Since my last blog post, my Future VC experience and internship at GCP have been in full swing. At GCP I have been fortunate to get an insight into the industry at a very busy time for the team. The completion of two deals in one week has shown how hard the team works and the strong attention to detail they put into developing their investment partnerships whilst spinning a variety of other plates such as portfolio monitoring, investor relations and the longer-term strategy of the fund.
So far the team have got me involved in activities that have developed my financial modelling skills and also research to assist in deal origination and pipeline building. This included reviewing businesses from multiple industries including pharma, cloud computing, cyber security and software development schools. It never ceases to amaze me just how competitive all these industries are, so, with my marketing hat on I’ve constantly been analysing how all these firms are able to differentiate themselves. I’ve been fortunate enough to attend the weekly team meetings, two investment committees and a board meeting, as well as being able to spend one-on-one time with several team members, treated as part of the team as groups go for their lunch and joined their half-day off-site focusing on the macro strategy through Fund V and beyond. It has been great to see the variation of work done by the team, from investment executives to partners.
Alongside my internship I have also been attending masterclasses delivered by VCs, courtesy of the Future VC programme. With the rest of my cohort, I’ve been learning about the processes of sourcing deals which highlighted that it’s certainly not a one size fits all approach and it does depend on an investor’s personality type and their stage of investing. The second was on spotting outliers, a class that really stood out as it showed the fact that as an investor you’re investing in people as much as their business. The next few were on, market sizing, due diligence, reviewing pitch decks, raising funds, transaction economics and term sheets.
Naturally, I’ve been taking note of the contrast between PE and VC funding. While over the course of a fund, VCs and PE funds would hope to earn similar annual returns, there’s quite a significant difference in the way they try to achieve this. This was made patently obvious just last week when I was speaking to a GCP partner about what happens post-deal. A PE fund like GCP has developed an approach that builds a supportive relationship with a management team. Once an investment has been made, GCP have a range of strategic support drivers from their Growth Toolkit that the management team can use to help reach their business goals. This helps to ensure the partnership can run smoothly. There should also be a professional but collaborative relationship with the management team to ensure potential issues or opportunities are highlighted early and dealt with sensibly and pragmatically with everyone working towards a common goal. It does highlight the successful partnership approach that GCP promotes and how important it is for management teams to build a relationship with investors that are aligned with their business values.
Through the Future VC masterclass that I attend, we were given the case of a VC fund in which of £100m invested: £25m of investments would be written off, £50m might breakeven, £20m would 3x money and £5m would 30x money. In the end that’s just a 2.6x multiple, but the path to getting there is far from predictable, highlighting the differences between the types of funding available to high growth businesses.
Now, it’s also worth pointing out that this is just the second time I’ve worked in a professional working place. Aside from an amazing two-week internship at a marketing firm three years ago, I’ve always worked either on my own or with my business partner. Numerous times over the years I’ve had mentors advise that where possible, I should spend some time shadowing a founder/partner or take up an internship at a firm so I could gain insight into how a real company operates. As alluded to in my previous post, PE seems to be somewhere in the centre of the corporate ecosystem. They work with lawyers, accountants, banks, entrepreneurs etc. and it’s been great to gain insight into worlds beyond just PE.
And lastly, the team at GCP seem like a real family, that works hard together and it’s been invaluable to get a glimpse into such a culture.