The most valuable insights from BGF’s Portfolio Day 2021

BGF’s first in-person Portfolio Day in two years brought together founders and CEOs from across the businesses we back. Held at the Southbank Centre in London, the event offered a chance to network, socialise and hear insights from experts in business and investment. Here are the highlights.

Playing the unplayable piano

Tim Harford (above), known as “The Undercover Economist” for his long-running Financial Times column, gave a keynote speech in which he discussed the way in which adversity can act as a spur to innovation.

He gave the example of pianist Keith Jarrett, whose record-selling album The Köln Concert was almost never made on account of an “unplayable” piano. The album is today regarded as a masterpiece, said Harford, precisely because it was recorded on a bad instrument in challenging circumstances, which forced Jarrett to draw on all his reserves of creativity and skill.

“What’s the response of the economy in the face of the challenges of the past 18 months?” he asked. “Pretty encouraging. We’ve seen lots of new businesses starting and a big increase in productivity, as measured by the OECD.”

In the last 18 month, we’ve had to adapt faster than we thought possible

Stephen Welton, executive chairman of BGF, shared his perspective on how BGF’s business has responded to the pandemic. Despite the challenges, BGF backed roughly one company a week throughout the period, which means it has now invested in more than 400 companies.

“We thought Covid would be an unbelievable challenge, and perhaps, for some, an overwhelming one – but we got through with determination and lots of collaboration between investors and portfolio businesses. We are now investing heavily in our people and our investment platform so that we can continue to invest in businesses with great teams and an ability to outperform.”

If you’re not paying attention to climate change, you’ll be caught out

Vaughan Lindsay, CEO of carbon offsetting business ClimateCare, told the audience that businesses of all sizes should act now to measure and reduce their carbon emissions. Where emissions can’t be eliminated, offsets can lower an organisation’s carbon footprint.

He spoke to BGF’s newly appointed head of ESG, Roshni Bandesha, explaining that business leaders should do this not only for moral reasons, but because companies are under increasing pressure from customers, investors and government to take climate change seriously.

“Customers, particularly younger people, are making choices based on climate credentials,” he said. “Investors are screening out high carbon intensity businesses because they’re worried about stranded assets. If that’s not enough to worry about, governments have made bold, headline-grabbing targets around net zero that will require them to introduce compliance regimes, such as a carbon tax.”

You feel good culture the minute you walk through the door

Vin Murria, founder of Advanced Computer Software and investor in businesses such as Celaton, which is backed by BGF, discussed the importance of a company’s culture, which she described as “vibe, energy, passion”.

In conversation with Cate Poulson, head of BGF’s Talent Network, she explained that culture is about creating an environment in which failure is acceptable so long as you learn from it – an environment in which great ideas come to the forefront, and staff are empowered to be nimble and flexible.

“World-class businesses must act like world-class athletes,” she said. “Train hard, get coached, understand metrics, get feedback, figure out how to get better.”

The market background has accelerated exits

Andy Gregory, chief investment officer at BGF, shared more details on BGF’s investment performance in 2021. As well as a significant step up in investment activity – with more than £445 million invested so far in 2021 – there has been a rise in successful exits. BGF has completed 25 investment exits in the year to date, he said, generating a return of £367 million – equivalent to a money multiple of 2.16 times.

“The market background has accelerated exits, pushing some valuations upwards, but we are encouraged by this step change,” he said. “It’s not a blip. There are between 25 and 30 exits potentially still to happen and up to 50 next year, mostly with a similar return profile.”

We need to get comfortable with being uncomfortable

Sasha Scott, founder of consultancy Inclusive Group, and Asif Sadiq, head of equity and inclusion at WarnerMedia, discussed how to address complicated issues concerning race, gender and sexuality in the workplace.

An effective diversity and inclusion policy is as much about listening as talking, they said. Leaders should encourage difficult conversations with people of marginalised identities, doing so from a position of humility and with a willingness to learn. “It’s got to start with psychological safety,” said Scott.

Diverse teams are said to make better decisions, which means that embracing diversity is good for business as well as positive for society. “We will all make mistakes,” said Sadiq, “but we can learn and grow.”

When the unexpected happens, you need more talent, more diversity and more ideas than you ever imagined

Margaret Heffernan, entrepreneur and author, discussed the problem of wilful blindness, in which members of an organisation choose not to see problems that glare them in the face – she mentioned the Enron fiasco and the Volkswagen emissions scandal as two examples.

Researchers have estimated that in a typical organisation, some 85% of executives have issues and concerns that they do not voice. The solution is to create diverse teams who work together over time, developing reciprocity and trust so that people feel confident enough to have amicable arguments and bring forward the kind of “half-baked” ideas that may prove transformational.

“What’s needed are culture and processes that acknowledge uncertainty, that aren’t wilfully blind, that don’t fall for forecasts as though they’re tablets handed down from the mountaintop, and which work to create the intellectual elasticity needed in a robust organisation,” she said.

A foundation for giving back

BGF had one more announcement to make: the creation of a charitable unit, the BGF Foundation, that will offer support and grants to small and mid-sized charities which improve life outcomes for disadvantaged children, young people and adults living in the UK and Ireland.

Alistair Brew, head of investment operations at BGF, explained that the foundation would target local and community-based charities, offering not just financial support but also the expertise of BGF’s staff and Talent Network to help them maximise their impact. The idea for the initiative came from Fiona Lowry, founder of The Good Care Group, who is personally backing the foundation along with the BGF board and others from the Talent Network.

“We see the foundation as an extension of BGF’s original purpose,” said Brew.

Investigating exits

BGF’s Portfolio Day also featured a panel discussion hosted by Ben Barker and Jane Vinson, BGF’s heads of portfolio for the North and South, which examined the best ways to prepare for and implement a successful exit, including selling to a trade buyer, to private equity or an initial public offering (IPO).

BGF’s Portfolio Day 2021 took place on 22 September 2021 at the Southbank Centre, London