Please can you give us an insight into your background? How would you describe your current role?
At one time or another I have sat at every seat at the deal table. I was originally an M&A adviser in the City but left to fail at a start-up leisure business whilst also transacting deals for a listed PE fund. In 2012 I acquired an international business in a distressed situation, entering the business operationally as Exec Chairman. This business was sold by myself to a $1bn revenue PE-backed firm in 2015.
Since then I have been deploying capital as a HNWI investor and serving as a Non-Exec, whilst also doing the occasional advisory mandate to keep my eye in. I can understand the drivers and stresses on every person around the table as a result.
What makes a company investable to you? What do you look for?
I start with the team and the market. For the team, I want to see experience in the industry, ideally prior exits, and not confusing achievement with hard work. Market-wise, I see so many nice ideas that just are not commercial enough to scale – show me how you monetise it.
One of the most important things to me personally is that the team align the risk/reward balance – committing ‘£100k in market-rate salary cost for free’ is not alignment. Show me milestones by which we can measure progress, and natural pivot points around ‘known unknowns’. We can then agree deployment of capital into the product and team as these are hit – recognise that and structure things accordingly.
You’ve recently invested in The Foundry, can you tell us a bit more about the company, and why you decided to invest?
The Foundry is a boutique gym chain with two sites in Central London. They give people the opportunity to be trained and treated like a professional athlete, by former professional athletes. What stood out in this investment was the very high quality of the team, and the strength of the brand around it which is ready to harbour a much bigger operation. Market-wise, they have targeted a niche at a price point that wasn’t being serviced.
Structuring wise, the team understood the benefits of using SEIS to an investor, and also that paper valuations based upon things read on the internet was irrelevant – it was about the cash they required, the equity the investing party needed to make it worth the opportunity cost, and what the investors could bring to the table above ‘just’ cash to fuel growth.
With avenues to investment coming in many different forms nowadays, what do you think ensures that someone selects the right investor?
There is a lot of obvious stuff, such as sector expertise, financial acumen. Or even practical things like surplus office space. Critically, there needs to be a feeling of a long-term, symbiotic relationship with chemistry and a commitment to working together – few success stories result from handing over a cheque on day 1 and then not engaging until the proceeds are handed back. Founders need to be wary of the pump and dump investors using tax schemes as their driver (rather than if they want to be involved), or those that have 10 investments into immature companies…you want someone that can devote time and attention and I think 5 is the max I consider truly manageable in a portfolio.
Are you actively looking for further investment opportunities? If so, are there any particular areas that excite you?
Of course, I don’t always work and invest alone so being active in the market is brilliant for helping people find investors that work for them. In terms of particular areas, I’ll always cast my eye over a tech deck, but generally I like to see those that are removing layers of friction from everyday processes rather than shooting for the moon or are totally new ideas (I’ll leave that to the VCs to fund). I like non-tech operating businesses as well (like The Foundry), but like to see some proof of concept in those cases.
Richard Matthews is a reformed professional services adviser. He is based in the UK, and in London most days, but with experience of owning and operating globally. When not investing, he can be found indulging in his new passion for strongman training or an old passion for BBQ food and beers.