for hybrids Europe We worked with Invest Europe on pan-european submissions including: Alternative Investment Fund Managers Directive (AIFMD) review Supervisory reporting Marketing funds in the EU Capital and remuneration requirements 12/33

13 POLICY Policy agenda For 2017/18 and beyond we are focusing on four key areas: Building trust in business The impact of Brexit and EU regulation Transparency and accountability UK growth and competition Brexit priorities As negotiations continue over the future relationship between the UK and the EU continue, here the main issues we are addressing: Access to talent (fund manager & portfolio company level) Continued funding for UK venture & growth captial Investor access (regulation such as AIFMD) Transitional arrangements 13/33

14 POLICY Fostering strong relationships We bring together key stakeholders in both the political and business communities for the benefit of the private equity and venture capital industry Our work in forging close ties with business and government can be seen in the following ways: featuring John McDonnell featuring Philip Hammond We hosted four events, focusing on the themes of private equity and venture capital s contribution to the economy and how business delivers growth and prosperity Party Conferences 2017 Labour Brighton Conservatives Manchester We engaged with 25,000 conference delegates Liberal Democrats Bournemouth SNP Glasgow 500 attended BVCA events 14/33

15 POLICY We also promote businesses through our Private Equity Map, which allows you to search over 2,000 companies backed by the private equity and venture capital industy. More info can be found here: privateequitymap.co.uk 2, bn companies total latest turnover 559,666 total latest employees 15/33

16 EVENTS Bringing the industry together Our events allow all our members, investors, portfolio companies and entrepreneurs to network, share ideas, and develop new relationships 16/33

17 EVENTS Making connections hroughout the year, our extensive T calendar of events enables people from all parts of our industry to connect with our farreaching network and build long-standing relationships. From conferences and technical forums to high-profile dinners with exclusive networking opportunities, we deliver incisive industry intelligence and specialist knowledge to the entire sector. In in 19 locations across the world we held over events from firms attended by over delegates We delivered and over hours of networking opportunities over , hours of technical and thought leadership 17/33

18 EVENTS 5 flagship events in with record attendances: We also held roundtables and forums covering sectors and topics including: Technology Retail & consumer Real estate 850 Summit 650 Annual Gala Dinner High Growth Tax, Legal & Regulatory Conference Breaking Barriers: Diversity Forum And we continued to organise our Peer Networking Series, a collection of breakfast and evening receptions that provide opportunities to share knowledge and make new contacts in an informal environment. Profession communities covered in included: Fund finance Alternative lending Life sciences Cyber security Social impact Secondaries Healthcare Fintech CFO/COOs HR Legal counsel Marketing and communications Partners 18/33

19 EVENTS For all the UK We are proud to represent members from across the country and are determined to shine a light on areas outside of the capital ur members come O from all over the country, and over the last few years we have increased the number of events outside of London. Our nationwide activities include: The BVCA National Dinner Series National Breakfast Series National Receptions North West Forum Next Generation event in Manchester This year also saw the appointment of our new Regional Director Phil Goodwin. 19/33

20 EVENTS We have a presence across the country: Birmingham Edinburgh Jersey Guernsey Belfast Manchester Leeds Bath Bristol Glasgow Aberdeen London Newcastle 20/33

21 EVENTS 21/33

22 RESPONSIBILITY CONTENTS Socially responsible The BVCA promotes sustainability and diversity throughout the private equity and venture capital industry 22/33 2/36 BVCA ANNUAL REVIEW 2018/ /18

23 RESPONSIBILITY Investing responsibly Sustainable and responsible investment remains at the top of our priorities, and the BVCA will continue to show its support through growing the market esponsible investment is a key part of private equity R and venture capital, and we help to promote good practice that mitigates environmental, social and governmental (ESG) risks. Each year we celebrate the outstanding ESG practices of our membership with our Responsible Investment Awards. In January 2018, we began offering our Starting the ESG Journey workshop. We also sponsored the UK National Advisory Board Rise of Impact report in October There were also a number of ESGrelated gatherings, including The Case for Impact Investing seminar in November /33

24 RESPONSIBILITY The BVCA Responsible Investment Toolkit In October 2017, we produced our Responsible Investment Toolkit, which provides the industry with essential insights about how to integrate ESG considerations into investment strategies. This includes the key components of a responsible investment management framework, both at house level and throughout the deal cycle. A great introduction to why responsible invesment matters to our industry Offering practical advice throughout the investment life-cycle, from due diligence through to exit, and at house level Updated content including case studies from previous BVCA Responsible Investment Award winners, showing responsible invesment in aciton Intuitive user navigation and fully mobile optimised content To find out more, click here /Responsible-Investment 24/33

25 RESPONSIBILITY A focus on diversity The BVCA is committed to improving diversity by increasing participation in the private equity and venture capital industry and encouraging representation in senior roles. We have put a framework in place to follow through on this strategy and we are focusing on four areas: Our own governance and structure The BVCA has committed to ensuring the proportion of women or men in the senior executive leadership team and Council is at least 30% Currently, 50% of the senior executive leadership team and 38% of the Council is female. Networking and engagement with the industry Events in our Diversity in Private Equity & Venture Capital Series range from one-day forums to breakfast and evening receptions, enabling in-depth debate and networking; Our HR Breakfasts also provide opportunities to share best practice and make new contacts in an informal environment. Publishing research to provide the evidence we need Research we have published in the past 12 month includes: Women in UK Venture Capital 2017 Women in Private Equity 2018 We are currently involved in a joint research project with the British Business Bank and Diversity VC project to identify ways to tackle barriers faced by female-led firms in accessing venture capital. The results will be published in autumn Taking further action through outreach activities We regularly spend time with the HR professionals within firms, promoting the issue of diversity to senior leaders within the industry, raising the profile of our events and working with the not-for-profit organisation Level 20, which aims to deliver greater representation for women at all levels of the private equity industry. 25/33

26 RESPONSIBILITY Transparency The BVCA is determined to ensure that the private equity and venture capital industry is fully transparent and at the forefront of providing good governance his year we worked T with a number of partners in reporting on the industry: 10th Annual Report of Private Equity Reporting Group was published in December 2017 EY also published the 10th edition of its Annual Report on the Performance of Portfolio Companies in December 2017 The Business, Energy & Industrial Strategy select committee also published its report on corporate The timeframe of private equity investment in portfolio companies averages 5.8 years, according to EY governance, which recognised the good work of the Private Equity Reporting Group and it s monitoring of the private equity industry s compliance with the Walker Guidelines. 26/33

27 CONTENTS TRAINING Professional development The BVCA s range of training courses gives members the necessary skills to succeed 27/33 2/36 BVCA ANNUAL REVIEW 2018/ /18

28 TRAINING Developing the next generation We are committed to maintaining high standards in the industry and enabling members to develop their skills Each year we arrange 40+ courses 3 flagship courses: Foundation LP Foundation (new for 2017/18) VC Foundation learners companies speakers and trainers 500+ e-learning courses taken 210+ CPD hours 20+ face-to-face programmes 28/33

29 TRAINING Our courses cater for all stages of your career Stage 1 Starting out Venture Capital Foundation For people in the first 18 months in the industry Stage 4 e-learning For people that want to study anywhere and at their own pace LP Foundation (new for 2018) Foundation (a third course was added this year due to popular demand) Stage 3 Stage 5 In-house Stage 2 Experienced For anyone that has worked in the industry for more than 18 months Support Team courses For those not involved in investments, but playing key support roles behind the scenes For bespoke, premium and convenient training 29/33

30 RESEARCH Analysing the industry Through research and analysis, we provide the key information that gets the industry talking 30/33

31 RESEARCH Expert research Our constant research into the industry provides our members with insight, analysis and statistics relating to how it performs Throughout the year we published a number of detailed reports into industry performance, including: The UK Private Equity IPO Report, which showed that private equity-backed IPOs are trading nearly 44% above their offer price January 2018 saw the launch the European Data Cooperative as the online data collection platform for our Report on Investment Activity. Working with Invest Europe, AFIC, AIFI and 20 other national associations across Europe, this is a single system for collecting data on the industry. This gives us the ability BVCA Report BVCA Report on Investment on on Investment Activity Activity In January 2018, we launched the European Data Cooperative with a number of leading associations to compare the UK with other countries in Europe on a like-for-like basis for the first time. Performance Measurement Survey 2017 Annual report on the performance of portfolio companies. 31/33

32 MEDIA & PUBLICATIONS Leading the discussion As the voice of UK private equity and venture capital, it is vital that we communicate the importance of our industry to the wider world and ensure our members are kept up to date with the latest trends and developments. We do this through press releases, case studies, thought leadership and regular communications and publications. Stay informed with: BVCA Journal Friday Focus Insight VC Voice Brexit Bulletin & Brexit Portal Technical Bulletin Technical Update Legal & Accounting Update We also promote our activities on LinkedIn, Medium and Twitter where we currently have more than 13,400 followers. 32/33

33 5th Floor East, Chancery House, Chancery Lane, London WC2A 1QS T: +44 (0) F: +44 (0) /33