Meet the investor: Melissa Yvonnou, BOOST&Co
The principal of the growth capital provider behind Triptease and The Clubhouse explains why innovation holds the key to unlocking investment...
Name: Melissa Yvonnou, principal
Where are you based?
BOOST&Co operates from London, with a support office situated in Cape Town.
We know that the small and medium enterprise sector is critical in supporting and driving the growth of the UK economy. That’s why we invest in innovative UK small and medium enterprises.
What kind of investor are you?
We understand entrepreneurship, and believe that management teams that have done the hard work of setting up a business, getting it off the ground, and proving their business model should have access to finance that preserves their ownership.
To do this, we create financing solutions that are tailored to the needs of the business, and allow owners to preserve their equity and keep control of their company.
We also pride ourselves on having a funding process that will minimise management distraction and takes just one to three months from first meeting to funding.
We think of what we do as growth capital, with a low level of dilution. Some people call it venture debt, growth debt, or alternative finance because we fill the gap between early-stage venture capital, and later-stage bank lending.
Our growth capital takes the form of loans of between £1m and £10m offered to fast-growth small and medium enterprises in the UK.
We do not seek direct involvement via equity, nor do we make management personally responsible for funding via covenants or personal guarantees.
What kind of deals do you finance?
BOOST&Co’s solutions are flexible and tailored to the company we are investing in, with no fixed criteria or ratio testing.
We do have two primary yardsticks that we look at when identifying potential investments, and they are:
- That the business is growing quickly. Our products can do wonders for management teams who are building up the equity value of their business quickly. This is when dilution is most painful – which is why the limited dilution that we offer is ideally suited to businesses at this stage.
- The business model needs to be fully proven and at the scaling stage. The company should have a fully functioning product, a fully formed management team, an established customer base, and proven routes to market that are delivering revenue.
Our investments can be in companies that are pre-profit, at break event point, or profitable.
What matters most to us is that there is a clear path for the company to service the debt. That can take the form of a clear route to break even, or a clear path to equity fundraising.
Some companies work with us when they are 12 to 18 months away from profit generation, while others use us to extend their cash runway and achieve milestones that will trigger a higher valuation at their next round equity fundraising.
We work with companies that are privately owned by the management team, or backed by institutional equity investors. While some lenders will only invest in companies alongside an equity investment, this is not something that BOOST&Co necessarily requires.
Ultimately, provided a business is growing quickly and ready to scale, and has a proven business model, growth debt is likely to be an attractive solution.
What kind of person do you invest in?
We look for talented management teams running innovative businesses.
We are naturally drawn to pioneers and trailblazers, but find it more important to lend to teams that we can trust and work with through both trying and prosperous times.
In our experience, the most successful management teams have a balanced view of their performance and don’t allow arrogance and short-sightedness to blind them to their business reality.
It takes a diverse team to ensure that balance, so we look for teams that show clear diversity – particularly when it comes to decision making.
How do you source prospects?
The bulk of our current and prospective clients operate in the technology sector and naturally tend towards online research, education and communication.
To reach these innovators, much of our marketing and communication is centred on creating a direct conduit to BOOST&Co via digital channels. As a team of young and entrepreneurial individuals ourselves, we firmly believe in using digital mediums to connect with interesting businesses and people.
It gives us great scope in terms of reaching the types of companies that we are interested in, and gives us the chance to provide rich content.
We also recognise the critical role that advisors play in assisting small businesses to raise finance.
We have found financial advisors to be invaluable in helping small and medium companies to understand when, and how, to access growth debt.
We have a network of financial advisors, equity investors, and venture capital firms that we work with for the benefit of all our portfolios, but are always on the look out for new opportunities to develop partnerships in these areas.
What is your ideal investment?
We look for small and medium-sized enterprises that are shaking up their sector by doing something innovative.
We look for management teams whose vision for growth we can understand, and with whom we believe we can establish a long-term relationship.
We believe that liking a management team is a fundamental element of financing a company.
What are your USPs?
What sets us apart is that our solutions are not dilutive.
We believe that when a management team has undertaken the significant hard work of developing a business to the stage of scalability, it should be able to access funding without having to sacrifice equity or control.
We have no interest in managing our clients’ businesses and take no board seat or voting rights – if we didn’t like the business and how it was being run, we wouldn’t invest in it.
We know that fundraising can be massively distracting for management teams, at a time when their main focus is on growing the business. We understand that decision making and knowledge flow needs to be streamlined and prompt.
Because our deal team is small, consisting of two partners and two principals, management is always talking to the people who actually take the decisions.
We also understand entrepreneurship and the technology sector, so we are able to support clients in growing their business by offering valuable insight and advice.
What are the hot sectors?
BOOST&Co is sector agnostic when looking for companies to invest in. What’s really important to us is that we work with companies that are doing things differently and innovating within their industry, whether it be a traditional or emerging sector.
In fact, we pride ourselves on having invested in a wide range of industries and currently have a portfolio of 35 companies across very diverse sectors. We’ve invested in software, online retail, offline retail, telecommunications, clean technology, call centers, and co-working spaces; to name just a few.
This investment diversity is important for our clients, as the chances of our having already worked in a particular sector are high. As such, we’re likely to understand not just their business, but their market. This means that we don’t need to be educated about the sector in which the business operates.
Personally, I am naturally drawn to the software sector, and software as a service (SaaS) companies in particular.
Partly because it is my own background, but also because the visibility of a recurring revenue model provides a good fit for raising debt.
Three things a company should be able to offer an investor?
Rather than looking at what a company can offer investors, we believe that it is more important to choose investments that offer a good fit and reciprocal benefit.
Ultimately, we find it more beneficial to ask a number of questions of ourselves when deciding whether to invest in a company:
- Can we provide a financing solution that makes sense and is tailored for the business? It does no one any good if a business is forced to spend five years forcing a solution to work for them, if it doesn’t fit their business and values.
- Would we enjoy a healthy working relationship with the management team? Five years is a considerable amount of time, so the businesses that we work with need to be assured that we will do what is best for their business. We care about our clients’ business journey.
- Can we deliver additional value to the business? We are not interested in operational involvement or control, but we do recognise that there is no harm in offering value that goes beyond the financial. We look for businesses that we understand, and where we can offer additional benefits, such as introductions, partnerships, and sound advice.
What is the cardinal sin made by businesses seeking investment?
Nothing derails a funding deal faster than incorrect data. Before entering the fundraising phase, it is critical for management teams to ensure that all documentation and data is correct.
Unrealistic forecasts and undisclosed information are the most likely suspects to scupper a deal in progress.
What continuing involvement do you like in an investment?
We view each deal as a partnership of three to five years and implement monthly monitoring to ensure that the relationship is on the right track.
As our loans amortise, we expect our companies to repay capital and interest on a monthly basis.
We also understand that the small and medium-sized enterprise journey can be unpredictable, and we are supportive and resilient in staying the course.
Even though our engagement doesn’t take the form of hands-on involvement, our extensive experience means that we have seen a number of businesses succeed and fail, so we have a fair idea of where improvements can be made.
We also meet new businesses, financial advisors, and equity investors every day, so we can provide meaningful introductions.
What has been your best performing investment to date?
Of course we’re happy when we make a good return and have a successful exit.
We wouldn’t venture to name a specific investment though. Lance Mysyrowicz, who founded BOOST&Co, likes to say that we should look at our portfolio companies as family – all of which need to be loved and supported, rather than picking one to the detriment of the others…
And it’s never a good idea to publicly choose a favourite family member. Somebody’s feelings are likely to be hurt!
To find out more about BOOST&Co and what it looks for in businesses to invest, click here.