Helping entrepreneurs to join the elite
Mention the name “London Stock Exchange” and most entrepreneurs will think of giant blue-chip companies like BP, GlaxoSmithKline and Marks & Spencer in the FTSE100 index or up-and-coming brands on the Alternative Investment Market (AIM), such as Goals Soccer Centres, Majestic Wine and Quiz Clothing. Yet the equity markets are just the tip of the iceberg.
One of the most exciting areas of work at London Stock Exchange Group (LSEG) is its “Elite” international business support and capital raising programme. Launched in the UK in 2014, the initiative helps companies to scale-up and, so far, more than 120 British businesses have joined.
So, why is one of the world’s largest stock exchange operators working with privatelyowned companies? “As part of our primary markets activity, we found that – especially after the economic downturn – we were engaging with private companies at an early stage, engaging with earlier-stage investors and having broader access to finance discussions not just about initial public offerings (IPOs),” explains Umerah Akram, head of Elite’s activities in the UK.
“LSEG is unique because we have a full offering, supporting the smallest of companies to the largest of companies. Not many exchange groups can say that.
“A lot of our work focuses on how our markets remain attractive to companies that are growing and how we create efficient access to capital. We felt we could better structure that engagement and formalise it through the Elite programme.”
Companies that take part in the programme typically have revenues of more than £5m, although some have sales totalling tens or even hundreds of millions of pounds. Businesses can come from any sector of the economy and firms that are rich in intellectual property (IP) are often interested in joining before they reach £5m.
“IP-rich businesses are typically looking for support because they need to protect their business model and they need help to find investors,” Akram says. “Firms with lots of IP are special because they need a good amount of capital to continue their research and development, and also to commercialise their ideas.”
Around 60% of the British companies that have taken part in Elite already have some form of external investment, whether through private equity or venture capital. Often they join because they’re beginning to look ahead to their next fundraising round even if it’s still a few years away.
“There’s a wide range of companies taking part,” says Akram. “What they all have in common is a good growth rate and great ambitions.
“To my mind, there are three big challenges that face scale-ups: whether or not they have a strategy in place, even if that might need to change or pivot; how do they get the right people to deploy that strategy; and how do they get the right investors and funding to help them execute their plans? We try to offer everything related to those three challenges.”
The growth programme is primarily delivered face-to-face at LSEG’s offices, with experts brought in to speak to participants about topics such as fundraising, growth strategies and how to manage talented staff. Entrepreneurs who have earned their stripes also come along to inspire the cohort of companies with their stories.
Informal networking sessions always prove popular, as do introductions to investors, advisors and other companies. LSEG can also help companies to raise their profile in the media, if they choose to do so.
Yet the growth programme is only just the start of the journey. LSEG also offers “Elite Connect”, a digital platform that brings together listed companies, institutional investors and financial intermediaries to work together online, saving time and saving money.
The latest addition to the family is “Elite Club Deal”, an online private placement platform that connects Elite companies to professional investors. “Although we’re introducing companies to investors through the programme, we know there are ways that we can make the process more efficient,” Akram explains.
“We’ve yet to see a UK company raise funds through the platform, but we’ve already supported two international deals – one was a ‘basket’ bond of 10 Italian Elite companies and the other was an equity raise for Israeli financial technology business eToro.”
Participants in Elite have included M Squared, the Glasgow-based laser developer that finished at the top of last year’s IP100 league table. The company, which was founded in 2006, raised £6.7m from Business Growth Fund in April 2012.
IntegraFin became the UK Elite company to float on the main market in London in March 2018, valuing the business at more than £640m. The group – which was founded in 1999 above an Italian restaurant in London – owns the Transact software platform, which is used by some 5,200 financial advisors to manage £29bn of funds belonging to around 155,000 clients.
One of the best-known brands to have taken part in the training scheme is Unruly Media, the video advertising company bought by Rupert Murdoch’s News Corp in 2015 for £58m. Unruly was part of the first cohort to join Elite, which also included Graze, Raspberry Pi and Naked Wines.
“People always recognise the brands, but actually a whole variety of businesses have taken part,” says Akram. “Four Elite companies from the UK have gone on to make IPOs – three on AIM and one on the main market – while LendInvest raised funding through London Stock Exchange’s order book for retail bonds (ORB) and recently listed a bond on our corporate markets.
Elite was initially launched in Italy in 2012 – where it has helped many family-owned businesses to consider succession planning, exporting and raising growth capital – and has recently expanded into markets including Brazil, Morocco and Saudi Arabia. Further international expansion is also on the cards.
“Companies that join the programme don’t just want to interact with the investors and advisors – they also want to do business with each other,” adds Akram. “As the international network expands, I think we’ll see more and more companies collaborating with each other overseas.”
Published: 26 April 2018