Growth Equity, VCTs and Exits with Rupert West, Managing Director @ Puma Growth Partners

0:00Rupert West:Hello and welcome to another episode of Riding Unicorns. Today we're delighted to be joined by Rupert West. Rupert is the founder and MD of Puma Growth Partners and it's great to have you on Rupert, thanks for joining us. I'm just going to start by asking you to introduce Puma Growth Partners for anyone who hasn't come across you guys before. Well thanks so much for having me on. Yeah so Puma Growth Partners, we are a UK focused, predominantly Series A early stage growth capital provider. we do checks of four to 10 million of primary capital into businesses. We work in three broad business areas, consumer brands, software and technology, and scalable business services.

0:40And there's lots of reasons for that sort of multi-sector focus, which we can get onto. And there's different ways we look at the different businesses, but that's the core positioning of the business. And we work out of London, Manchester, and Edinburgh.

0:53Rupert West:Awesome. And when you say Series A, are there particular milestones that you guys like companies to hit for you guys to qualify them as a Series A business? Yeah, it's really different, though, between those three different types of business. So in a sense, if I start sort of way earlier with sort of why we kind of do that and the different positioning, I actually think it's really important from a sort of fund and ultimately our investors perspective to have that bit of diversification that protects you against all sorts of things of sectors trending up together and trending down together, protects you from hidden concentration risks behind a bigger pool.

1:34And I saw a very vivid example of that earlier in my career, which, you know, potentially we could talk about, which it has just helped shape why we're less comfortable and why we're very concerned about that. So the composition across the three. But I also think it's just it's massively useful to have the skills and experience and network and understanding of working with those different types of business to be able to better assess opportunities, better support the businesses that we work with through having looked in a very close way at these different types of businesses and the functions that they're working on.

2:13Rupert West:yeah great and and so you you have that variability across the different types of business models is there any that you personally get most excited about it's funny I mean I think it's very hard not to get excited about every opportunity you look at and it's really you know we're sort of pretty high conviction investors and we spend a lot of time working on on the investment opportunities that we ultimately go on to proceed with and And they're all sort of super exciting. So I think that is part of the dressing. There are some themes that we're looking at, some themes that exist. FinTech is still a space that we are quite exposed to, quite exciting.

2:57I think there's a lot still to happen there and a lot of disruption to come, which makes that interesting. It's a sector I work on a little bit across our portfolio. Obviously, there's so much happening in AI. that is just a kind of such a big challenging interesting dynamic space to start thinking about what might actually happen so that's that's kind of pretty appealing but but no it all it all interests me and i think really actually the the sort of the why of that is comes from the experience of setting up puma and kind of growing that business and that that's sort of our whole ethos and position and where we come from.

3:38If I give you a little bit of background about me and the journey and how that happened. So I started off as is slightly seen as stuffy and boring, I guess, in the sector. I started off within investment banking, but specifically in emerging markets. And I was working in Southern Africa, Middle East. I did some transactions in Pakistan, Saudi Arabia, and just absolutely loved it. And actually, I think that is not irrelevant because working in emerging markets has real parallels with kind of growth and scale up in that everything is problem solving. It is not sort of following the playbook. It is coming up with solutions, being very able to cope with uncertainty and react.

4:23And that was a sort of super fun and exciting part of my career. I then rather sort of stupidly felt I should move into kind of grown up, boring Western European investment banking and started working at Barclays Capital in Canoe Wharf, which is a period that certainly taught me to work very hard. But that was moving into the financial crisis. So it was sort of having finally really got myself in a kind of good seat in investment banking, then the world fell apart. And that was pretty stressful. I then moved into kind of venturing and growth equity. Then I was part of the team that set up Puma Capital Group, which is the sort of top co main entity for Puma in 2012.

5:04And then I set up Puma Growth Partners in 2018. And so it's the experience of having done that, that we draw on in all of our investment work. And really our sort of ethos at Puma is to take all of that experience of building our business and kind of mainline it into the businesses that we back and help them in every way we can to build the business. So fundamentally starting at sort of leadership and people and who to add, the order to add them in, how to scale up functions, how to build everything consistently at the same time so your business is sort of balanced, how to expand, how to launch new product without kind of breaking other bits of the business.

5:49So So that's our sort of entire positioning is that we lean on that experience and really use it. And I think in terms of kind of what's exciting to me, it is that function of building businesses and helping them do that. And hopefully sort of helping them achieve the great pride that we have in Puma and what we've done. and the ability to look at people around you and think, God, I wish I was doing this job that you're doing when I was your age. I really think this is a great place for you to be, and I'm so proud to have generated or been part of the team that generated that environment. So that's the drug.

6:34I think for me that's the sort of real hook of working with these businesses and working with leaders and founders and hopefully sort of helping them achieve success.

6:46Rupert West:Yeah, absolutely. And does that change at all as the portfolio gets bigger or is there a natural kind of, I don't know, rotation through the portfolio as companies mature? There's slightly kind of two answers to that in that there's the ask Puma growth partners as an investor and then sort of me personally for my role. And that's the same as the founder journey that we sort of help people go on in that you personally do get further away from the original work that you did and that you enjoyed and potentially were good at if you've progressed. But as a business, Puma and our ethos as an investor is that we remain extremely close to the people we back.

7:37And we manage to do that by investing in ourselves and growing pretty deeply. And we've added regional offices, as I said, in Manchester and Edinburgh. We've invested in additional people, both in terms of investment people, as generic investment people. This sounds sort of pretty ludicrous because it's such a kind of esoteric task we're asking of these people to do. but also sort of deep portfolio expertise. And we have within our organisation, people who've been on the journey of building our own business, but have very deep, you know, 20 plus years of experience in, for example, personnel, in legal, in finance, in marketing, in sales.

8:23And we use all of that expertise to support our portfolio companies. And that's really what's so wonderful about being an early stage investor is that you are so aligned on the outcome. You have an enormous opportunity to shape the trajectory of this young business because it's early, it's young. And if you are successful in doing that, the management team benefits, you benefit, your investors benefit, the staff of the company, the customers of the company. you know it is it is such a sort of win-win activity and that's it's just enormously motivating and and kind of in a positive way which is which is nice yeah and how does that

9:08Rupert West:work in practice is it regular kind of brainstorming sessions and meetings where you kind of get the whiteboard out or is it much more informal or is it both of the above you know how does that actually manifest full-time yeah definitely both in that we will lead the rounds that we participate in almost university so we will often bring in specialist investment partners but we will lead the round and that gives us a kind of deep relationship with the management we back and a and a good level of access but that must then be both formal and informal so there's the formal work around you know yes around the board cadence and sort of particular working sessions that come off that but then there's there's a great need to have the sort of informal more relationship driven discussions with people to actually understand them continue the journey of meeting them as people understanding them properly and being there for for the thing they need so to try and kind of bring that to life so we'll have we'll have sessions in our diligence exercise where we're looking at people's management accounts and we are working with them beginning what's actually quite a long journey of converting those into very actionable kpi driven pieces of information that the companies can actually kind of leverage to make decisions but we'll also you know it's when And I talked about some leadership and people will also, as part of that process, our own chief people officer will do sessions with the management teams that we're engaged with, going through very detailed psychometric reports that they have completed and effectively doing a kind of coaching session with those people on themselves, their strengths, their current limitations.

11:04conversations but really really getting into right you've got to hear what is the precise nature of your skill set character that's helped you do that but how is that going to take you to the next stage the next size of business which bits of it will be very useful which bits of it are potentially not going to work as well when you've moved from you know 20 to 50 20 to 100 people and therefore let's start thinking about that now and putting support and infrastructure in place and just us as investors kind of being aware of this reality and putting it actually kind of front of mind to facilitate then these sort of informal stroke formal conversations and just basically really getting to know the people we're backing so that we can support them as in as strong

11:53Rupert West:ways possible yeah absolutely and you we you know a lot of people when they think of venture they just think of kind of sourcing and selecting deals but that you we've touched a lot on the supporting element there that you you guys are pretty hands-on with and giving real operational support around does it does your experience and the the profile of you and your team also help with the selling part you know it's a very important part of venture dpi it's sort of a unspoken about metric for us as investors but presumably with your with your investment banking experience you guys can actually be quite a useful resource for founders when it comes to actually selling their business so can you share a bit of light on that as well so i think aiding businesses with the exit process is an absolutely essential part of the job as you as you talk about i mean there's also actually the kind of task for investors of selling yourselves to founders which we you know which is quite an interesting topic and one we should you know none of us should sort of overlook the importance of but yes i think we we certainly bring you know pretty sound knowledge of the wider financial markets there's a lot of financial industry within us and and the wider Puma group, we're a billionaire company with pretty broad resource.

13:22All of that helps. And as we've raised capital and raised institutional capital ourselves, those are significant transactions that we've been through. We have full-scale internal legal who can handle that, and that can all be brought to bear. And I think that's the real sort of essence of us as investors at Puma, we bring sort of rigor and platform of, I think a much bigger investment, but with sort of relationship and personality and bespoke, but real sort of deep relationship driven support of a kind of much earlier stage investor. And we try to very much sort of bring the best of all of that to bear but we're still you know very fundamentally growth primary capital investors we are not leverage users we are not a buyer house so you know that is all part of our sort of offer i suppose

14:28Rupert West:yeah it's great and i think you know there's there's a sort of feeling that we only want you know exited entrepreneurs as vcs in the market and it's complete nonsense we need a mix of skills that help not only with sealing and selecting and sealing which is that winning the deal part but also the selling element like the venture industry has to get good at generating returns not just on paper and so I think it's important that venture teams have a good mix of that financial acumen as well as the maybe the more sort of founder type profile and and there's no right or wrong there's no one or the other we need both in the industry so I think that's great and then maybe we could just talk a little bit about a recent transaction have is there a deal you've done recently that you can talk about yeah so on our most kind of very recent fresh investment new to the stable is is we should probably disclose is one that you you know very well because you're a early stage investor yourself and i think you had the founder on this program some time ago but a business called yasso which is is a infrastructure and tech platform to support western brands moving into but it really sort of accelerating their sales in china and it's you know that that's that brings some fascinating opportunities for ukvc such as you know such as us because it's giving exposure to a different geographical market and different sort of economy that we wouldn't take directly.

16:05You know, we're sort of not close enough and wouldn't take directly. But it's also still at heart a very classic, you know, we're backing a founding team, a just phenomenal founding team who are, you know, if someone said, sit down and write the CVs of the three people at the top of a business who was doing this, you'd sort of scratch head a bit and then you'd come up with something and then you'd be showing these people and you go well that's much better than i said like that that's exactly what i want and you know it's a team that's got so we i mean it doesn't sound profound but we really focus on domain expertise and people to understand the customer base that they're working with and the kind of pain point that they're trying to solve and you've really got this with with this particular management team here they've the two of them out of three have lived in china they speak chinese they have a broad range of very complementary skills and so interestingly and i sort of won't reveal anything personal but having seen from the inside our diligence process on the business and the people firstly that gives us enormous confidence but we have seen how tightly the trust is how how tight the trust is between these top three people who run this business and their sort of comfort in their own capabilities.

17:28But it is not blind, arrogant comfort. It is sort of trust. It is confidence, but it's quite self-aware. And they, I think, would say that going through that process was quite valuable. And hopefully that stretched beyond the sort of the people work through all of the quite comprehensive diligence we did on that business was all focused on being very confident as to where we're going to apply the money for the maximum impact and the best delivery of value and there was lots of work we did that you know arguably was sort of gilding the lily it was pretty heavy dd set for a for a round of the size we've done but it does mean we you know the the risk risks have been caught now when the business is relatively small which won't then amplify and become a real problem and you talked about the need for earlier stage investors to be helping a business exit itself but also of course helping the business do larger rounds and i think that there's one thing we certainly can bring is a sort of real awareness of what later investors will be looking at from a diligence perspective.

18:44So look at it now, fix it. And it can be quite simple things, but if it's put in place now, it'd be so much easier to sort of solve. And, you know, part of our job is to get that business to be next round ready and exit ready. So that's been a, it's been a good journey, you know, nice deal to do.

19:06Rupert West:and yeah i mean they're very very exciting business i mean just a huge market so massive potential upside and as you say you know very very difficult to execute unless you have these incredible profiles that they the founding team do it's a funny one though because for some investors they just see the word china and they just go no not for me i'm not even going near it without even really taking the care to think about how the business operates and where it's licensed and all of those sorts of things. Do you think your personal experience with doing large transactions in multiple territories kind of gave you that ability to look through that and then get into the weeds on what the business actually does and why this was an exceptional opportunity?

19:54Actually, yes, I do. I think I've actually personally travelled in China a fair bit, but as you say, sort of having done transactions in, emerging market geographies it comes from a world view that i think risk you need you need to really understand the risks you're taking but you also need to really understand that you're taking enormous risks to back in any early stage company and to get very excited about the fact or probably better put very exercised about the fact that's doing some work in china okay that's a different flavor of risk but it's not like doing it here is completely risk-free right so i think that's sort of non-fear element was probably you know quite helpful but as i say we also you know we looked at it very carefully and we we do you know it does i know kind of aggravate the people we back a little bit but we do run pretty heavy dd and but it's it's done for the benefit of the business but we we did have a good old look at that and we spoke to a lot of people who've operate in China and sort of experts and tried to get to the feeling where we at least had some conception of the risk profile we were dealing with and what sort of mitigant, but with a healthy awareness that, you know, there are some things here that you just sort of can't do a whole lot about.

21:17But I also think to bring it back to our comfort in operating across consumer brands and software technology and business services that is also an important part of this because we we actually do work with consumer brands and we understand their needs and challenges and how tough it is to sell into new geographies and geographies that are you know not familiar what was sort of highly unfamiliar and we've seen their marketing metrics and we've seen the quality of information they get from sales and distribution partners in the Middle East or in Asia. And so that really helped us get the pitch here, right?

22:03Because we could see it from a consumer brand's perspective, as well as being able to look at the tech and look at the infrastructure and understand the business from that sense. But we did, you know, we sent one of our staff members out to China for a week to frankly check everything was there and meet the team out there and meet the senior people and that you know it's it's inconceivable that we would have done the deal without that but I did to to actually kind of address your point of the personal piece I was if I was a little younger I would have definitely liked to have done that myself and that would have been an extraordinary trip.

22:36Rupert West:Yeah no I think it's just interesting because I think investors we naturally have our own biases but we also have our own edges and ability to accept risk or understand it and contextualize it and I think there's definitely something in your experience that means that you were able to do that with Yasso because I think everyone can see it's a massive opportunity but there's some people who just put the blinkers on before giving it fair credence and Puba you've got multiple funds i think of different styles i think you have vcts and other sort of forms of funds so do you want to just explain that a little bit for anyone who doesn't know kind of debug what those all are yeah sure so the the vast majority the kind of the bulk of the money that we deploy on the growth equity side is from our vcts so we have two that run in parallel and they're i mean they're fascinating vehicles that the vcts so for anyone who isn't aware these They are government-sponsored tax wrappers to support and stimulate investors backing earlier stage companies.

23:44And they give a great deal of flexibility to the manager and to the companies receiving the money. And they do give this piece of support. So they do give a piece of support to the investors to sort of encourage it. From the manager's perspective, and therefore what we can offer to the people we invest into, VCTs give sticky money and therefore real confidence about the ability to build up the manager's resource bank and therefore what can be used to support the company. So our investors come into our VCTs for a period of at least five years. We raise additional money into them on an evergreen basis.

24:27So we raise every year. They therefore grow as a pool of capital. So we have really clear visibility about the level of resource we can hire into the team and that we can put to work out into the real economy, which has helped. We've been through some pretty rocky times. We all have in the last few years. And so actually sort of we've been through this period where the investor community, both earlier stage and into the lower mid market, and the mid market have really struggled to return money to their LPs. They've really struggled to raise more capital. We'd been through a big, big expansion in the number of investors with sort of successful partners splitting out of bigger houses and raising funds in a period where fundraising was easier.

25:20And a lot of that has fallen away. And I think actually having some players like us who are fortunate enough to have some permanent capital and have some good fundraising capability is really quite important for the UK economy. because we can keep that flow of investment going, which we certainly are. We're having quite a high momentum year in terms of level of investment. And we're very risk-on at the moment. We are actively investing and out there doing more.

25:52Rupert West:That's great. And I think it'd be really interesting to understand a little bit about your mindset when you started Puma. A lot must have changed over that time. What was your thesis or vision when you started and how has it changed? Yeah, maybe what did you not know that was kind of a good to not know and what was not a good to know? I mean, the thesis was really that I just wanted to be involved with growing businesses and I loved working with challenging problems through the medium of able and exciting people. And, you know, to be able to be at that nexus of sort of deploying money, which is financial markets, which is the world I kind of knew and was involved in.

26:45So that kind of was just a sort of sensible starting place. But to be involved in that nexus of sort of helping people build businesses and trade on kind of things we'd seen and mistakes we'd made and all of the rest of that. So the thesis was as simple as this is what I want to do, here's a way to do it let's get let's get going wrapping around that was this determination to be an ultra active very involved really properly give support and and to sound in danger of sounding a little cheesy for a bit like we we really genuinely want to be as good it is as it is possible to be at doing what we do and in our view that is about supporting companies and and properly bringing to bear practical operational experience to support them and help them not fall into some missteps that can use up money, use up time, you know, all the rest of it.

27:45So, so that was the sort of passion driving the project. We, I suppose what I've learned is clearly we've kind of fine-tuned how we looked at businesses and how we looked at how we look at founders but you also and I think anyone who's run a business for a period of time and especially over the challenging years such as as we've had we kind of talk about features that a founder needs and sort of you know resilience and self-belief and stuff but you kind of don't really know what that means until you've had to sort of do it yourself and go through it and you know I kind of joked my as soon as I got myself in a good investment banking seat we had a global financial crash and then I moved into sort of fund management and joined a fund where Lima Brothers was secured as a cornerstone investor and then like two weeks later you know they were bust and I was reasonably young and feeling pretty exposed and it was pretty frightening and then I set up a venture firm and like a year and a half later it's COVID and we were right at the cusp we were completing investment into a of all things a kind of wellness platform right like just on the day of the COVID lockdown being announced in the UK and you know these were sort of big decisions and big frightening decisions and then everyone was at home and we were and we were all sitting there doing weekly cash planning for all of these companies and then on friday they'd announce some massive new policy that would change it all anyway we had i'm sure we all did right everyone in the investment space we had weeks back then we're gonna have to make hundreds of people redundant like tomorrow you know and And for me, where we were with the business at that point, that was very frightening because it was early.

29:50We were trying to build a track record in this period and we hadn't gone into it with kind of big established portfolio positions that would sort of tide us over. But you carry on and you are resilient and you push at stuff. and it's it's actually that is that has now become a big part of our ethos of sort of how we look at founders and we we've even done sort of work on what are the indicators of that sort of robustness that tenacity and looked at how events shape your brain chemistry and just try to come at it with sort of right this is what we need but we must have the empathy to understand this journey and to an extent i can tell my team what that journey feels like where it's sort of visceral and frightening and we are able to empathize about that and share that and come at it effectively i've said to all of my portfolios stood up in a portfolio event last year and said to them you you have to you have to understand how this period of challenge in the in the runaway inflationary period has has shaped your approach to decision making you know this has been tough and that is emotionally draining and this will mean that you are approaching decisions in a different way in a different mindset and you have to actually now shake that off resettle rebase calm down kind of go again so that i think has been a massive part of of the journey of the you know of the experience but also what you know what we are able to roll back and constantly sort of iterate and improve our approach to working with the people we back

31:34Rupert West:yeah yeah and I think you know it's really interesting to hear that from your own experience of building firm and you've obviously touched on some of the more challenging periods there has there been a moment where you got to you know raise a glass of champagne or anything where everything went well that you can talk about yes i mean it's absolutely and actually we do i mean it's interesting it's not doom and gloom right it's all been great fun and we do celebrate success we celebrate that with with our portfolio companies and with each other and you obviously there's an element of sort of you add a new position to the portfolio that's that's very exciting but the real you know the real success and celebration should be when you either raise a you know big round into that company or you you exit position because ultimately that's kind of cash validation of of the view you've taken and the work that management have done and the support you've given so those moments are are really great and i think the we did have one exit we were doing just at the point that the conflicts in ukraine broke out and that was was a challenging process to kind of get through but ultimately was successful and was was quite a good investment for us so again that you know that felt great but we've we've also had and i think it becomes quite emotional and you've been part of this company for quite a long time so i think where where the greatest feeling of success comes is when yes you've done well you know your investors have done well and it's good for track record and it's a very satisfactory sort of successful outcome but where you're you're also seeing the founders do well and their management teams and ultimately the kind of the business has thrived that that is just genuinely the most thrilling thing and we had a business that i worked with for for quite an extended period called Pure Cremation, run by a guy called Brian Powell and his team, including his wife.

33:39And it was a business that he had put together, sort of seen echoes of the model being successful in Australia and the US and brought it here and had just an incredibly driven but esoteric team of wonderful people who were very open and would say things like, I'd always wanted to be an undertaker, and I never thought I'd have the opportunity, and now I work in a funeral business. But they built a hugely successful business and something like that. And we actually agreed with them to sell our state back to them in an MBO. And that was a great exit for us, really good return, really both on a sort of money multiple and IRR basis, but also brilliant for them.

34:28And I was, you know, actually people did say to me, you know, some time later when they went on to sort of ultimately exit the business, you know, gosh, you know, we left a bit on the table there. I was like, well, that's just not, you know, it never occurred to me to look at that way, frankly, because we had done really well and we'd seen them do really well. And it was, you know, hugely positive. And I think investors need to not underrate the time value of you you know you can't hold everything for another four years because you might do well sometimes you should yeah but you can't always well also i mean it would feel a bit

35:07Rupert West:weird if every time you sold something it kind of crashed the day after yeah and then you felt really great about it because you got out the right time it's kind of a bit soulless isn't it it's like yeah you want to build eventually people might notice when they put things for me yeah exactly exactly no i think i think that's completely fair um well that's awesome and rupert i mean we've we've sort of just scratched the surface really but it's been really interesting to hear your your experience prior to starting puma and and the journey you guys have gone on there and then how the model works and operates and i think there are so many ways to do venture But I think it's really important that we have a really healthy balance of financial acumen, real rigorous business, sort of operational, all the things that we really need to build great businesses in the country, as well as creativity and entrepreneurialism and all those things blended together.

36:08Rupert West:And I think you've given a really interesting insight into why all these things are so important. and it's great to hear about some of the tough times and how you've sort of survived them and gone through and how you can share some of those war stories with your founders and then also obviously the successes as well. So yeah, thank you so much for kind of sharing all of that. We're just going to end with a couple of fun little questions that just get to know you a little bit better and some of the things you're working on. So the first is our future unicorn prediction. So is there a company that you've come across maybe in the earlier stages of its journey that you think could go all the way?

36:49Well, I'm going to sort of, I don't know if it's cheating, but take the opportunity to talk about one of mine because I sort of can't resist. But obviously the sort of disruptive neobank space is really interesting at the moment, kind of booming in the UK and a kind of real strength of the UK. There is a company that we are invested into called Pocket, which provides digital banking for the underserved. So this is for people who are just not the target audience of your Revoluts and your Monzos and other kind of digital disruptive bank, often because they are lower income, sometimes because they're elderly, sometimes because they're migrant workers into the UK.