Veteran NED Steve Bellamy discusses how to engage your board in fundraising for high growth

Bellamy’s experience includes chair, NED and advisory roles to public and private companies and to corporate capital providers. He’s worked for firms including AIM-listed Michelmersh Brick Holdings and Advanced Medical Solutions as well as a broad range of private and PE-backed companies. Bellamy says his focus is “on maximising the value of both high growth and turn around companies, mostly in B2B industries” - and given his extensive experience in both advising fundraising firms and funding capital providers, we’ve grilled him on how firms can raise the most cash, please their backers - and make the most of their purse-providers’ skills, too.

You're a chairman to public and private companies and an expert adviser to corporate capital providers - what have you found to be the different features for each?

In my experience, it’s not two sides, the money-seeking and the money-giving, but three different kinds of groups involved. There are:

Public companies, with multiple owners with varied expectations, and a fluid shareholder base that is more removed from investee companies. They’re usually not as active in communicating with investee companies and can have either a very short term and opportunistic, or a long term and supportive, investment horizon.

Then there’s private companies, which typically have no other owners, or just a single external, majority owner - private equity, which has a three-to-five year horizon where it wants a high-financial return, full stop.

Lastly, there are the capital providers who are very clear at the outset on their end goal and how to get there but they vary in approach. Some, for example Business Growth Fund, one of the UK’s larger and better-known capital providers, can be very financially driven and, in my experience, have little understanding of the many operational issues facing businesses and their various stakeholders but others have strong operational teams that assist in more ways than just providing capital.

Given your experience on both ‘sides of the fence’, what do you think fundraising firms should think more about?

I enjoy working with all three groups as long as we - NEDs, execs and investors - are all aligned as to what we are looking to achieve. Saying and achieving that are, of course, very different but part of the chair’s role is to ensure that the agreed objectives are what is achieved. So fundraising firms need to be clear as to their end goal, be honest with themselves as to whether they are truly ready for external capital, be prepared for big changes if they do raise external capital, and understand what form of capital is best for their needs and culture.

How does the involvement of private equity change things - what do firms wanting PE-backing need to hone in on?

First, the criteria: I think that private businesses need to be aware that they will struggle to get PE interest unless, typically, they have at least £2 million EBITDA, are one of the leading players in an attractive market space and are growing the top line quickly.

Then, it’s timing. They need to be able to show that there is a high likelihood of the PE firm achieving a successful exit within their time horizon. Normally the best way to do so is via evidence of both historic and forecast strong revenue growth, healthy profitability, and giving confidence that they will deliver, deliver, deliver against the expectations that are being set. The latter is also true of public companies but PE houses are, typically, less forgiving.

What are the biggest mistakes that you've seen from firms seeking funding?

Mostly, not achieving the above. Remember that the funding process takes months to complete and PE firms are in no rush once you are in exclusivity with them. They want to see how you are performing whilst in process, so set sensible expectations and deliver - both during the process and beyond.

Although your public company investors can be numerous and diverse, they rightly expect you to maintain strong communication channels with them so that when the time comes to raise funds they already know you well, believe in the business, and are fully up to date – investors don’t like surprises.

Also remember that funding, like job hunting, is a two-way street. The funders should readily be able to convince you that they will be good investors as much as you need to convince them that you will provide them with a good return. What value, other than money, do you expect them to add? Make sure you are clear on that and that they can add that value - if you have the luxury of being fussy of course. And stay close to your funders. Failing to do so often ends up with disappointment on both sides.

Given your M&A experience, how can non-exec boards best advise the exec team in this area?

As an exec, and as a NED, I’ve completed and assisted and advised on many deals, and I believe non-exec boards can really help by ensuring an M&A strategy has been developed and agreed by all, so that the M&A isn’t reactive or haphazard, that the company has a strong M&A team (both internal and external), and that it has an even stronger integration plan to ensure maximum value is derived from the acquisition.

Overall, NEDS can give the benefit of a slightly removed, birds’ eye view: they should assist with developing the M&A strategy, bring specific experiences to bear, as and when relevant, advise on the potential pitfalls, and provide an independent and healthy challenge throughout the process, especially given the execs will be heavily into the detail and focused on closing the deal.

How did you find your Nurole experience?

Overall, very good. When there was communication it was clear and helpful. I like Nurole’s model. It works for me.

You've worked as a NED for almost three decades- what have been the biggest changes?

Wow, yeah three decades... Scary but true! So much has changed - it’s now far more of a prerequisite to understand the obligations, legal responsibilities and governance requirements of being a director, and to stay up-to-date with the constantly changing regulatory environment. This is making the role more of a policing one than a strategic, oversight and advisory role. But the substance of what a good NED or Chair is remains the same: good NEDs have always ensured that they fully understand the business, its challenges and opportunities, assisted in developing and setting, but not delivering, the strategy, and closely monitored both the financial performance and the performance of the Exec team, in a challenging but supportive way.

And now for some quick-fire questions…

What’s your favourite book?

Legacy by James Kerr. Applying learnings from the world’s most successful sporting team to the business of life.

And favourite quote?

Every problem has a solution.

Favourite holiday?

Almost anywhere in Italy.

What do you do to have fun?

Sports - mostly watching now, especially live events. And keeping close touch with friends around the world.

Favourite app?

It’s hard to choose between Google Maps and WhatsApp… but I’ll pick WhatsApp because it makes it easy to stay in touch with friends and family around the world.

When does your alarm go off and how many hours of sleep do you have?

My alarm seldom goes off before I wake up; on average I get six hours a night.

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