Thursday February 14th 2019

Thursday February 14th 2019

News about 11 UK growth companies and/or accelerators + turnover in the GRID marketplace, 30th October – 5th November 2016:

Carshop | Hillarys | Second Home | Visualise | Lanchester Wine Cellars £31m | Greencroft £40m | Lucky Generals £8m | LoopMe | 10x Future Technologies | FreeAgent £6.8m | Gousto

Off-GRID: * ATG Media £310m

 
CARSHOP: Nice little earner for car salesman | Ben Harrington, The Sunday Times. October 30
DZ profile:
Business: one of Britain’s largest used-car chains, selling 25,000 vehicles a year.
Launched: Northampton
Founder: Paul Dunkley, 57, chairman
Staff: sons Jonathan Dunkley, the chief executive, and James Dunkley, commercial director
Financials: generates operating profits of about £8.5m.
Investment: owned by Camden Ventures. Paul Dunkley led a £23m management buyout of Camden in 1996 from Barclays bank. In 2014, he sold the car dealer Allen Ford to the South African company Super Group in a deal worth about £53m.
News: has recruited DC Advisory to sell a stake in CarShop, which City sources said was likely to value the company at £70m to £100m. Dunkley would prefer to sell a stake to a private equity firm willing to back a management buyout led by his sons. They are said to be planning on doubling the size of the company over the next few years.

HILLARYS: Blinds maker on the block | Ben Harrington, The Sunday Times.
DZ profile:
Business: supplier and fitter of upmarket blinds. Initially focused on making venetian and vertical blinds. Since then, the company has grown significantly. It now makes a wide range of products, including window shutters, curtains and carpets. The business also has a network of more than 1,000 self-employed sales people.
Launched: 1971
Location: Nottingham
Founder: founded from a garage by Tony Hillary
Investment: owner private equity firm European Capital. Tony Hillary sold the company to the buyout firm Close Brothers Private Equity for £50m in 2001. Several private equity firms — including Change Capital, set up by the former Marks & Spencer boss Luc Vandevelde — have bought and sold Hillarys since 2001. European Capital bought the company in 2007, at the height of the credit boom, for £229m. Reports suggested it had to inject £5.5m into Hillarys in 2014 as part of a refinancing of the business.
News: City sources said that European Capital had been interviewing investment bankers in the City with a view to a possible sale and that it could be about to change hands for about £250m. Bankers said the sale of Hillarys could be complicated by the fact that European Capital is itself going through a change of ownership. The fund’s American parent company is in the process of being bought by Ares Management, the finance house that owns the upmarket paint company Farrow & Ball.

Tearing down the walls that can block creativity | Simon Duke, The Sunday Times.

SECOND HOME
DZ profile: Second Home Ltd
Business: shared office space that houses 150 companies and social enterprises. Billed as a “cultural venue” as well as a workspace. Silva wants to create a community of like-minded people, with an emphasis on forging serendipitous connections and “creative collisions”. Members pay a monthly £350 for each person in a team, can start in an office with just six desks and expand to several dozen desks before outgrowing Second Home.  ...sells office space to young companies. The business set itself apart in a crowded market by actively building connections between its members and fostering a strong sense of community ….launched in 2014 at a site just off Brick Lane, in east London, and quickly became the coolest spot for young businesses in the British capital
Launched: 2014
Location: four-storey complex , a former textiles factory, east of Spitalfields market, east London
Founders: Rohan Silva, 35 and Sam Aldenton, 33. co-CEOs. Silva had previously served in government, where he had spearheaded tax breaks for tech investors as an adviser to David Cameron, and was later a trustee of the Garden Bridge project, the controversial London river crossing that was eventually scrapped. Aldenton had built Dalston Roof Park, a popular venue in north east London, and helped create Feast and the Long Table, two favourites of foodies in the capital. 
Investment: have just raised £20m from leading entrepreneurs, including veteran venture capitalist Robin Klein, Time Out owner Peter Dubens, Bebo founder Michael Birch, the billionaire Facebook investor Yuri Milner and ITV chairman Sir Peter Bazalgette. ATOMICO, a fund set up by Skype co-founder Nicolas Zennstrom, and the Sainsbury family have also backed Second Home.
News:
1. New investment is funding an outpost in Lisbon, which opens next month, with Los Angeles to follow next year. There are also plans for more London locations.
2. It is not just about attracting pure technology start-ups. The members, as Second Home calls its customers, include the Italian fashion label Ermenegildo Zegna, the advertising agency Wieden & Kennedy and a raft of social enterprises. The auditing giant EY has even set up an outpost at Second Home. The idea is that all members can learn from — and work for — each other.

UPDATE:
The struggles of Second Home | Kadhim Shubber, FT. December 12, 2017
3. …the company has had successes, and is learning from its mistakes. It has created a brand and community that other workspaces in London have struggled to match. 
4. Investment: has raised more than £40m from some of the UK’s best-known investors as Silva put the contacts he built up in government to good use. Saul Klein and Jon Moulton have invested, benefiting from the tax breaks Silva had helped to boost. Klein resigned from the board this summer. The last funding round Silva raised was for £10m in September.
5. Its new east London site Second Home London Fields, the company’s fourth site, is still under construction. Its spring opening was pushed back to September … delayed again. The new launch date is May 2018.
6. Prosaic problems at Brick Lane: sound of construction …. water leaks. The “soundproof” rooms were less effective at silencing conversations than members had expected. … some enjoyed the ambience of the intimate lighting, others found it intolerably dark when night fell. ...the hand-picked, unique chairs … turned out to be quite uncomfortable. Before long, members began to complain.
7. A site in Los Angeles has also been troubled. Silva said it would open in 2017, but it is still a work in progress. The SelgasCano-designed pavilion Second Home intended to exhibit there has languished in storage. And its first international location, in Lisbon, opened six months late, so when Second Home ran events in conjunction with WebSummit in 2016, they were effectively held in a building site.
8. Silva and Aldenton grappled with the initial challenge of launching a company without a human resources team. Former employees described a stressful, even “toxic” work environment where staffers struggled to meet the entrepreneurs’ exacting standards.

Second Home pulls plans for “Carport Building” | Kadhim Shubber, FT. February 12, 2018

...has withdrawn plans for a major expansion of its flagship east London site after opposition from local residents. …latest sign of the difficulties faced in opening new sites. Another location in east London is a year behind schedule, while a long mooted expansion into the US is yet to materialise.

VISUALISE

DZ profile: Visualise Creative Ltd

Business: virtual reality production studio
Launched: 2013
Location: London
Founder: Henry Stuart, co-founder, 34.
News: has collaborated with a “bunch of other companies” that rent space at Second Home. Company shot a film for the estate agency Cushman & Wakefield, another Second Home member. Also, it won a commission for a virtual reality “fly-through” of Google’s new UK headquarters in King’s Cross through a chance encounter at a Second Home event.

Growing a company takes a lot of bottle | Laura Onita, The Sunday Times

LANCHESTER WINE CELLARS
DZ profile:
Business: family-run drinks and gifts group, which comprises: Lanchester Wines, Lanchester Wine Sales, Lanchester Gifts, Lanchester Energy, newly-launched pet gift brand Best In Show and its Greencroft Bottling business. Supplies more than 1,000 wholesalers, brewers and pubs with wine and spirits in the north of England and Scotland. Clients include the Co-op, pub operator Greene King and the Costcutter corner-shop chain.
Launched: 1980
Location: Stanley, a former colliery town near Durham
Founder: Tony Cleary, 63, owns 100% of the shares. Set up the company with £4,000 of savings and £6,000 borrowed from friends and family.
Staff: 362. Children, Alexandra, 30, Benjamin, 27, and Caroline, 25, all work full-time in the business and are being groomed to take over.
Financials: In 2015, made pre-tax profits of £1.3m on sales of £31m.
News:
1. In 2000, he paid £1.3m for Greencroft, a bottling company with a 400,000 sq ft plant in Stanley.
2. During the recession he bought three warehouses, two in northeast England and one in Kent. Up to that point, he had rented his storage premises. Cleary snapped up an assortment of companies and created a handful of others. His gift hamper business counted the now-deceased department store chain BHS as one of his biggest clients for many years.
3. Appeared in Real Business’ Hot 100 2015 – “The UK’s fastest growing private companies”. The business was recognised two years running in the London Stock Exchange book “1,000 Companies to Inspire Britain“.

GREENCROFT
DZ profile:
Business: one of Britain’s biggest wholesale wine bottlers. 400,000 sq ft plant. Today, after considerable investment, the plant fills up to 90,000 bottles of wine an hour, 24 hours a day, 5 days a week, on behalf of wineries in New Zealand, Australia, America and Moldova. The bottling plant is mostly powered by renewable energy from its four wind turbines and it recycles its waste and unused packaging, including plastic, glass, metal and wood. “We invested £8m to build a green business,” said Cleary. “It saves us money.”
Location: Stanley, near Durham
Financials: last year it made pre-tax profits of £3m on sales of £40m.
Investment: In 2000, Tony Cleary, Lanchester Wine Cellars, paid £1.3m for Greencroft.

LUCKY GENERALS: Entrepreneurs: From hostels to rainforests, the daredevil trio who are boxing clever in the ad world | Alex Lawson, Evening Standard.
DZ profile:
Business: Advertising agency
Launched: 2003
Location: just off Exmouth Market, London
Founders: strategist Andy Nairn, creative director Danny Brooke-Taylor (who made his name as the youngest creative director at TBWA) and Helen Calcraft. Nairn and Calcraft learned their trade together at AMV BDDO and went on to form their trio with Brooke-Taylor at MCBD. Calcraft, a founder, helped sell the business for £27 million and was tempted out of consultancy by the other two. Their career campaigns have included Waitrose’s essentials range, government anti-smoking initiatives and the Hovis ad with the boy running through the decades.
Staff: 48
Financials: Turnover £8 million last year; £10 million-£11 million (2016 forecast)

LOOPME: Keeping in the loop | Elliott Haworth, City A.M. October 31.
DZ profile:
Business: LoopMe uses artificial intelligence (AI) that learns in real time what a user is likely to be interested in at that given point in time, to direct more appropriate advertising that benefits both brand and consumer. "I think that out of the top 10 global brands, as rated by Interbrand, we work with eight of them,” Upstone says. His business has touched 1.5bn people, handles 500bn bits of data a day, and has opened offices from Los Angeles to Bangalore. The software behind the platform is highly adaptive to changing circumstances. “It learns itself, updating its full assumption set every 20 minutes, which means it can change its mind about how it sees the world every 20 minutes. It’s doing that on the basis of different data points – we’re seeing now about 500 bn different bits of data a day.”
Launched: 2012
Founder: Stephen Upstone, chief executive
News:
1. Advertising works by convincing people that they want or need a product or service. But measuring whether a consumer has changed their mind because of advertising has been impossible in the past. Following the customer journey from ad to purchase ends with what Upstone calls the “Holy Grail” – “whether they pay with a credit card, Apple Pay, or any payment that’s linked back to the phone. Then we can understand which ads work for who.” Its product, Purchase Loop, surveys a sample of 5 per cent of a campaign, to discern whether an individual has changed their mind due to an ad. With that data, LoopMe can “show ads not just to the people who will watch them through, but to the people who will change their mind.”
2. “now 68 per cent of the time we spend digitally is with mobile, and video is king.”  …because it “instills empathy in people.”  ...a game changer for advertisers ... but the wastage, that is, showing people irrelevant adverts, was mammoth. Despite its infallibility as a medium, video ads are often skipped by impatient users. “In normal circumstances, about .. 30 or 40 per cent won’t skip at all, and using AI, you can increase that up to 70 or 80 per cent.
3. “Everything we see is related back to a handset, so we don’t know who the user is, but we can see patterns of behaviour from the handset that can detect the type of content people want to see,” says Upstone. He refers to “moments” often – not just whether you’re at the golf course or away travelling, but whether you tend to engage in ads, and what sort of content you’re likely to engage with. “By learning a little bit about the moments, you’re learning about the types of content an individual is interested in,” says Upstone. “The AI then makes a decision based on billions of different pieces of data in that moment – every day we now see 25-30bn different opportunities to serve a video ad – it gives you a lot of choice, so that you really select the best ones.”

10X FUTURE TECHNOLOGIES
Former Barclays boss Antony Jenkins launches fintech business | Rebecca Smith, City A.M. October 31
Ex-Barclays head in ‘antiquated’ bank tech talks | Emma Dunkley, FT. October 31

DZ profile:
Business: technology system that allows banks globally to quickly retrieve their customers’ data in order to offer them faster, cheaper services. 10x Future Technologies aims to gather and analyse data ranging from customers’ existing finances to lifestyle preferences. The platform will provide banks “with a new core digital banking platform” that Jenkins said would allow them to unify their range of complex data systems. Jenkins said 10x Future Technologies will give banks better insight into customer data, enabling them to offer products like mortgages, credit cards and loans that are better tailored to customers’ specific needs.
Launched: 2016
Founder: Barclays boss Antony Jenkins, executive chairman. Has a strong interest in technology and oversaw the development of a series of innovations in his time at Barclays, including the payment of cheques into an account through a photo on a mobile phone.
News:
1. Jenkins has said that banking faces an “Uber moment” as a range of challenger names seek to shake up the sector. “Our core digital banking platform, based on advanced data modelling and database design, will allow financial service providers to develop a much deeper understanding of their clients, cut costs and deal with regulation.”
2. 10x Future Technologies has already been focused on snapping up top talent from the fintech sector and said it was in advanced talks with a number of potential clients.
3. Jenkins is following in the footsteps of a number of other big name bankers who have moved from sector stalwarts to newer upstarts. Jenkins’ former colleague Rich Ricci is now chairman of currency trading website Freemarket FX, while the former chief executive of Citigroup, Vikram Pandit, has invested in a range of peer-to-peer lending websites. The chief executive of challenger bank Aldermore is Phillip Monks, who previously established Europe Arab Bank and held senior roles at Barclays.
4. Jenkins has criticised all of Britain’s big four banks for failing to update their “antiquated and inefficient” IT systems — as he seeks to sell them a new fintech solution for handling customer data. High street banks have come under pressure from their archaic technology, some of which dates as far back as the 1960s. Most have systems that have been patched together over the years following mergers and acquisitions. As a result, customer data are spread around the bank, making it tough for lenders to gather, analyse and then offer services and products aimed at customers’ needs. But pressure is building from fintech firms with modern systems that provide customers with new services based on lifestyle, such as alerts about switching to a lower-cost energy provider, or faster access to a range of mortgages.

FREEAGENT: bucks trend by going ahead with IPO | Lauren Fedor, FT. October 31.
DZ profile: 
Business: UK start-up that provides accounting software to small businesses. FreeAgent designs cloud-based software products and mobile apps for companies with fewer than 10 employees. Currently has more than 50,000 customers.
Launched: 2007
Location: Edinburgh
Founder: Ed Molyneux, chief executive; Olly Headey, chief technical officer
Financials: lossmaking, but has a target of moving into profit by the end of 2018. It reported annualised committed monthly recurring revenues — or revenues from subscriptions — of £6.8m in the financial year to March 31. These revenues increased to £7.7m in the first six months of the current financial year.
Investment: has raised about £9m privately through a combination of equity and debt. It is looking to raise £8m through the flotation, according to people familiar with its plans, which would give it a market capitalisation of between £31m and £35m upon admission to London’s junior market, Aim.
News:
1. Is pressing ahead with plans for an initial public offering despite a sharp drop in the number of companies planning to float in London. There have been only 41 IPOs in London this year, the lowest number since 2012, and the value of the companies that went ahead with float plans in the third quarter is down 42 per cent compared with last year. N+1 Singer is advising on the flotation.
2. FreeAgent said the funds raised through a flotation would allow it to improve its software in anticipation of new HMRC rules, set to go into effect in 2018, which will require businesses and landlords to report income and expenditure on a quarterly basis, rather than annually. It will also spend more money on acquiring new customers and improving customer satisfaction.
3. Sage, Britain’s largest technology company with a market capitalisation of £7.8bn, also provides business management software for accounting and payroll services. However, FreeAgent is hoping to set itself apart by focusing on Britain’s 5.2m so-called “microbusinesses”: the very small firms and self-employed individuals that do their own bookkeeping and file tax returns directly to HM Revenue & Customs. The company.

GOUSTO

Gousto raises funds to take on HelloFresh in recipe kit market | Lauren Fedor, FT. November 3
Recipe box startup Gousto gobbles up millions more in funding | Lynsey Barber, City A.M. November 3, 2016
DZ profile: SCA Investments Limited (Gousto)
Business: grocery deliveries and recipe kit subscription company. Gousto prepares the exact quantities of ingredients for at least two meals a week and deliver them, with cooking instructions, to customers’ homes. ...targets people on relatively higher incomes — but it insists its business model reduces household grocery spending because people do not buy ingredients that go unused. The company also claims a food waste rate of less than 1 per cent, meaning nearly all the food that it orders from its suppliers goes directly to customers, rather than sitting on warehouse shelves. Its pricing in the UK starts at £27.49 — for two meals for two people — and rises to £59.99 per delivery, with the most-expensive option including four recipes and ingredients to make dinners for two adults and two children. Recipes, priced from £3.75, take an average of 40 seconds to order via the website or app. 

Competition: Trying to compete with Rocket Internet-backed HelloFresh in an increasingly crowded food delivery market:

• HelloFresh, a Berlin-based company that broke into the market about five years ago and was valued at €2.6bn in a funding round last year, is among the largest worldwide and is the market leader in Europe. In September, Rocket reported that HelloFresh’s losses before interest, tax, depreciation and amortisation swelled to €45.7m in the first half, more than double a year earlier. HelloFresh pulled its flotation a year ago just days before it had planned to publish a full prospectus and pricing range amid investor reluctance to back the group.
• BlueApron, which is based in New York and operates solely in the US, has raised nearly $200m in venture capital and was valued at $2bn in its most recent funding last year. The costs of expansion are evident at some of its rivals.
• Investors have poured money into dozens of start-ups with similar business models, funding companies including Abel & Cole, Simply Cook and Marley Spoon in the UK. 

Launched: 2011
Location: London
Founders: former Rothschild bankers Timo Schmidt and James Carter
Financials: does not disclose revenues but said its turnover had grown by more than 200 per cent each year for the past three years and that it delivered nearly 100,000 meals each week to UK customers. Mr Boldt says the underlying business was profitable but the company was “making an active decision to sacrifice some of the profitability to be able to grow” by investing in acquiring new customers.
Investment: The latest £10m of funding brings the total amount the start-up has raised to £28m since 2012. That compares with $250m for HelloFresh. Gousto’s latest raising was led by London venture capital firm (LoveFilm entrepreneur Simon Calver's) BGF VENTURES and involved a clutch of other UK investors including ANGEL COFUND, which is backed by the UK government, MMC VENTURES and the venture capital arms of UNILEVER and BARCLAYS. All except Barclays are previous investors in the firm.
News:
1. Gousto is planning to expand in a market that Technomic, the US consumer research firm, has estimated is worth $1bn worldwide and could reach $10bn of revenues by 2020.
2. Neil Campling, an analyst at Northern Trust, says he was sceptical of the long-term growth prospects for HelloFresh and other similar recipe kit start-ups. “I only see evidence that the scale comes from high investment that doesn’t necessarily lead to recurring revenue,” he says, adding that while customers were often wooed to try these services by free vouchers and discount codes, they were unlikely to be consistent, long-term subscribers to recipe kit services. “With most of these services, they are not a subscription per se, they are an ad hoc subscription,” he says. “We really struggle to see any evidence of high returning customers or retaining customers … I see no evidence to say that they are anything more than low to mid-single digits.”

UPDATE: 

Mindful Chef and GOUSTO feast on £24m funding | Liam Kelly and Peter Evans, The Sunday Times. January 6 2019

3. ...has received £18m from backers including UNILEVER VENTURES, BGF and the fitness writer Joe Wicks. Gousto’s funding comes less than a year after it raised £28.5m to invest in its technology platform.  ...looking to hire 125 more employees this year to add to its 500 staff.

4. generated sales of £23.2m and made a loss of £13.3m in 2017.

* ATG MEDIA: Secrets of my success - John-Paul Savant | Daniel Hambury, Evening Standard. November 3
DZ profile:
Business: ATG Media publishes Antiques Trade Gazette, operates its arts and antiques auction portal, the-saleroom.com, and industrial and commercial auction portals BidSpotter.com, BidSpotter.co.uk and i-bidder.com, as well as white label solutions for auctioneers. An online auction technology company, across 12 different industries from heavy machinery to cars and fine art. Web site: “ATG Media’s technology platforms allow bidders from around the world to browse fully illustrated sale catalogues and place bids over the internet in real time with live audio and video feeds delivering the auction room atmosphere. Bidders are also able to participate in timed, online-only auctions. In the last 12 months, ATG Media’s websites have transacted £310m ($460m).”
Launched: 2008
Location: London
Founder: MBO team included Anne Somers, Deputy Chairman.
Staff: John-Paul Savant, chief executive.
Financials: Sales in 2012 stood at £214m. In the last 12 months, ATG Media’s websites have transacted £310m.
Investment: Matrix, now MOBEUS EQUITY PARTNERS, invested £4.5 million in October 2008 to finance the MBO of ATG from Daily Mail & General Trust plc. In April 2013, Mobeus provided an additional £4.5m to enable ATG to acquire US-based company BidSpotter. In June 2014, ATG was sold in a secondary MBO to ECI Partners in a transaction in which Mobeus rolled over a significant proportion of its holding to invest alongside ECI to participate in the future growth of the business.
News:
1. “It’s still built largely on antiques, so we try to inhabit the space between eBay and Christie’s — £50 to £50,000 purchases. Unlike most Silicon Valley companies, we are not trying to knock out the traditional industry but work with them. For me, that means travelling the country to meet the 600 auctioneers who pay to use the site, as well as using my experience from eBay and PayPal to improve the customer experience on our sites.”
2. ATG Media was 'One to Recognise' at the Sunday Times BDO Profit Track 100 awards, 2014. The Profit Track Ones to Recognise award represents the best top-performing private companies who are set to grow rapidly in the future
3. Appeared in “1000 Companies to Inspire” 2015 - the London Stock Exchange Group’s celebration of some of the fastest-growing and most dynamic small and medium-sized enterprises (SMEs) in the UK and Europe. “More than £300m-worth of business passed under its virtual hammer in 2014. ATG Media has grown, on average, by 26%, year-on-year since 2009.”