When economic constraints encourage consolidation or centralisation, it may – at first – sound logical. But, whilst London-based firms will invest £50m in a North East business, they may not be so keen to invest £50,000 or even £500,000. Smaller deals (up to £1m) are just as complicated as the larger transactions – if not more so, and need not incur the additional cost of travel and executive time, when there are comparable deals closer to home.
Any venture investor must be aware of what’s happening globally – particularly in their own sector; however, to find the best deals in a regional centre, its better to take a “bottom up” approach, building relationships with local professional advisers, working the innovation networks and prowling the corridors of University research departments.
Furthermore, being a great venture capital investor isn’t just about reading business plans and signing cheques. It’s about building trust with the entrepreneur or management team, and that’s much easier to do if you can meet for a coffee.
John Doerr, one of the father figures of the Silicon Valley tech community, often said “Successful early-stage venture capital is 20% down to an investment decision and 80% down to an effective mentoring relationship”.
In other words, doing the deal isn’t even half of the job. Good early-stage investors need to be there to help entrepreneurs with strategy, introductions to potential customers and partners, hiring decisions and finding great non-executive directors -a relationship about so much more than just money.
All four of the fund managers delivering the new £120m North East Fund will be based right here in the region. Two of them have their corporate head offices in the north east and each team boasts managers who have been working here for many years, building on their national and international experience with the likes of 3i and IP Group. They understand what makes the region tick and where to seek out the best opportunities.
That’s why previous investment funds in the North East have been successful; their managers have their eyes on global trends but are also deeply rooted in the local business and venture community. “Think global, act local” a philosophy to which we are wholly committed at the North East Fund.
Chief Executive, North East Fund