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Life with BGF: CEO stories

BGF News 07.20.2016


To celebrate our fifth birthday, we brought together five CEOs – each representing a different year of investing – to talk about life with BGF.

The initial choice

Sarah Wood, Unruly: We were in an unusual position of being able to cherry-pick a syndicate of investors – Amadeus, Van den Ende & Deitmers and BGF. We were a media technology company with global aspirations so the syndicate model worked well for us. There was a strong chemistry with BGF; they were compatible in culture and vision, and interested in helping British companies grow sustainably and into other territories.


BGF also felt entrepreneurial; it was another startup with a mission to be collaborative and experiment with new business models. They were also very engaged. We ruled out quite a few firms who did not want to come to our office, or who wanted a second meeting in their own office. BGF ruled themselves right in by being so close to our culture.

Fraser Smeaton, MorphCostumes: We had a decision to make: either to sit on the beach and wring our one idea for as much cash as possible, or get investment and focus on the Halloween business – a market worth up to $6 billion and with few sophisticated competitors.

Traditional private equity would not look at us because we were a one product business. We had an initial chat with BGF and developed our plan. I was impressed by the flexibility of their approach. They offered us a way to take some money out to de-risk personally but also supported us with cash to invest to grow. This long term patient capital influenced us from heading to the beach.

Mark Cass, Cass Art: My business was going well but we needed to expand beyond London. We had identified 20 potential locations. We also needed to develop our online business. At the time, I owned the business outright and here I was looking to open stores when everyone else was cutting back their retail estate. My family could have put the money in but I wanted a partner who would invest and de-risk.

The business had started as a bit of fun and had grown organically. Success meant that things got serious. There was an opportunity – and were we going to seize it? My bank was rather scared of my funding requirements but they suggested BGF, who were amazing. They understood the business proposition and that we wanted to roll out a successful formula – which is what we have done

Max Dudson, Dudson: We had got to a point where one of our product groups was growing really fast and yet it wasn’t part of our existing manufacturing capability. We had capacity in one area of the business but no capacity in another. We couldn’t afford to invest further, so we needed a partner. It was important for us that the family did not lose control but, if we were going to take our business to the next stage, we needed some support.

We were very nervous about taking this step. We had lots of meetings but they were one-way conversations – people did not listen. But BGF invested a lot of time with us. They went round the factories. They visited sites with us and looked at what we were doing. They tried to understand and that was really healthy.

Nan Williams, Four Communications: In 2014 we were looking at the options to grow the business – a trade sale or taking on private equity. During that process we met BGF. The first time we met and listened to what they said, we thought it was too good to be true. It suited us down to the ground. We thought it was too early to sell and do an earn-out because we are still very passionate about the business. We wanted to take it to the next stage while enabling some people to realise some capital. Our share capital structure had got complicated, so the deal enabled us to tidy that up as well.

The partnership

Fraser: BGF has lived up to what they said they were going to be: long-term and patient. They have stuck with us through the bumps; I don’t think other private equity houses would.

Sarah: BGF was always very supportive. When plans didn’t go to plan, they were willing to discuss things. There was no ego involved, just a desire to support and find help when we needed. We found that right up to the very end, even then with three very different investors, the focus was on what was best for Unruly.

Max: They have been a very good partner of the business. They have bought into our plan. There are areas where we have had to change plans. That’s life. In our business, a terrorist attack means that people stop travelling and eating out. And if they don’t eat out, people don’t buy our products. This is a cyclical business, so there are periods where you have to retrench and then try to grow again. The really satisfying thing has been BGF’s involvement through that.


The shareholder structure

Nan: BGF’s minority approach has given us a second bite of the cherry. When it comes to the ultimate sale of the company, we will have taken it to a much bigger place than we would have expected otherwise. We had not realised that this was possible.

BGF is a non-threatening investor for other shareholders as well for our staff and clients. The management team still has control. We are all still there and committed. So there has been no change, but we have been given an accelerator. We did get other offers from private equity investors but they all wanted a majority stake. While we would have been happy to consider this, we really liked the fact that we could achieve our goals with a minority shareholder.

Max: We had no intention or desire of losing control. Continuity was our goal; we want to hand the business on stronger and better. We were looking for a partner who was not going to threaten that view. We did not want to be in a position of being forced to sell the business.

Sarah: It’s a real benefit of having a minority investor that the founder stays in control. We did not want someone coming to tell us what to do but to support us. We had control and were in the position to lead on the decision making.

Mark: It resonated with me that BGF was going to be a partner and not own more than 40 percent of the business. With others, it was clear I would lose the baby at some point.


The board

Mark: I was concerned, even fearful, about how the investment would change the way the company would be run. Up until then I had been making the key decisions at 7am before I went into the office. Finding the right chairman was a good early test of the relationship – and that has been a big success. Stuart Rose, with his background of running Body Shop and Hamleys, is a good partner.

Having a strong board has freed me up. I have gone from having no counsel or anyone else to talk to, and being accountable for everything, to having a true moment of reflection each month.

Fraser: BGF helped us grow up as a business. We were just in our early thirties and had worked as middle managers in blue-chips but had no idea about corporate governance or board meetings. We were operational guys. Our adviser helped us with our deal, sitting on a wicker chair in our Edinburgh flat. For us, just getting an office was a shock!

Nan: We have been the same management team for 14 years and had all worked together before then. So it can be very helpful to have someone from outside who can make some small, accurate observations. It’s often about pointing out the bloody obvious.


Max: We did have a board structure but historically there was not really a lot of challenge. The family made the decisions. Now we have two independent non-executive directors. My brother remains as chairman and is the figurehead of the company, but the change in the board brought an end the historic family culture of making decisions over breakfast. We now have to rationalise and talk through our decisions. It can sometimes be uncomfortable but it is healthy.

Sarah: The board helped create much greater clarity across the organisation. Before that investment round, everything was founder-led and in the founders’ heads. After that, things stopped being so febrile. Our Series A round gave us a regular pulse – a time to stop and reflect. We could manage fast and slow. We could spot patterns and forecast more effectively. And then we could take those messages down to the rest of the team. We could talk with one voice and greater clarity because we had taken time at board meetings.

As a board member, BGF looked for dissonance. They weren’t unduly bullish or bearish but held us accountable for our story. They were less about judging us but helping us uncover potential inconsistencies.

The talent network

Max: We have recruited from the BGF talent network and have generally benefitted from exposure to other businesses and contacts. Our horizons have got broader. We were a very insular business that knew all about ceramics and how to make a plate. We knew all the people who made plates around the world but nobody else. We knew our market but didn’t understand other businesses.

Mark: We lost our CFO early on and through the BGF network we got a fantastic replacement. Recently, we have gained one of the nation’s top CIOs as a data expert through the BGF network. Like, wow!

The future

Nan: We did three acquisitions last year and have three in the pipeline for this year, as well as pushing organic growth. So far all our acquisitions have been in the UK. But one we intend to do this year is in the UAE.

Max: Trends in restaurants are moving much more quickly and so there are more opportunities to innovate. We are seeing good growth in Eastern Europe and the Middle East. Parts of the Far East including Korea are potential future markets for us.

Fraser: Our future lies in developing vertically integrated product lines onto Amazon. That is really exciting me. The scale of this marketplace is ridiculously large. Our Amazon business is up 120 percent this year.


Mark: We are in the creative activity business. So we’re developing graffiti products for young children. We are very excited about the growth of the maker movement. People ask me about the craze for colouring in. We were integral to its development and over the past few years it has shown terrific growth. But now it is has gone mainstream and our customers are not the mass market. But there is always the next big thing in creativity – and we will be there.