Mike Fell, partner at Key Capital Partners in Cambridge
Key Capital Partners (KCP) launched in 2007 to address the ‘equity gap’, making investments of between £1m and £10m in profitable, growing UK companies. The firm operates nationally from offices in Birmingham, Cambridge and Leeds and has made seven investments since closing its maiden £100m fund. KCP’s portfolio includes contemporary furniture and home accessories retailer, Dwell, manufacturer of soups and sauces and the Glorious! brand, TSC Foods, and street fashion business, Fly53.
1. Has your decision to open in Cambridge been justified by the opportunities you are seeing?Yes. A base in Cambridge has given us access to opportunities from across the region, including other business centres in the wider area, including London, Milton Keynes and Norwich. 2. Do you share the perception that because of its tech community and the University, Cambridge is protected from the worst of the economic downturn? Although small technology firms have access to venture capital finance, larger European financial institutions have reservations about the returns associated with start-ups in general. However, Cambridge itself will be relatively cushioned from the public sector cuts as, historically, it has not been highly geared towards public sector employment. 3. Can you give a flavour of the type of businesses in which you have invested to date?We have invested in businesses from a variety of geographical locations and sectors, including recruitment, food, retail and publishing. However, what unites these businesses is good management teams that are driven by growth. We target growth markets and companies that want to use the expertise and experience of KCP and its operating partners to help grow their businesses in a sustainable manner.4. Do you have more funds to invest and, if so, what is your dream ticket as a potential investee company?Yes. We have lots more funds to invest. In our industry, everyone’s dream ticket is an MBO of a business that is run by a proven management team and is experiencing significant levels of growth. If it can be purchased for an EBIT figure of less than 5x and has debentures at Lord’s, the deal would be perfect!5. Would you say that you are risk averse and take a safety first approach?We take calculated risks with people and markets. By definition, private equity can’t be risk averse. We leave that to the banks.6. What has been your highest high to date?Co-founding KCP in 2007 has been my greatest professional achievement as it has given me the freedom to make my own investments and become a master of my own destiny.7. And your lowest low?Investing in small businesses has its ups and downs. The disappointment felt when management teams fail to deliver what they promised is always a low. However, assessing the competence of management, even after detailed due diligence, tends to be one of the most difficult aspects of the dealmaking process.8. Is the UK ever going to be more like the US in terms of throwing bigger sums at start-ups earlier in their life cycle?No. In principal, 10-year returns on start-up venture capital investments are extremely poor. As a result, it is not an attractive asset class for most institutions in the UK, which prefer private equity and other more mature investment channels.9. Is Cambridge, metaphorically speaking, even on the same planet as Silicon Valley in terms of innovation with potential?In terms of innovation and brain power, Cambridge is a match for Silicon Valley. However, the city does not have access to the same infrastructure and support as its American cousin, which is holding it back.10. Are VCs and angels technology obsessed when some of the biggest, sustainable businesses are in more traditional sectors like engineering and manufacturing?Engineering, be it mechanical or chemical, is a vital part of the technology industry. Technology is generally thought more attractive because it can be scaled up quickly and generate good returns in a relatively short period of time. However, establishing a manufacturing plant can take years to develop and requires intensive capital investment, which may not be cost effective due to the ease of outsourcing to the rest of the world.