Shares in UK cybersecurity startup Darktracce surged as much as 43% on its hotly anticipated stock market debut on Friday.

The firm initially priced its shares at 250p on Friday morning, for a total value of £1.7 billion. But at around 8:15 AM London time, these shares climbed above 358p – an increase of 43%.

Darktraace said that its initial offering would comprise around 66 million shares, or roughly 9.6% of its issued share capital, and raise a total of £165.1 million. £143.4 million of this will go to the company, while the remaining £21.7 million will go to existing shareholders, with the possibility of a further 9.9 million shares also being sold if demand beats expectations.

Darktrace shares began trading in conditional dealings on Friday under the ticker “DARK”. Unconditional dealings are expected to begin on 6 May.

The firm’s successful stock market debut comes just weeks after the highly anticipated Deliveroo IPO, which became one of the biggest London debut flops in history. Shares in the Amazon-backed food delivery startup plummeted as much as 30% when trading began on 31 March.

As a similarly tech-focused UK startup, the Darktrace IPO has been viewed as the second major test of London’s viability for high-growth tech company debuts.

Darktrace uses AI technology developed by a team of Cambridge mathematicians to identify unusual patterns in firms’ IT systems that indicate hacking attempts. It has raised a total of $230.5 million from investors to date, according to data collected by Crunchbase.

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The startup’s progress towards Friday’s stock market debut has been dogged by concerns over its connection with Mike Lynch, founder of Autonomy and an early investor in Darktrace, who faces fraud charges in the US over allegations of having inflated his firm’s value before its sale o Hewlett Packard in 2011.

Coinbase, the most prominent cryptocurrency exchange platform in the US, is planning to go public through a direct listing, the firm announced in a statement on Thursday.

The San Francisco-based firm previously stated in December that it had confidentially filed registration documents with the US Securities and Exchange Commission (SEC), though it hadn’t disclosed that it would pursue a direct listing rather than a traditional initial public offering. Its statement on Thursday did not detail when the stock would be listed or under which ticker.

The SEC has approved a proposal from the New York Stock Exchange to allow companies to raise primary capital while listing directly, removing what had previously been a significant drawback of bypassing an IPO.

Direct listings enable companies  to skip elements of the standard IPO. The need to price and sell a block of new equity is removed, allowing the firm to simply list its shares to become available for trading. This method usually requires a high degree of visibility to prove attractive.

As it goes public, Coinbase will join a small number of other tech companies that have previously undergone direct listings. Consumer-facing companies like Spotify have listed directly, and online video game company Roblox Corp has also announced its intention to go public via direct listing.

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Founded in 2012, Coinbase allows its users to buy and trade decentralised tokens including bitcoin and Ethereum. It has raised $547.3 million in funds as a private company.

London-based online food delivery company Deliveroo has been valued at over $7 billion (£5.1 billion) after its most recent fundraising round.

Deliveroo announced on Sunday that it had secured another $180 million from its existing investors, including minority shareholder Amazon, as it gears up for a blockbuster initial public offering in the coming months. The IPO will be London’s biggest new share issue in three years.

The company, which had already raised $1.5 billion from its investors, plans to use the newly raised funds to innovate, expand its online grocery business and establish delivery-only kitchen sites.

"This investment will help us to continue to innovate, developing new tech tools to support restaurants, to provide riders with more work and to extend choice for customers," said Deliveroo founder and CEO Will Shu in a statement.

Deliveroo is among a range of eCommerce companies to benefit from the shift in consumer spending caused by the onset of the COVID-19 pandemic in 2020. Last April, the Competition and Markets Authority approved Amazon’s purchase of a 16% stake in Deliveroo after the firm warned that restaurant closures in the first UK-wide lockdown could cause its collapse.

With the ensuing country-wide rise in demand for online food delivery, Deliveroo managed to double its revenues in the UK and Ireland, achieving profitability in the second and third quarters of 2020. It is now planning to add a further 100 cities and towns in the UK to its coverage, having already built up a base of 140,000 restaurants on its platform.

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A successful IPO would complete the company’s recovery from the initial shock caused by the pandemic. JPMorgan and Goldman Sachs have been hired to advise on its stock market flotation.

During the Internet bubble around the turn of the century, not a day would go by that a future Fortune 500 wasn't hitting the stock market for the first time as part of an Initial Public Offering (IPO). For those unfamiliar, an IPO involves offering new stock shares in a private company on the open market to stock investors.

Why initiate the Initial Public Offering process? For one, the IPO process is a way for private companies to raise capital or reward initial investors. Generally, the stock’s initial price is determined by the potential demand for the stock and the amount of money the company wants to raise. Once the shares open up for sale on the open market, market forces take the stock in one direction or the other, usually upwards.

Besides boosting a company’s market value, going public can provide the liquidity that short-term investors require. Additionally, completing the IPO process can help a business owner improve their retention rate, as these company shares will enhance less-than-stellar benefit packages.

Due to the legalities involved with going public, the IPO process can be unnecessarily complicated. Fortunately, the private company in question can partner with legal professionals to help streamline the process.

Advantages of going public

Before initial investors willingly concede to giving up control of their company, they’ll have to understand the benefits they can derive from doing so.

The primary benefit of initiating an IPO has to do with the opportunity mentioned above to raise capital. With this extra capital, a company can fund research and development (R&D) projects, fund business acquisitions, expand company efforts, or reward initial investors.

After introducing the company to the marketplace, a company stands to benefit from the Initial Public Offering process. In most cases, undergoing the IPO process will swing open doors and allow the company to gain market share for its products or services.

Besides boosting a company’s market value, going public can provide the liquidity that short-term investors require.

Downsides of going public

Of course, there are some disadvantages a company must manoeuvre when going public.

Firstly, there’s a significant cost associated with undertaking the IPO process. These costs include accounting and legal services to prepare for the IPO proceedings and the marketing costs of raising public awareness and piquing community interest.

Secondly, the new company's reporting requirements rise significantly. Under the scrutiny of the Securities and Exchange Commission, the company has to provide quarterly and annual financial information as a form of transparency to the government and investors.

Finally, the IPO process wrestles some management control away from initial investors/owners as a Board of Directors takes over.

The roadmap for an IPO

As was stated above, the IPO process is very complicated. For an IPO to legally and successfully make it to the IPO closing, every "i" needs to be dotted, and every "t" needs to be crossed.

If you’re contemplating taking your company public, you could probably use a roadmap to get your company where it needs to go. To help in that regard, here are the most important steps you would need to follow.

Securing the services of an underwriter

An underwriter is an investment bank specialist assigned to lead the company through the IPO process from a financial perspective. These underwriters assume the responsibility of setting the initial price. Often, these IPO players participate by selling/marketing the stock and becoming actual investors.

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Setting the IPO guidelines and framework

Once the underwriter is in place, there are many legal documents and agreements that the designated parties must fill out and sign. This list of documents/agreements includes (but is not limited to):

• Underwriting Firm Commitment
• Engagement Letter and Letter of Intent
• Red Herring Document (about the company in question)
• Underwriting Agreement
• S-1 Registration Statement for SEC
• Prospectus (defines IPO)

Roadshow and price setting

This stage is when marketing personnel make presentations to top investors and brokers to drum up interest and determine potential demand. This information collected during these presentations forms the basis for setting the initial price of the offering.

The quiet period

After executing marketing-based efforts, there comes a 25 day "quiet period." During this time, underwriters are granted access to oversubscribed purchases of the stock. This window, dubbed the quiet period, is the timeframe where the "lock-up" period is set. The lock-up period, usually 90 to 180 days in length, is when insiders can’t dump their allotted shares on the market.

IPO closing

IPO closing is the day and time when the IPO goes to market, and stock transactions can begin. To reach this long-awaited day with ease, follow the steps outlined above.

According to new data compiled by AksjeBloggen, the world’s ten largest unicorn companies reached a collective valuation of $563.3 billion as of September 2020.

Topping the list was the Chinese fintech Ant Financial, with a valuation of around $150 billion. The company, which offers clients a range of financial services from lending and payments to investing and insurance using a platform business model, recorded revenue of $10.5 billion in the first half of 2020 – a 38% increase year-on-year, with a net profit that rose almost 11 times to £3.26 billion during the same period.

Ant Group filed for its hotly anticipated IPO in August, and will be listed on both the Hong Kong Stock Exchange and Shanghai’s STAR Market.

ByteDance ranked as the second-most-valued unicorn. The parent company of Chinese social media giant TikTok gained a valuation of $140 billion as of September, representing an increase of 86% from the start of 2020.

Didi Chuxing, another Chinese company, ranked third among global unicorns with a $62 billion market value. An app-based transportation service provider with over 550 million users, the company facilitates ride-sharing, bike-sharing and taxi-hailing services, among numerous others.

US unicorns Infor and SpaceX rounded off the list of the top five global unicorns with respective valuations of $60 billion and %46 billion. America represented the largest unicorn market in the world, according to CBInsights data, with 236 private companies valued at over $1 billion. China ranked second with 182.

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When the term “unicorn company” first came into usage in 2013, there were only 40 private companies in the world that held a valuation of over $1 billion. Now there are 12.5 times as many unicorns currently in business, with around 500 existing as of September this year.

73 new unicorns were minted in 2020. Taken together, the world’s unicorns are worth a collective $1.5 trillion as of September. A full third of currently operating unicorns are involved in the fintech sector.

This valuation should easily create the world’s most valuable listed company, and reports indicate it will achieve this through the sale of a 1.5% stake in three billion shares. This is just short of market analyst predictions for 2% of the company to be sold off to the public.

The IPO’s targets specify between $24bn and $25.6bn is to be raised for the Saudi government to diversify into other revenue channels beside oil, specifically growth in tourism.

The valuation could have bene higher, but the official investment prospectus detailed some risks ahead, causing concern among investors.

According to Sky News, Jasper Lawler, head of research at London Capital Group, said of the flotation: "The valuation is short of the $2trn value sought by [the] Saudi Crown Prince.

"Foreign investors just weren't willing to pay up to give MbS (Mohammed bin Salman) his blockbuster.

"A valuation above $1.5trn seems to be where foreign demand dried up so under current plans, shares will be taken up by mostly domestic investors.

"Assuming the IPO moves ahead at this price range, it will succeed at the goal of raising funds for Saudi Arabia to diversify away from oil.

"It won't be the big draw of outside money into Saudi Arabia that it could have been."

Saudi Aramco (the Saudi Arabian Oil Company), a state-owned national petroleum and natural gas company in Saudi Arabia, is known for its radical R&D plans and connections with Saudi sovereignty, but is also according to accounts seen and assessed by Bloomberg, the most profitable company in the world.

It recently filed its investment prospectus, including all details, risks and figures, ahead of its grand IPO this year, which is set to change history. You’d think hey let’s invest, sound like win all round, but are the real risks?

Firstly, the prospectus itself does not mention a valuation, though Crown Prince Mohammed bin Salman has previously estimated Aramco should be valued at $2 trillion, but estimating value is not always so straight-forward.

One of the many risks mentioned is armed conflict, with the company being state-owned, in the middle of a drone attack zone. Recent attacks resulted in a 20% jump in oil's price per barrel. In future, further attacks involving Aramco facilities "could have a material adverse effect.”

Second on the prospectus’ list is climate change, which of course with it being a natural gas company, makes sense. Global protests, environmental protection and carbon footprint are all elements that may or may not affect the overall efficacy of Aramco’s operations moving forward, meaning the company would have to “incur costs or invest additional capital."

Peak oil demand has always been on the horizon for Aramco and similar companies. The adoption of renewable energy and a shift away from fossil fuels is a future many see as confirmed, and this could also pose some risk to the overall profitability of Saudi Aramco 2020 onward.

Political and social instability are also big risks due to the significance of the company’s location globally. The Middle East and North Africa region are heavily influenced by surrounding political agendas and uncertainties, meaning future figures for Saudi Aramco could be just as uncertain given that even the prospectus mentions the vital importance of the Suez Canal and the Straight of Hormuz as critical shipping routes in its operations.

5^th on the list is government ties. Simply put, being a state-owned company Saudi Aramco plays a key role in the nation’s GDP, overall growth and economic health. Any shift form either side can affect the other, and if the Saudi government suddenly needs to change tax policies, it may have to pocket more of Aramco’s revenue, thus affecting future potential for investment.

Finally, the prospectus lists its actual offering as a risk in itself. "An initial public offering in the Kingdom of this kind and size is unprecedented," it reads. "Any disruption in trading of the Shares could impact their market price and delay the ability to conduct transactions."

What are your thoughts on this huge opportunity? Let us know in the comments below.

Sam Smith from finnCap Group says that for small to medium-sized companies with scale-up plans, this more uncertain climate poses questions about whether they can access the financing they need to fund their growth.

However, sources of capital to back growth companies have actually increased. Government supported institutions such as the British Business Bank, regional growth funds, the bank financed BGF and its early-stage-funding subsidiary BGF Ventures are all helping SMEs with their funding needs.  Alternatively, there are Peer2Peer lenders, venture capitalist and private equity houses with significant funds to deploy. Meanwhile, AIM as one of Europe’s best scale up exchanges remains a resilient source of capital. At finnCap, we work with a wide range of these institutions to supply funding opportunities for growing companies looking to scale up and the insights we have drawn from these relationships inform our view of the changing fundraising arena outlined below and how growth companies can best steer through this more complex environment.

Funding outlook more challenging

There are currently clear concerns about financing growth. These stem from a range of factors, including equity and bond market dislocation, the likely withdrawal of the EIB from the UK and largely Brexit inspired uncertainty around GDP growth and Brexit. In 2017 the EIB group lending was €654m to UK SMEs, which was some 42% of the organisation’s total funding commitments.

Meanwhile, banks which, following the 2008 financial crisis, have scaled back their lending to small and mid-cap businesses, are a continuing source of concern. SMEs make up 99% of private businesses in the UK and account for more than half of all employment and turnover. However, lending to small businesses last year remained static, with the £7bn of new loans drawn in the third quarter of 2018 compared with £7.1bn in the previous quarter, according to the most recent data from UK Finance.

Lending to small businesses last year remained static, with the £7bn of new loans drawn in the third quarter of 2018 compared with £7.1bn in the previous quarter, according to the most recent data from UK Finance.

In addition, equity markets remain turbulent with FTSE 100 losing 12.5% in 2018, with most of this downturn occurring in the final quarter of the year, and meaning that the index’s suffered its worst performing year since the financial crisis in 2008. Similarly, AIM also suffered losses in the final quarter of last year, despite outperforming the main market for the first three quarters.

 Government policy driven initiatives offer funding

Although the present financial climate does pose challenges, there is a range of funding alternatives available to companies searching for scale-up capital. Some of these opportunities in the funding landscape have stemmed from Government driven initiatives. As a national investment programme, the British Business Bank (BBB) was initiated to improve the supply and mix of funding available to SMEs through the development of a wide variety of initiatives.  Overall, in the four years to 2018, the BBB has facilitated some £5.2 billion of additional funding for SMEs through its range of programmes and partnerships. This includes the establishment of regional powerhouse funds such as the Northern Powerhouse and Midlands Engine, which offer a mix of equity and debt solutions, with the former providing SMEs with £31m of funding in its first year.

A further potential source comes from the Alternative Remedies Package (ARP), proposed by the European Commission and UK Government, which has the Royal Bank of Scotland (RBS) backing the £775m scheme to provide greater financing options for growth businesses. Some £425m makes up the Capability and Innovation Fund, which helps facilitate and encourage eligible bodies, including challenger banks, to develop and improve their financial products and funding services available to SMEs.

VC investment in UK SMEs was £5.96bn over the course of 2018, which was more than 1.5 times the level invested in fast-growth businesses in Germany.

Alternative sources of capital continue to fill the gap left by banks

In addition to Government supported initiatives, the funding landscape today is far broader than a decade ago with an array of capital raising opportunities to consider for companies searching to scale up. Private equity and venture firms have substantial funds to invest. For example, private equity houses invested some £3.2bn in UK SMEs in the first half of last year, which was up 12% year-on-year and the trend stayed strong over the second half of the year. Similarly, VC investment in UK SMEs was £5.96bn over the course of 2018, which was more than 1.5 times the level invested in fast-growth businesses in Germany.

The alternative lending industry, which includes challenger banks, private debt and Peer2Peer lenders, which emerged following the financial crisis – partly resulting from the unwillingness of banks to lend to SMEs - has matured over the past decade. As an example, Funding Circle as a leading P2P funder has become an increasingly important source of funds for businesses in recent years, accounting for around 10% of all lending to SMEs in 2017, according to the Cambridge Centre for Alternative Finance.

AIM remains Europe’s top destination for fast-growing firms looking to go public

Despite the instability of 2018’s last quarter, AIM is still well-positioned and remains Europe’s top market for fast-growing firms looking to go public. Last year it was responsible for 59% of the funding secured by growth companies across European bourses, raising £5.5bn across 398 separate deals. This compares well with £17.7bn for the entire main market in London.

In fact, AIM has performed well amongst the backdrop of Brexit. There were 42 IPOs on AIM in 2018 raising £1.6bn for growth companies, compared with 49 IPOs a year earlier raising £2.1bn – itself a 97% increase on the money raise in 2016. Furthermore, AIM still after 24 years continues to play a vital role in helping SMEs to scale up, while also including a range of more mature businesses, which have prospered on the market, offering a better balance of risk for investors.

The alternative lending industry, which includes challenger banks, private debt and Peer2Peer lenders, which emerged following the financial crisis – partly resulting from the unwillingness of banks to lend to SMEs - has matured over the past decade.

Scale-up funding still available

finnCap Group plc itself provides private fundraising, corporate finance, debt advisory, sell and buy side advisory and trading services to 125 public and private growth companies, to help them find the right investment for growth and access capital. Since it was established in 2007, finnCap has helped raise more than £2.6bn of new capital to support corporate clients.

finnCap Group plc’s listing on AIM last December illustrates our confidence in the market as a source of growth capital for companies and its key role in helping to further their growth. AIM also remains the first choice to raise capital for a wide range of companies from across the economy, with the sheer diversity of its constituents a key strength.

The broad range of alternatives and continuing attraction of AIM should be a salient reminder that scale-up capital is still available and Britain and the country’s growth businesses should be able to play a strong role in powering the growth of a more global Britain.

Website: https://www.finncap.com/

The global initial public offering (IPO) market has been a double-edged proposition this year.

Activity levels were down 21% at 660 IPOs globally in the first half of the year versus the same period in 2017, although the volume was 5% higher at US$94.3 billion.*

The reduced activity could be attributed to a backdrop of increasing risks, including trade wars and geopolitical tensions. However, economic fundamentals and equity valuations remain strong, meaning an IPO is still a tantalising prospect.

High profile successes and failures so far in 2018 highlight the potential rewards and risks in the current environment. Major successes this year include the US$3.2 billion Axa Equitable IPO, while the failed Aramco IPO demonstrates the high risks and costs involved.

Companies that wish to go public should consider all the factors that can help maximise the chances of success. In an increasingly digitised world, ignoring the benefits of rapid technological progress, would be a costly mistake.

Technology cannot replace humans in relation to strategic thinking and business planning, which are fundamental to any company. But it is an impressive tool when it is correctly integrated into the more process-driven functions of firms, increasing the power to collect, process and distribute information to the right parties with much greater speed and accuracy.

IPOs are stressful

An IPO is one of the most stressful activities that a company can go through and success is often dependent on a business’s ability to handle high volumes of data in a consistent and timely manner. Companies need to demonstrate transparency and control to all stakeholders, including regulators and potential new shareholders.

In practice, Virtual Data Rooms (VDR) are used exactly for that purpose. Virtual data rooms connect authorised users, including those inside a company and their external stakeholders, digitally and in a secure environment with real-time access to all relevant documentation.

A VDR ensures documents are always available to authorised parties in a secure environment and helps ensure that they are up-to-date. All data is stored online on a cloud platform and is always accessible to both internal and external parties, depending on their individual permission levels.

Creating a database in which documents can be updated consistently gives asset owners full control and the ability to react to the latest market conditions, bringing a company to market quickly when the conditions are right.

Post-IPO benefits

Companies should consider the benefits that a VDR will provide after a successful IPO. It is highly likely that compliance standards will be more stringent for listed companies. Ongoing use of a VDR will aid transparency and speed of response to regulators’ requests for information.

The extra security provided through a VDR is also invaluable and it can be updated as new regulations come through. For example, the European Union’s General Data Protection Regulation came into effect in May with the aim of safeguarding individuals’ personal information. It imposes complicated demands upon companies but these can be met through the use of VDRs, which can be continuously audited and adapted to new requirements and technology as they develop.

Documents create value

The value of having robust documentation for companies going through an IPO is hard to exaggerate. Unclear and/or incomplete data and documents often lead to price reductions and can even cause an entire sale to fall through. It also leaves companies open to regulatory actions if they cannot demonstrate due diligence.

It is crucial that a VDR has in place a stringent and standardised index structure for all assets within a portfolio, which promotes clarity and transparency.

Lifecyle VDRs: 5 elements to success 

Careful planning is required to ensure that a life cycle VDR is structured correctly and that it includes all relevant documentation. There are five elements to implementing this.

First, before starting a project, it is important to get an accurate picture of the situation e.g. how far has a project progressed? How many documents are missing?

Second, time frames, processes and the responsibilities of all relevant parties should be defined.

Third, a project’s success is dependent on the acceptance and participation of various parties, so these should all be included in seeking solutions to the challenges posed by the need to change management processes.

Fourth, documents must be gathered from both internal and external sources and will sometimes need to be digitised before being transferred into a VDR. Detailed reports should be drawn up showing which documents are available and those that are still missing.

Finally, maintaining a life cycle data room is an ongoing process. Documents should be updated regularly, with new documents added as they become available.

Clear advantages

Creating and maintaining a VDR can be a challenge initially, requiring a cultural change and an overhaul of processes for some companies.

But for those companies looking to go public, it would be perilous to ignore the benefits afforded by adopting a VDR such as Drooms NXG, which was the first data room to integrate machine learning technology to streamline workflows. Through increased efficiency, accountability and higher transparency, it can streamline the process to a highly successful IPO, giving senior executives the time to concentrate on strategy and business development - the pursuits that human intelligence still does best.

*Source: EY, Global IPO trends: Q2 2018

Website: https://drooms.com/

Ramphastos Investments is a venture capital and private equity firm focused on driving top-line growth in enterprises in all stages of their evolution: from start-ups to scale-ups to high-growth medium-sized companies and mature enterprises.

The firm was founded in 1994 by Marcel Boekhoorn, who left a career in accountancy at Deloitte after becoming the Netherlands’ youngest Partner to pursue his passion for entrepreneurship. Within a few years, Marcel had grown the firm’s portfolio and invested capital exponentially after realising spectacular returns through several high-profile exits. In this period, he also laid the foundations for the approach toward building businesses that the firm pursues today: a focus on driving growth on the revenue side of the equation through buy-and-build strategies, marketplace innovation, internationalisation, management empowerment and strategic partnerships.

Today, Marcel is joined by a team of seven partners who share his passion for and hands-on approach to business building as well as his upbeat, solutions-focused and status quo-challenging mindset. As founders, builders, operators and investors in businesses of all sizes and in all phases in their evolution across multiple sectors and geographies, Ramphastos’ partners have successfully turned around businesses, created and sold start-ups, launched IPOs and completed de-listings, achieving outsized average returns on investment throughout the firm’s growth.

The firm currently holds interests in more than 20 companies with a cumulative revenue above 3.5€ billion and more than 8,000 people employed across a range of sectors from financial services, gaming, new materials and advanced manufacturing and energy and across all continents. Ramphastos is focused primarily on acquiring majority stakes in companies that meet three criteria: a unique competitive position (through a patent, brand or operational efficiency), strong intrinsic growth potential and favorable underlying trends in the industry or marketplace. As an investor of its own capital, the firm has the financial independence and appetite to take on complex transactions and special situations.

This month, Finance Monthly had the privilege to catch up with Marcel Boekhoorn and hear about the exciting journey that founding and running Ramphastos Investments has been to date.

What was setting up your own investment company in the Netherlands back in 1994 like? What were some of the hurdles that you were faced with?

When I left my job as a Partner and M&A Expert at Deloitte & Touche, I had no money of my own to invest, so my first step was to set up shop as an independent M&A consultant. That work brought in enough money, and when one of my clients was unable to pay for my invoices, I decided to take a stake in his business. I made just about all the mistakes you can make, starting with taking a minority stake and having no control over the direction of the business. I also witnessed first- hand that a Founder’s entrepreneurial creativity doesn’t necessarily translate into day-to-daymanagement or leadership skills.

Within eight months, the company had folded, and I was on the verge of bankruptcy. But poverty breeds creativity, and within a year, I had earned enough to try it again, this time taking control of a struggling wood box maker and turning it around by focusing production on cigar boxes. We produced boxes for Davidoff, Tabacalera and other global brands, and I sold my shares for a good profit – enough to branch out into more investments.

My strategy from the start was to focus on unconventional companies that no one was interested in, like small wheelbarrow or spray can manufacturers, and to build them into market leaders through buy-and-build strategies. By realising significantly higher margins as market leaders through premium pricing strategies, these companies were able to accelerate outsized growth in their sectors. By purchasing them when they were small and selling them quickly as market leaders, I was able to realise outsized returns in the process.

Now, almost 25 years later, we’ve moved on to larger, different and more complex investments, but our fundamental emphasis on top-line growth, as well as our preference for taking a majority stake in our investments and our interest in companies, markets or complex transactions and special situations that others shy away from, are still our main priorities.

A key component of any successful PE investment is to turn the business around; what are the considerations in terms of operational integration? What are the typical challenges you face?

When we consider investing in a business to turn it around, we look to see how we can add value on the revenue side of the equation – through a buy- and-build strategy or by challenging the status quo with the introduction of a new channel strategy, internationalisation, or a new product portfolio or pricing strategy. We have seen that it’s on this side of the equation that we can make the biggest difference and add the most value. It’s also where we’re most at home. We are entrepreneurs and business builders first and foremost.

This sets apart from much of the private equity world, with its emphasis on the cost side of the business. Don’t get me wrong: all of the revenue- driving strategies I just mentioned will only succeed if the organisation and operations are structured effectively to deliver on them. And any successful turnaround includes robust cost control and simplified, streamlined operations. Getting that right will always be part of our turnaround strategy, but we are fundamentally more about catalysing growth through entrepreneurial innovation and management support on the revenue side rather than driving profit by slashing on the cost side of the equation.

A hallmark of our approach to turning businesses around is to focus on company leadership. The company’s management and its employees – the people – are the ones who will make or break the business. Our work starts at the top, getting the leadership bought into and aligned on the new direction, ensuring that they embrace the same vision of the future, the same sense of who we are today and where we are headed. We make it a point to be there for leadership teams and help them work through such processes. We’re hands-on builders, and this is a role we love to play. Getting a turnaround right throughout the organisation – not just among leadership’s direct reports but company-wide – hinges on consistent, well-aligned communication. We find time and again that executing consistent communication – from instilling an understanding of strategy to fostering a growth-focused culture among employees. This is one of the most important operational KPIs for a successful turnaround.

You ask about typical challenges. Well, for starters, most people aren’t hardwired for change, and if the change isn’t something that they introduced themselves, it scares them. They don’t like it – until they see that it works and benefits them, of course. Take the example of introducing a channel strategy to move a retail business entirely online – or vice-versa. We’ve done both in different sectors, geographies and cultures, and we have found that three things help mitigate resistance and galvanise employees to deliver on the new strategy: first, a clear and consistent communication about the strategy and its benefits, second, creating and showing progress against a roadmap with compelling short- and mid-term milestones and third, cultivating a culture of listening and dialogue among employees.

What is the state of the market in relation to venture capital right now? What challenges are faced by businesses looking for funding?

Looking at the markets for venture capital and private equity, we see that increased competition has driven up valuation multiples up consistently.

From 2009 to today, sustained low interest rates have made debt cheap and have driven investors’ money toward VC and PE in their search for higher returns. Strategic buyers with strong balance sheets and big cash reserves are competing with one another, driving prices up.

In spite of this overall pattern, there are plenty of businesses who struggle to find funding. In the VC space in particular, we see that geography plays a role. If you’re a start-up based in the States looking for, say, two-to-five-million dollars, you’ll be well served by the market. If you’re a European company looking for the same investment in

Europe, you’ll struggle. The VC market is far less developed than the market in the States, with investment concentrated around a handful of potential unicorns.

At Ramphastos, we have always focused as much as we can on companies in underserved markets and in investments that others avoid. Conversely, we’ve always stayed as far away as we can from competition with other investors. Our point of view is that if you have to compete in an auction with

20 or 25 other players, then you’ll always end up paying too much and struggle to reach your target IRR.

We build businesses with our own capital, and in doing so, we pursue the high-risk, high-return opportunities that others avoid. We’re currently focused on turning around larger enterprises that face complex challenges. Unlike typical private equity firms that are happy with 25 or 30% IRRs, we are looking for driving significantly higher returns. So far, our approach – which plays to our strengths as creative thinkers and hands-on business builders – has paid off. In our 24 years as a firm, we’ve realised average multiples of money invested above ten.

How are most of your investments structured? To what level do you, as the investor, want a say in the day-to-day running of the business?

We do the majority of our investments on our own.

We invest our own capital and value our financial independence. This keeps us flexible and agile as investors. We usually take majority stakes to allow us to do what we do best – roll up our sleeves to help company leadership hands-on as they build their business. As founders, builders and leaders of businesses of all sizes and in all phases in their evolution, our partners have first-hand experience with just about anything you can encounter as an entrepreneur. We usually take a board position in our portfolio companies working side-by-side with company leadership to shape strategy and – if needed – give them tactical counsel, talent, tools and innovations to deliver on their plans.

Whereas we’ve been successful to date in the VC space across multiple sectors from flight simulators (Sim-Industries) to online brokerage (TradeKing) to flooring technologies (Innovations4Flooring) and open to opportunities, we are increasingly focused with our investments in larger, more mature companies, particularly ones with three qualities: one, a unique competitive position through a patent, brand or operational efficiency; two, strong intrinsic growth potential; and three, strong underlying trends in the industry or marketplace. We also love helping companies tackle tough, complex problems and turn themselves around. We’re actively looking at opportunities in that space, particularly among larger enterprises.

How are exit strategies agreed and structured? What are typically the common areas of disagreement regarding exit timing and strategy between the business owner and Ramphastos Investments?

We don’t have a predefined exit strategy, but we never buy into an enterprise without having a good idea about whom we’re going to sell it to. If we don’t know our exit, we won’t buy it – it’s as simple as that. And because we invest our own money, we have no pressure or obligation to sell. Our capital is patient: we’re in no hurry. Rather than working towards a specific exit, we focus on the execution of a predefined strategic value creation plan. When companies continue to grow, they will sooner or later attract buyers. We are all about value creation, and that can take time. We exit when the time is right.

To date, we have never had disagreements with the management teams on timing or nature of the exit strategy. The social dimension is important to us. With a good deal, everyone should be happy: buyer, seller, management, employees, partners – everyone. When the ABN AMRO bank dared to support us with 200€ million on our first really big deal, we rewarded them with a discretionary 10€

-million premium at exit, without any contractual obligation to do so. They had never experienced anything like that before. We don’t do deals where we can’t make such things happen.

Out of all of Ramphastos Investments’ success stories, what would you say are your three biggest achievements?

The first is without a doubt Telfort, a Dutch mobile telecom provider, which we acquired as majority shareholder, grew exponentially and sold within nine months to market leader KPN for more than a billion € in 2005. That deal was a milestone for Ramphastos, because it earned us our first half billion. It’s also a good example of the success of a robust top-line strategy. While part of our success involved getting the costs under control, we grew the company’s value explosively by swiftly migrating the business from an online- only platform to the high street retail channel, through creative retail and consumer incentives, and we raised the consumer price sharply while remaining the market’s price leader, driving profits from 50€ million to 150€ million in just eight months. We also capitalised on excess network capacity by opening our network to mobile virtual network operators, and we closed a unique deal with Huawei, as the company’s European launch customer.

A VC success story that we’re super proud of involves Sim-Industries, a developer of flight simulators that we launched in 2004 and sold to Lockheed Martin in 2011. The story is a good one, because it shows how being flexible and thinking out-of-the-box can steer a start-up to success. Sim started out in the software business, developing software for flight simulators. When the market leader in that space stood in our way, we asked ourselves: Why not go further and build simulators too? We fought hard to gain a place in an oligopolistic market, with incumbents poaching our employees and trying to scare away our suppliers, clients and us. In the meantime, by taking a fresh look at design, we built a superior product, overcame legacy issues, installed a senior management team, focused on execution excellence and became market leader in civil aviation simulators for leading aircraft types.

A third story I’d like to share has less to do with business, but everything to do with deal-making. It’s a deal that centres on an issue that is close to my heart: the preservation of species; and it’s a deal that fulfils a dream that I worked personally, persistently and patiently to fulfil over 17 years – making a home for two giant pandas in the Netherlands. That dream began when I bought a zoo located to the east of Utrecht and returned it to profitability. After hundreds of hours’ worth trips back and forth to China, education, complex relationship building with the Dutch and Chinese governments - across three Dutch prime ministers and three Chinese presidents, the dream became a reality in October 2015, when I travelled with a trade delegation and our King to the Great Hall of the People in Beijing to sign a ten-year agreement in the presence of Xi Jinping. The agreement includes an annual contribution of one million dollars to the preservation of the panda and the conservation of its natural habitat in China. The pandas arrived almost exactly a year ago at the zoo and are thriving in their new home, which was voted this year as the world’s most beautiful panda enclosure.

Over the years, what has kept the company moving forward? What sets you apart from the competition?

What’s kept us moving forward first and foremost is that we absolutely love what we do. We love building businesses. We love wrestling with thorny challenges and innovating our way with management teams toward successful turnarounds and outsized growth. We love closing deals that make everyone a winner.

It hasn’t been smooth sailing every year. I founded the company with plenty of fits and starts, as you heard, and when the Great Recession hit, it didn’t look at us and say: They’re a nice bunch of people, let’s give them a break. I’m happy to report that all of the companies in which we hold a majority of shares are turning a profit today.

What’s gotten us through the tough times is a combination of our unbreakable optimism and solutions-mindedness, our deep respect for one another and our collective creativity.

There’s also the fact that that we nurture close, trusting relationships with the management of our portfolio companies. We’re open with one another, and all of us here are ready and willing to jump in and contribute. We’re able to anticipate problems before they surface or tackle them quickly before they spin out of hand.

To put your finger on what makes us different, add to that our resourcefulness, boundless energy and appetite for challenging the status quo. We thrive on pushing ourselves and our companies to innovate and adapt constantly to drive revenue and margin growth, and in today’s world, if you don’t have the mindset and wherewithal to be agile and adapt, you’re in serious trouble. As a financially independent investor, we are free to take risks, tackle problems that others avoid and make the kinds of bold moves that catalyse truly breakthrough growth.

What do you hope to accomplish in the near future? Are there any exciting new projects that you can share with us?

I have an important role to play as the chief motivator, inspiration and driver of creativity within our team, and I hope to continue to do so for many years. Entrepreneurship is what fires my heart and gives all of us here energy, inspiration and strength. And all of us at Ramphastos see the kind of creativity-driven value that we’ve been creating here pays itself forward to beyond Ramphastos to the management teams and employees and suppliers of our companies and markets they serve. We have been doing well for almost a quarter of a century and aim to continue to steer this course.

As for projects on the horizon, we have some really exciting deals on the way. I wish I could tell you more, but I can’t. Stay tuned - there are more chapters to come.

Website: http://www.ramphastosinvestments.com/

With the explosion of cryptocurrencies over recent years, many businesses and start-ups are turning to Initial Coin Offerings, or ICOs, to raise money to get their projects up and running. This week Finance Monthly gets the lowdown on ICO management from Dr. Moritz Kurtz, CEO & Co-Founder of Acorn Collective, clarifying the point, purpose and benefits of launching an ICO.

In an ICO campaign, early backers of the venture buy a percentage of the cryptocurrency, often based on one of the existing public blockchains, in the form of tokens created by the company they are supporting.

An ICO can theoretically be used to fund any project or product in any category, however, before an ICO is launched it needs to clarify:

• The concept
• The token model
• Funding required
• Next stages if funded

With so many ICOs in the marketplace you must lay out your concept in detail before launching an ICO. This way contributors can see the utility of your token, and understand what they are buying into. It also makes token holders feel part of the process of creating a new technology, platform or product.

Who should run an ICO?

Whilst any product or project CAN launch an ICO, that does not mean anyone SHOULD. ICO’s have become a popular funding model with start-ups looking to bypass the traditional, and more rigorous, process of gaining funds via venture capital backing.

Although technically an ICO model can be used to fund anything, it is important to consider:

• The necessity of the blockchain
• What you want to achieve
• Utility of your token: What real-world utility will your token have?
• Potential for regulation: Currently, ICOs are largely unregulated, but that does not mean they will be in the future. As the ICO market grows, many countries plan to impose stricter regulations.

ICO for Crowdfunding

An ICO could be greatly beneficial for the crowdfunding space, as it allows for the following:

• Removes transaction and platform fees: Current platforms charge 5-10% in fees.
• Be accessible to all: Without the same commercial pressures as traditional crowdfunding platforms, an ICO-funded platform would be able to accept any legal project in any category and country.
• Integrated post-campaign marketplace: The token economy created through ICO funding means the platform could have an integrated post-campaign marketplace, alongside reasonably priced campaign support services for founders.

Essentially, an ICO can be used to ‘crowdfund crowdfunding’.

How is an ICO mutually beneficial?

Successful ICOs benefit both backers of the venture and those relying on the funds it provides.

The backers can contribute towards a product or project at an early stage, thus benefitting from the increased demand for the token as utility increases. Meanwhile, projects can receive early funding to build their business venture without having to give away equity in the company.

Things to think about

Although launching an ICO can hold great promise for start-ups, it’s not all plain sailing.

Getting the funds can be tricky. When launching an ICO you must generate interest from contributors to encourage them to buy your tokens which, in a crowded marketplace, can be challenging. Not getting enough funds is one of the biggest risks. Not meeting the minimum target means the funds are returned to the token holders and the ICO is deemed as having failed.

An ICO is a great way of raising funding for the right projects in certain industries, but is by no means an easy solution. The ICO world is currently saturated with projects and competition for funding is intense. Making sure you have a viable and sustainable idea that requires blockchain is a good start. From then on, a successful ICO requires all the same focus on marketing and community building as any other form of fundraising.

In this clip from 1999, Jack Ma delivers a speech to 17 friends in his apartment to introduce Alibaba and lay out his plan to compete with US internet titans.