Thought leadership

Bigger or better?

The UK’s growth capital industry invests money into small businesses to help them to grow.  And building bigger businesses means good financial returns for investors.

But, for a moment, I want to think about whether the growth capital industry is just building bigger businesses.  Or whether it is also building better businesses.  I mean better for people, our society, and our planet?  Perhaps three answers – yes, normally and could do better.

Yes

Growth Capital investment is used by UK businesses to help them to grow, which nearly always means more jobs, typically means more exports, and often more British led new technology.  For example, we recently had a look at YFM’s own portfolio and found:

• Last year, nearly half (44%) of all sales were exports
• Over 300 more people were employed than when we first invested
• £14m has been invested in R&D

Normally

Bringing a professional investor into a business should also make a real difference to its governance.  I don’t just mean proper board meetings and an independent chair.  But also making sure Health& Safety is on every board agenda, making sure there is an Anti Bribery & Corruption policy in place, and ending any bad tax practices.

Could do better

However growth capital investors also have a unique opportunity to put “Impact” on the agenda of the businesses they invest in – ie Impact on people, society and the environment.  At YFM we have asked each of our portfolio of businesses to think about their Impact and to score themselves against 40 Impact criteria.  We will then help them to pick 1 or 2 specific things that they will target for improvement next year.  This will then go on the monthly board agenda and hopefully a measurable outcome reported when the Impact review is done again in a year’s time.

It’s early days but we have already had some interesting commitments from our businesses to: reduce energy consumption through a factory efficiency programme, switch to green tariff energy, ensure all waste aluminium is recycled, improve gender staff ratios, start a work placement scheme with a local college, and put in place mental well being support for employees. All sound ideas that are good for business and good for people, our society and our planet.

There are about 1000 business funded by VCT investors in the UK and many more funded by other growth capital investors. What if they were all encouraged to commit to 1 or 2 things to improve their Impact?  Not a bad thought for Christmas time.