Brighter Thinking: Raising growth capital in the TMT market

As the world sets about recovering from the coronavirus crisis, the spotlight is on thriving Technology, Media and Telecommunications (TMT) businesses, many of which rely on third-party finance to further their strategic growth plans. Just when access to funding is critical however, the cumulative impact of Brexit and the pandemic has created a perfect storm for the business lending marketplace. 

While more established TMT companies are shoring up their portfolios and streamlining existing assets, others are facing more significant challenges. From start-ups seeking initial seed funding, to growing businesses in need of venture capital, it’s become more difficult for innovation-led businesses to access the finance they need to thrive. With many investors sharing a ‘risk off’ approach, there is a chance that businesses seeking funding are left to sink or swim. 

Under these conditions, businesses need access to a team of trusted professional advisers. They can help by providing guidance and supporting the development of a dynamic business strategy – one that’s capable of weathering today’s challenges and those that might arise in the future. 

Providing just this type of support, Menzies LLP, is a leading firm of accountancy, business, and financial advisors, with expert knowledge of a variety of market sectors. Its expertise extends from healthcare and hospitality, to manufacturing and technology, the company’s 400+ advisers are adept at driving company performance. Combining cutting-edge diagnostic tools and good old fashioned people skills, the firm’s experts get under the skin of the businesses they support. 

To find out more about how Menzies LLP operates and the value it brings, we spoke with Alexander Duffy, the firm’s Corporate Finance Director and Head of its TMT advisory team. He explained that the firm’s brand is rooted in what it calls ‘Brighter Thinking’, which means applying the knowledge and ingenuity of individual experts and their teams to solving real world business problems. For the Corporate Finance team, more often than not, this means utilising professional networks and investor relationships to secure growth capital for entrepreneurial TMT businesses. Here’s what he had to say: 

Can you describe your career path so far? What led you to Menzies?

“Before joining the Menzies’ team in 2018, I held managerial roles at RBS and RSM UK, founded Gold Lion Consulting, and was an Associate Director at Waypoint Partners. I was drawn to Menzies because it really believes in the mantra of Brighter Thinking - improving outcomes and helping SMEs to succeed, regardless of the challenges they are facing. 

“I specialise in advising businesses on raising capital to reach the next level of growth as well as mergers and acquisitions in the TMT market. Supporting entrepreneurial businesses in this way is so important to me: I really believe in it.”

Despite how volatile the post-COVID market is, why is it so important for SMEs to be developing a robust growth strategy at the moment?

“Coming from an investment and corporate finance background, I know that if companies don't take action to drive growth and innovate, they will go into decline and lose sales. Maintaining market share and finding a way to build on it has always been important.

“Keeping the momentum going, even during tough times, is paramount. However, it’s a mistake to keep operating like nothing has changed. In the past, tech-led companies have struggled to compete with those in other high-profile sectors, such as property, retail or travel. But the pandemic has reversed this relationship as physical spaces lost value while digital markets such as DaaS (Data as a Service), video streaming services and ecommerce platforms saw market demand soar. 

“Digital tech businesses aren’t constrained by the physical - an attribute which has become all the more advantageous during the pandemic and in the immediate aftermath of Brexit. These businesses tend not to be exposed to the borders or tariffs of physical trade; software-as-a-service (SaaS) doesn't operate within borders per se, so integrating with these relatively Covid and ‘Brexit-proof’ industries is essential.”

It is clear that you’re fully immersed in the TMT ecosystem; you mentioned speaking at tech conferences around the UK. How does this benefit your clients?

“I have a passion for technology and if I can assist founders in taking their organisations - or even just a concept - to the next stage, then that feels like a win for everyone involved. It’s not just about running with an idea and becoming successful, it’s also important to translate that into something of value for the rest of society. 

“It’s no longer enough for an adviser to claim that they have TMT experience. TMT has so many sub-markets and specialisms that you need to understand how they marry up. You need to know the associations between specific sub-markets and spot opportunities for growth and expansion.

“Of course, sectoral experience is incredibly valuable to businesses that might be seeking funding. As well as recognising the immediate needs of the company, the adviser must be able to articulate the bigger picture and the market opportunities that might exist now and in the future. You also need to nurture relationships with investors, so you understand which client propositions will be most attractive to whom.”

• The British Venture Capital Association states that £43bn has been invested in more than 3,230 companies over the last five years. In 2019, 87% of those investments were directed at SMEs.
• Investments in TMT soared to £10.1bn in 2019, representing a £3.1bn increase on the previous years’ already impressive figures.
• On a global level, London was placed fifth when ranked by venture capital funding amounts by Dealroom.co. It was a mere $100m behind Shanghai.

Do you see a fundamental shift in the investment community? If so, is there any insight and advice for TMT businesses?

“In 2020, it was reported that investment in UK tech startups was up by a whopping 34% between 23 March and 27 April. The industry has since gone on to achieve record figures, with tech start-ups and scale-ups in the UK now valued at £422.55bn collectively. Technology is advancing so quickly in many areas - driverless cars, AI and machine learning, AR and Big Data to name a few, and there is so much overlap that this is creating new market opportunities.

“The TMT space is still considered quite niche, however, especially when it comes to raising capital and understanding the nuances of a range of investors. From angel rounds all the way up to Series F or private equity involvement, understanding funding processes and matching them to the business’ lifecycle is vital. 

“When presenting an organisation to investors, it is important to do so in the most compelling way possible. As well as understanding the core proposition, investors want to know who the competitors are, how the market is evolving and where the most fruitful returns are likely to arise.”

What makes Menzies LLP’s ‘Brighter Thinking’ approach to raising growth capital different?

“Menzies helps companies create new growth strategies and implement them successfully. As well as understanding and supporting their growth plans, this often involves streamlining operations and staying ahead of competition. It’s a benefit of being a smaller company with a long track record of success and it’s something that can be lost when you go into the larger firms. 

“It’s all about investing time in developing strong client relationships, which stand the test of time. This doesn’t have to be based on lots of face time, at Menzies we believe in providing a digitally-enhanced customer experience, while maintaining a strong sense of collaboration. We very much view ourselves as a large family and community, something we’ve been careful to preserve during the COVID-19 restrictions, through the extensive use of video conferencing platforms.

“I think many other professional services firms have suffered from not having that connection with their clients and colleagues. Menzies has really transformed its digital presence online and is continuing to invest in digital transformation.

“When it became clear that we were going to have to get used to living in a world with COVID-19, it was no surprise to me that life, as well as the tools we use every day, would need to change. Our social habits, the ways we work, and how we consume content were always going to have to adapt – the ‘Golden Age of Tech’ was already underway before the pandemic but it’s now just being spurred on even further.”

How can Brighter Thinking help SMEs and other businesses to plan for the future? 

“Brighter Thinking is essentially ‘business advisory done better’; the concept is based on innovation, collaboration, and developing empathy with clients. We listen to the client’s needs and then, by thinking outside the box, find a solution that will help them, in the short and longer term.”

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Significantly, what Menzies’ approach highlights is a shift away from ‘one-size-fits-all’ solutions: every client has different circumstances, goals, and means. To say that business strategy has become more complicated over the last 12 months is an understatement. However, companies can’t afford to sit back and wait for things to happen; they must take action to adapt in order to survive and thrive. However, taking decisions about how the business strategy must change can be difficult to do in isolation, so businesses need access to skilled advisers. 

The Corporate Finance team at Menzies LLP is growing to meet demand from local businesses. The team is both successful and highly experienced, having completed a wide variety of deals across many markets, as well as being recognised as the 2020 Transaction Services Team of the Year at the Insider Southeast Dealmakers Awards. 

To summarise, what is your vision for the future of the TMT sector and how can Menzies LLP help?

“TMT businesses were already growing rapidly before the crisis and many of the shifts in behaviour that have taken place during the pandemic have played to their advantage. London remains the financial capital of the world and the European capital for technology. 

“From an advisory and corporate finance perspective, Menzies LLP has an important role to play in supporting these businesses in cementing their business plans and securing the finance needed to realise their commercial potential.  

“Brighter Thinking can undoubtedly help TMT businesses to thrive and help to drive the UK’s economic recovery.”