All Star Lanes £15.3m | Bloom & Wild | Fashion Enter | Prodigy Finance | Cloudreach | United Corporation £7.8m | Starling Bank
News about 7 UK growth companies and/or accelerators + turnover in the GRID marketplace 12th – 18th February 2017:
ALL STAR LANES: in £3.5m strike | The Sunday Times February 12
DZ profile: All Star Leisure Ltd
Business: American-style tenpin bowling chain. The first venue opened in Holborn in 2006, followed by Bayswater in 2007, Brick Lane in 2008 and Westfield Stratford City in 2011. All Star Lanes opened its first site outside of London, in Manchester in 2013. Enjoyed a bumper 2016 after reinvesting in locations including its flagship site in Brick Lane, east London. Revenues had started inching up following a complete restructuring of the business, which involved the introduction of a new, high-end menu, and a renewed focus on corporate events.
Location: London E1
Founders: Mark von Westenholz and Adam Breed - Newcastle University graduate, studied business in Paris and, set up “The Lonsdale” Notting Hill cocktail bar with his brother Charles in 2002. More recent co-founder (with Dov Penzik) of BOUNCE, bar and restaurant with 17 table tennis tables in Holborn.
Staff: Christian Rose, who used to run Searcy’s and Chicago Leisure, took the helm as MD in January 2015.
Financials: 2016 - revenues grew 5.7% to £15.3m; Christmas revenue grew by 13.5% year-on-year. Gross margin also improved to 82.1% in 2016, up from 81.8% in 2015 and 78.9% in 2014. Adjusted EBITDA grew by 39.5% to c. £1.5m (c. £1.1m in 2015 and £854,000 in 2014. Profits had started shrinking several years ago, with sites in Brick Lane and Westfield Stratford City failing to earn their keep. Profits before tax dropped from £502,000 in 2012, to £426,000 in 2013 to £209,000 the following year.
News: The company has rejigged its debt after securing a £3.5m credit line from HSBC.
Florist’s German sweetheart | Laura Onita, The Sunday Times.
Flower delivery startup is set to blossom with millions in fresh funding | Lynsey Barber, City A.M.'s February 13
BLOOM & WILD
DZ profile: Bloom and Wild Limited
Business: online florist that posts bouquets through the letterbox fits fresh flowers into slim boxes that are ordered online or via an app. The cheapest bouquet costs £20. has delivered more than 1m flowers to date. The company sources its flowers directly from growers in Britain and on the Continent. 75% of its customers are women
Location: Vauxhall, south London
Founders: set up by management consultant Aron Gelbard , 34, chief executive and hedge fund manager Ben Stanway
Financials: Gelbard claimed the business had grown 1,000% a year and turnover was “definitely many millions”.
Investment: BURDA PRINCIPAL INVESTMENTS - and previous investor MMC VENTURES,
1. Has won £3.75m investment from German media company Hubert Burda's venture arm - Burda Principal Investments - and previous investor MMC Ventures, along with other angels. "Bloom & Wild has shown an impressive growth rate of 35 per cent per month within the last years. The team is using innovative technology, design and operating models to redefine the flower business and customer experience" said Christian Teichmann, managing director of Burda Principal Investments which has backed the online retailer NOTONTHEHIGHSTREET.COM and previously backed Etsy. The cash will be used to expand in France and Germany and to diversify into corporate gifts.
2. Named one of Britain's 50 most innovative companies last year, Bloom & Wild's total funding now comes to £6.25m
FASHION ENTER: is a made in Britain firm behind fast apparel | Jim Armitage, The Evening Standard. February 13
DZ profile: Fashion - Enter Ltd
Business: make everything from tops retailing for £8 to fancy blouses for £50, and trucks them out to retailers quicker than a sweatshop in China, Bangladesh or Eastern Europe ever could. It’s fast fashion on steroids. It is a sleek, modern workshop where skilled machinists, cutters and designers manufacture womenswear ranges for Marks & Spencer, Asos and a host of other big retail names. Eight thousand garments a week
Location: industrial unit five minutes from Manor House Tube, London N4
Founder: Chief executive Jenny Holloway worked in top jobs at Littlewoods, Arcadia and Marks & Spencer before setting up this latest venture.
1. Jenny Holloway declares: “Made in Britain makes sense.” Her argument, which she sets out as London gears up for Friday’s launch of Fashion Week, is compelling. Not only can Fashion Enter get new styles into the shops faster than factories overseas but, because of that speed and proximity, she can make to order, so there’s hardly any waste.
Buying from long-haul destinations in Asia, she explains, a retailer will tend to buy shipping container-sized volumes to get the most back from the transport costs. That’s fine if a range proves popular. But if the great British public goes “meh” at the colour, fabric or cut, the stores are left with thousands of unsold items on their hands.
“With us, we’re so nearby that they can order smaller lots and quickly replenish the sizes, styles and colours the customers demand. So what they spend on our higher labour costs, they save on not having to discount unsold stock,” Holloway says. Not only that, she adds, but you can guarantee the garments are made by workers on decent wages, and in comfy conditions.
2. Holloway is upset about Brexit, particularly because skills shortages in the UK mean most of her workers are from the EU.
3. “But Brexit just makes it all the more vital that we reskill our own youngsters,” she says. She’s doing more than most to make this happen. Last year she opened the Fashion Technology Academy with a soft loan from Asos and state funding. It provides full-time training or day release courses for apprentices and anyone considering a career in fashion design. Says Holloway: “You can’t do design unless you know about construction. We have a motto: ‘not fashionistas, but productionistas’.” Holloway runs Fashion Enter as a social enterprise, with the factory subsidising the schooling and outreach work. Asos has been a loyal supporter. Now, more big retailers should sign up with their custom and financial backing.
PRODIGY FINANCE: The fintech firm that went global on day one | Sophie Jarvis, research associate at The Entrepreneurs Network, City A.M. February 14
DZ profile: Prodigy Finance Ltd
Business: Prodigy Finance has provided over $250m of funding to graduates from 118 different countries, with a 99 per cent repayment rate. Prodigy Finance took international graduates who had been cast aside by banks and lent to them – initially just through alumni networks, but now also through a pool of impact investment funds. Prior to founding Prodigy Finance, Stevens was at Insead, where he and his co-founders witnessed students domiciled outside the US unable to access funding. They found it paradoxical that a graduate could be accepted into the best universities in the world but not be trusted to pay back a student loan.
Location: offices in London, Cape Town and New York, as well as a satellite office in Bangalore
Founders: Ryan Steele, Miha Zerko, Cameron Stevens - chief executive
Investment: Investors - BALDERTON CAPITAL and Ed Wray
1. Stevens’ advice from a credit lawyer was straightforward: “Please don’t do this. This is the only advice we’re going to give you. You’re going to regret it.” So far, he has nothing to regret…
2. Banks remain restricted by local considerations when offering their services. Stevens says there’s been a fundamental shift in how the world works. Just because someone has moved country, it shouldn’t make it harder to collect their debt. LinkedIn and other platforms allow banks to keep track of debtors
3. Prodigy Finance has been global from day one, with Stevens praising platforms such as UPWORK and CLARITY for making it easier to scale.
4. Sometimes things get lost in translation. Stevens recommends employees read Erin Meyer’s Culture Map to address “the problems that arise with hiring people from different backgrounds and the mindsets they bring.” His South African team don’t always understand why the American team on Skype video don’t take a couple of minutes out for personal interaction before getting down to business.
Fintech startup Prodigy Finance lands $240m funding led by Index Ventures to expand post-graduate loans | Lynsey Barber, City A.M. August 21, 2017
5. INDEX VENTURES has led a series C equity round of $40m, with previous investor Balderton Capital also participating and ALPHACODE also joining them, in addition to $200m in debt financing. The startup will focus on expanding in the US, with the country now accounting for 50 per cent of the market, picking up pace since entering the market just two years ago. Asia will also be a focus, with China now accounting for eight per cent of the international student market. That expansion will include growing its 115 staff across technology, engineering and business development.
6. Around 25 per cent of students at the Insead Business School, one of the best MBA programmes in the world, are funded through loans from Prodigy Finance.
CLOUDREACH: Private equity giant Blackstone buys majority stake in London technology company | William Turvill, City A.M. February 16
DZ profile: Cloudreach Europe Limited
Business: provides cloud computing products and services for companies including BP, Pearson and Hearst Corporation.
Location: headquartered in London, has offices in seven countries and has a presence in both Europe and North America.
Founder: Pontus Noren
Investment: Private equity giant BLACKSTONE has announced a deal to acquire a majority stake in Cloudreach. ARMA PARTNERS, a specialist M&A firm that focuses on communications, media and technology, advised on the deal. Cloudreach’s co-founder Pontus Noren will become chief executive of the company under the terms of the deal, while Dave Johnson, a senior adviser to Blackstone, will be chairman of the board. “This investment by Blackstone will allow us to continue to expand our geographic reach, our software development capabilities, and further automate and expand our managed services/ cloud operations capabilities. The focus is to enable our customers to innovate at pace and adapt their business to today’s IoT, AI and digitally driven world.”
UNITED CORPORATION: Brexit uncertainty leaves UK high-tech exporter’s plans in limbo | Jonathan Ford, FT. February 16
DZ profile: United Corporation Ltd
Business: supplier of high-tech equipment to giant Middle Eastern oil and petrochemical companies. United manages critical parts of the supply chain for big state-owned Gulf producers such as Kuwait Oil Company, Qatar Petroleum and Saudi Aramco, furnishing them with specialist components such as wellhead parts, filters and air compressors. United’s small staff at the Croydon base and its warehouse in Hounslow near Heathrow airport import and forward up to 500 consignments a month. Has two Queen’s Awards for Enterprise.
Founder: Karim Fatehi
Financials: turnover £7.8m in 2015
1. …since it invoices in the UK currency, with powerful customers insisting on long-term contracts at pre-agreed prices, United is painfully exposed to sterling’s fall. About 85 per cent of what it sells comes from abroad, much from Europe and the US. The fall in the pound since the referendum vote has sharply increased sterling prices for these products. He is concerned higher costs could tempt more customers to shift their buying to Europe.
2. Suppliers also play an important role in assembling components into finished products, a process in which experience and trust are vital. United tends to buy foreign goods and components mainly through UK distributors, which is expensive because it also pays the middleman’s margin. Mr Fatehi has considered contracting directly with equipment suppliers to cut unit costs, but remains reluctant. “The problem is also that manufacturers only want to sell in volumes that would be a strain to finance for a business like this,” he says.
3. The currency adjustment may be a temporary phenomenon, but Mr Fatehi is concerned Brexit will bring turmoil that allows EU competitors to steal some of United’s business as wary clients move to diversify their suppliers.
He says the company’s best cards in fending off such a threat are its long-established relationships and its London location.
4. He is concerned that Prime Minister Theresa May’s plans to leave the EU customs union — and replace it with an as yet undefined customs agreement — could further strain his already complex freight operation. “Create more paperwork and I have to increase the numbers of staff I employ just to do the same level of business I am doing now,” Mr Fatehi says.
5. United had hoped to forge relationships with the Iranian oil industry following the easing of international sanctions. Now, Mr Fatehi says, expansion plans are on hold. Everything remains in limbo until there is more clarity on Brexit.
STARLING BANK: Digital banker fears Brexit will damage competition | Jonathan Ford, FT. February 17
DZ profile: Starling Bank Limited
Business: one of a clutch of digital-only banks vying to take on the heavyweights of UK retail finance. It eschewed the quick route to market, preferring to build a fully independent institution from the ground up. It has also assembled its entire IT infrastructure system from scratch. Its main selling proposition is its smart, customer-friendly technology and app.
Location: London SW1
Founder: Anne Boden, a former chief operating officer at Allied Irish Banks
Staff: About a fifth of Starling’s 80 employees are from overseas, the majority of them from the EU, and Britain’s departure is likely to raise bureaucratic obstacles to hiring from the continent.
Investment: £48m of capital from Harald McPike, a Bahamas-based investor
1. Ms Boden enthusiastically contends that the EU directives that other financial professionals love to hate have in fact helped make London the fintech hub it is today. She also worries that when Britain eventually leaves the bloc, the pace of financial liberalisation will reduce, giving entrenched big banks more scope to squash competition
“The EU has come up with some very good payment and banking legislation,” she adds. “I know the traditional banks don’t always like it, but if you look at it from a competition and innovation point of view, and especially for the development of fintech, then European legislation has been both important and good.”
2. Ms Boden was emboldened to set up Starling by changes that liberalised what had been a relatively closed and oligopolistic system. An EU directive on payment services in 2007 forced traditional banks to open the national payments systems they controlled to entrants. It turned out to be a big cost-lowering measure. A second EU directive is forcing banks to open their valuable customer data hoards to rivals, making it easier to pitch competing services.
3. The Brexit ramifications extend to the bank’s business model. Starling had planned to launch its services in Europe over the next two years, taking advantage of the EU’s financial services passport to expand in other countries. “It is disappointing that we won’t be able to go abroad using the passport process,” she says. “But if we have to get approval elsewhere, this is something we still have the stamina to do.”Ms Boden is confident that Britain will remain an important fintech hub, whatever happens.