Rupert Hambro’s career as a start-up investor began around six years ago when two young men walked into his office and told him they wanted to start the first gin distillery in London for 189 years.
“Well you can imagine how little I knew about the thing they wanted to go into,” says the financier and one-time chairman of the famous family merchant bank, Hambros.
“But these were two remarkable young men with industry knowledge,” he adds. “They had energy and drive, had been at school together, and I knew the father of one. It was clear that together they would create something and whether it was raising bees or making gin, they’d make a success of it.”
Mr Hambro, 73, decided to back Sam Galsworthy and Fairfax Hall with a “modest” financial investment, and a rather larger slug of old style City nous — helping them raise debt without giving personal guarantees, for example. The outcome was Sipsmith, among the first and most successful of the new wave of craft gin makers. The company was sold last year to Beam Suntory of Japan for more than £50m.
It was enough to whet Mr Hambro’s appetite for seed investing. So when an ex-management consultant and serial entrepreneur, Dominic Perks, 39, proposed joining forces to back start-ups, he accepted. The meeting led to Hambro Perks, which has made investments in 21 mainly technology businesses since its founding three years ago.
The company is an unlikely fusion of old and new City — clubby establishment networking alongside high-tech entrepreneurial energy.
Dominating its lobby is a gilt framed portrait of the family bank’s founder, the Danish merchant Carl-Joachim Hambro. In the halls beneath are rows of techies, hunched in chinos and T-shirts over computer screens.
From the founders’ perspective, it has been a well timed entry into start-up finance. With ever tighter restrictions being piled on pension funds, wealthy private investors have been herding into investments that still offer tax relief, such as stakes in early-stage companies that come under the enterprise investment scheme.
So far, Hambro Perks has invested mainly its own partners’ money, putting £6m into start-ups and taking rather more in “sweat equity”. But now the company is looking to raise a further £15m to meet follow-on cash calls and take stakes in new opportunities.
That means opening its capital to external private investors — those able to stump up at least £250,000.
Its firepower is magnified by a network of wealthy individuals and family offices. Co-investors have put £80m into its ventures over the past 18 months, and Hambro Perks is looking for another £120m over the next year.
“We’re a conduit for a ready-made stream of angel investments,” explains Mr Perks.
He is keen to emphasise that the company’s contribution goes beyond that of bankers, or early-stage investors. “We’re a collective of entrepreneurs here, as opposed to just financiers,” he says.
Hambro Perks, which has 30 staff, focuses on products that can disrupt large, established markets. Its investments include Laundrapp, a laundry service sometimes referred to (at least internally) as the “Uber of dry cleaning”; Tootle, an online car sales service; and Labrador, which provides home smart meters that switch customers to the cheapest suppliers.
In each case, Hambro Perks incubates and finances the venture — generally taking a minority stake of up to 40 per cent, although it can have a majority in some ideas it devises itself.
The partners emphasise the differences with conventional venture capital. “We’re not a fund business and we really believe that early-stage investment sits better with permanent and patient capital, rather than capital which is on the clock in a fund,” says Mr Perks. He argues that VCs are inevitably “skewed to selling the winners” quickly to show performance and thus raise more money.
The other difference is they do not demand a control position, or build in special rights through buying preference capital. Mr Perks says this makes them “founder friendly”, and helps to encourage entrepreneurs to bring them ideas.
Mr Perks’ preferred parallel is with Rocket Internet, a controversial if highly valued German internet company that repurposes US tech ideas for other markets. It is an interesting choice given the questions that have swirled around Rocket’s punchy accounting practices. “We are obviously different,” he adds quickly. “We’re taking genuinely innovative ideas and scaling them, not copying others’ stuff.”
However, bringing in external investors raises questions about how a permanent capital vehicle measures progress. Hambro Perks regularly appraises the share value of its start-ups, but inevitably this is more of an art than a science.
The company’s approach also raises governance issues. Mr Perks admits there is the risk that in the absence of formal legal controls, some companies might go off track and start spending money in ways the investors had not intended.
The answer, he says, is partly about picking the right people and using influence in the board room astutely. “We may not have the ability to ‘crack the whip’ like a VC, but that doesn’t mean our companies don’t have robust sets of articles and shareholder agreements,” he says.
It is early days for the partners but Mr Hambro is enjoying what he calls his “third career” in the City after merchant banking and investment management.
“For me it’s very exciting because the team are all aged between 25 and 35 and it’s great,” says Mr Hambro during a tour of the company’s new offices. “They’re very nice to me. Every now and then they even ask me my advice.”
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