Seasoned players in the UK mid-market, Ole Bettum and James Stoddart are targeting this less crowded space with their new development capital fund Bestport LP. Angela Sormani reports.
Bestport Ventures (Bestport), a development capital fund management company founded by former Close Venture Management director, Ole Bettum, and Bamboo Investments CEO, James Stoddart, has reached a first close of its inaugural fund, the Bestport LP Fund.
The fund has raised close to £15m in just under seven months, well in excess of its initial target of £10m, and is focusing on smaller development capital and buyout opportunities in the UK. Bestport is aiming to raise a total of up to £30m by final close, which is expected to be in the second half of 2006.
Investors to date are a mixture of large family offices and wealthy individuals including a number of entrepreneurs the Bestport founders have backed in the past as well as several investors in funds previously managed by the founders. Serial entrepreneur and one of the cornerstone investors Robert Gaines-Cooper said: “I decided to invest in Bestport’s inaugural fund on the basis of the strong track record of the Bestport team and their focus on a segment of the development capital market with substantial opportunity that remains under-serviced and under-supplied.”
The fund will provide between £0.25m and £2m of equity funding to UK companies typically with a turnover run-rate of between £0.5m and £10m and strong growth prospects through organic growth and/or acquisitions. Bestport will consider companies in all sectors but is particularly active in business services, healthcare and technology markets.
James Stoddart, joint managing partner, said: “We are delighted to complete a relatively quick first close of the fund as we have a number of interesting deal prospects in the pipeline including two advanced prospects in the healthcare services space. The UK market for smaller development capital investing is very attractive as it is significantly less competitive than the mid-market space and there is a strong entrepreneurial culture in the UK.”
James Stoddart and Ole Bettum established Bestport in 2005. Bettum previously spent nine years with Close Brothers Group where he was instrumental in building Close Venture Management from an early stage to a highly successful development capital investment business with some £130m under management. Stoddart previously managed Bamboo Investments plc, an investment company behind successful businesses such as Active Hotels, Cassium Technologies and Bango.net.
Bamboo Investments was set up in 2000 and raised £16m from a collection of high net worth individuals to invest in early stage/high growth businesses in the technology field. The fund is now winding down. Stoddart says: “Our view with Bamboo was that it was 2000 and technology and it was a company structure, which wasn’t very efficient. We have already returned over £17m back to shareholders and still have a meaningful residual portfolio. However, the company is relatively small in size and is now in the final stages of realisation mode.” Stoddart is managing those investments with Close Venture Management and as there are only a few companies left in the portfolio it isn’t taking up a huge amount of time.
Stoddart says of the Bestport fund raising: “We’ve been pleasantly surprised. We recognise raising a fund at this size falls below most institutions’ thresholds because the market has moved on substantially and raised even bigger funds and so those in our own space have become fewer. We have been talking to large family offices and a few small institutions and a number of people we’ve worked with in the past either through Bamboo Investments or other ventures because we knew our type of fund would be attractive to high net worth individuals and private family groups.”
Looking at competition in the space they are investing in Stoddart sees some of the larger VCTs as competing in the same investment remit, but does not see those vehicles as much of a threat as many are restricted in what they can invest in.
Stoddart is confident he and Bettum will attract deal flow: “Ole and I have been investing in this space for 10 years. Almost 70% of the deals we have done in total have been proprietary, that is where there was no competition.”