A Life in the Day: Octopus and Peter Mandelson
Christopher Allner - 14 August 2009
It's been a whirlwind week in British politics with Peter Mandelson taking the reins of Government in Gordon Brown's absence. As managers of one of the Government's Capital for Enterprise Funds, set up to fund Small and Medium Enterprises (SMEs), I and some of my colleagues met with Mandelson on Thursday. We were in Nottingham to mark the first investment for the Octopus Capital for Enterprise Fund into integrated systems company Ketech Ltd, which is also the first investment for the Capital for Enterprise Funds as a whole.
Politics, finance and media fused into debate at the event, reflecting how important the economy's future direction is to us all. For us it reinforced how crucial supporting UK SMEs is right now. We're focused on working with the Government to achieve this through a combination of advice and funding for companies.
The journalists at the event put Mandelson through his paces, their two main questions being, ‘is the CFE money really enough?', and ‘why has it taken so long to for the CFE funds to make their first investment'? One particularly headstrong Panorama journalist, in demanding Mandelson justify himself, asked if he really thought he should be defined as a ‘modern day Sheriff of Nottingham', which raised a laugh.
While Mandelson was fielding these and many other questions travelling the political spectrum from national to local (Where is the economy going? Should there be car park levies to finance the tram system in Nottingham?), we also spoke with the press about the timing and extent of funding.
As the Capital for Enterprise Funds were launched in January and the first investment was announced in August, there have been rumblings about how long this first investment has taken. We explained that the Government had to research and appoint managers for the funds, with Octopus mandated in April. Once we started work, the Ketech investment took 12 weeks to complete, including all the necessary legalities, research and due diligence, making for a fast turnaround.
Furthermore, we believe that now is a far better time for SME investment, than any time earlier in the year. In early 2009, the economy was in a state of virtual collapse and many companies with it. In such times of economic upheaval, it is very hard to invest or lend to a company and weak businesses fail. Strong businesses however, with robust management and sound business models, adjust to survive. Right now we are seeing such companies, that have survived the drop but have largely used up their financial reserves. These are the companies that deserve support and now is the time to help them with funding. In this way, the Capital for Enterprise Funds are well timed to meet the needs of deserving SMEs, as the economy stabilises and then resumes growth.
The challenge lies in whether there is enough money available for small growing companies and unfortunately the answer is probably not, as available funds such as VCTs are drying up and banks are still not opening up for lending. The press and public are naturally concerned about how long it takes to get money to companies and how much or little they're given, but VCT managers could now be used as a relatively fast route to provide such funding, if they had it. To give an example, if the Government sets up a fund of funds for smaller companies, it could be well into next year before more money is available, by the time a manager has been found and co-investment arranged. However if VCT funding was stimulated (by enhanced tax relief and reduced investment restrictions), money could be available for investment into SMEs before Christmas! VCT providers could play a vital part in getting more money into the SME market and helping the economy get back on its feet.
At Octopus, we're going to keep the focus on making investments into growing companies and providing the support they need to be big successes. Each one forms a part of Britain's future economy.
