Meet the investor: Karen McCormick, Beringea
She's the partner and CIO of one of the UK's "biggest evergreen growth capital funds" - Find out how McCormick brings "entrepreneurs' ideas to life"
Name: Karen McCormick
Where are you based?
I’m based in Beringea’s UK office in London’s Covent Garden. Beringea also has a US office in Detroit, Michigan.
What kind of investor are you?
We're growth capital investor. We invest between £1m and £15m in companies that have already generated at least £1m in revenue – so the kinds of businesses that have a proven product or service and an existing customer base and can use our investment to scale up quickly.
With £215m in funds under management from our London office, we currently have one of the UK’s biggest evergreen growth capital funds.
What kind of deals do you finance?
We’re multi-specialist, with particular expertise in digital media, business software and services, and consumer products.
Having said that, we’re all about following opportunities and we're packed with sector-specific knowledge across a wide variety of industries at the senior level, so we’re able to pick out the best companies at the forefront of the most significant emerging trends. The common factor in all our investments is that the companies have shown strong potential in their early stages and are now ready to scale up.
What kind of person do you invest in?
It’s crucial that we can see eye-to-eye with the people we invest in. For me, being able to speak to each other frankly and with mutual respect is a fundamental requirement.
Given that venture capital funding is essentially about bringing an entrepreneur’s ideas to life, it’s important for any entrepreneur we consider investing in to have a clear and realistic idea of how funding will support and drive the growth of the business. That said, the flexibility to adapt ideas and plans if needed, and have confidence to trust in our expertise, is also crucial.
How do you source prospects?
We strongly believe in the importance of proactively immersing ourselves in the industries we invest in, rather than waiting for opportunities to land in our laps. That’s why you’ll often see us out and about – whether it’s at networking events or on judging panels at demo days and pitch events.
Although we invest in companies at the growth stage, our first contact with entrepreneurs often comes much earlier. If we meet a business we really believe in while it’s still at a very early stage, we’ll stay in contact and track progress until it’s ready for later stage funding.
The jewellery company Monica Vinader is a good example of this; we got to know the Vinaders when the business was quite small, and fostered the relationship until they were at the right stage to take on investment.
At Beringea, we’re also lucky enough to have an additional pool of talent from our US colleagues. We’re able to support and advise businesses looking to enter the UK market.
Likewise, our UK portfolio companies looking to expand into the US market have benefitted from having a Beringea team on the ground in the US with a whole new network of contacts to work with. Blis is a great example of this; the UK funds provided £2.5m in investment in earlier stages, and then the US funds came in for a $25m round later. We are very fortunate in this respect.
What is your ideal investment?
We always look out for what we call ‘capital efficient’ businesses. We want companies we invest in to have a clear route to being profitable, rather than needing to keep raising funds in order to continue expanding.
Obviously whether or not this is possible will depend on the industry a company operates in, but current and future profitability is the ultimate aim for any investment.
What are your USPs?
We’re not an invest and run company. We like to take an active role in the growth of our portfolio businesses, working closely with entrepreneurs to help work through day-to-day issues, and sharing expertise when it comes to the longer-term strategic decisions that will affect the future of the company and exit prospects.
Our investment team has boots on the ground experience of managing businesses in number of sectors – one of our investor directors, Maria Wagner, was the MD of Birchbox UK, and I ran the watch division of Swiss Army – so we really relate to the daily challenges, both personal and professional, and can help navigate around them.
On top of that, our transatlantic presence really helps our portfolio companies when it comes to expanding internationally. Most businesses today have borderless visions of success, and the US is sort of the holy grail. Having colleagues on the ground with specialist knowledge and industry contacts is invaluable in that process.
What are the hot sectors?
Our recent activity in the broadcast technology and digital media sectors has been very exciting – two of our portfolio companies, Whistle Sports and TV Player, have been making waves over the past year as consumers appetites for digital brand content continues to grow and people increasingly adopt a ‘streaming first’ approach to television viewing, or even abandon linear viewing altogether.
Some of our e-commerce portfolio companies, such as Thread and My 1st Years, have been excelling too as the sector evolves. Brands are moving beyond offering ‘just’ online shopping to provide a full ‘experience’ that is personalised and curated in previously unimaginable ways. It’s going to be a very interesting industry to watch.
Three things should a company be able to offer an investor?
Clear objectives, flexibility, and trust are essential if you want your business to succeed with VC help.
What is the cardinal sin when looking for investment?
It is imperative that companies go with an investor that really understands their business; it’s all too easy to be dazzled by the fame and size of a VC firm and assume that their success with other businesses means they’re the right choice for you.
Don’t assume anything; speak to other entrepreneurs in an investor’s portfolio who will be able to validate your instincts – ask for referral from the VC, or just go directly. If the investor is right for you, they’ll help to smooth the crazy journey of growing your business, and will always prioritise the interests of your company. Doing your due diligence to ensure you approach the right investment firms is crucial – whoever you pick will have a defining influence on your business’s future. The investor will become a part of your team, so don’t settle for a deal if you don’t feel certain that they’re the right choice.
On a more discreet note, a key mistake made when presenting is focusing on the market and opportunity without ever showing us the product; it’s surprising how often teams get to the end of the presentation and are taken aback when we ask for a demo, but it’s the best and fastest way for us to gauge our interest. If you have to really sell us on the market potential, it’s probably too far out of our remit.
What continuing involvement do you like in an investment?
We always take a seat on the board of our portfolio companies, and we align our individual professional experience with businesses. One of the key things we can bring as investors is introductions and contacts, and we have to understand the business in good detail to be able to do this effectively.
Some intros may be to target customers, others may be to experienced execs who have ‘been there done that.’ We also help make sure we bring in external market data and new trends to the board discussions, and keep our eye on the prize, which is maximising the returns to the whole team.
What has been your best performing investment to date?
Given that we focus on growth capital, we don’t have a traditional model of ‘one pays for 10′ which typical in pure venture capital. Instead, we have less variability – few of our investments actually ever go bust – and a more normalised return across investments.
However, we have had some particularly stellar exits and Mergermarket was our best to date, with a return of 14 times on our investment. This was recently followed by our 2016 partial exit of Monica Vinader, delivering 12 times on our original investment, and our exits of i-Level and Saffron Digital also delivered great returns.