Broadening horizons — an interview with the new Chair of the BVCA
Calum Paterson, the BVCA’s new Chair and managing partner at Scottish Equity Partners, talks to Dan Matthews about his plans to double-down on the progress made by UK scale-ups in the year ahead.
Despite his remarkable achievements in putting Scotland on the equity investment map with the fabulously successful Scottish Equity Partners (SEP), Calum Paterson is humble about his contribution to the asset class over the last 25 years.
The firm has raised some of Europe’s biggest venture funds and has backed some of the UK’s most innovative companies, including Scotland’s major tech success story Skyscanner, as well as Matchesfashion, Craneware and cutting-edge innovators like Cambridge Silicon Radio, Biovex and Exco Intouch.
“Serendipity is the word that springs to mind. I didn’t really set out with a career plan beyond wanting to work hard, doing something positive and progressive, and having a degree of control over my own destiny,” he says, describing his route into the sector.
“Venture capital and private equity certainly has a much higher profile today than was the case 25 years ago, but I got hooked from pretty much my first day and have never really looked back. It’s an exciting industry to work in.”
After graduating from the University of Strathclyde with a degree in economics, Paterson began his career at global professional services firm EY before joining Scotland’s national development agency where he became head of its investment team.
The agency sponsored his MBA and the combination of experiences led him to consider a move into the private sector. Bypassing further job opportunities, he moved directly into owner-management by co-founding SEP with five other investment professionals.
Lessons from the dotcom bubble
“We set the firm up back in the year 2000, just before the biggest technology downturn in history, so not exactly perfect timing,” he jokes, referring to the dotcom boom in which countless investments were swallowed up in high-profile digital businesses.
“As a team, we built up our experience and track record, backing a number of Scottish technology companies that went on to be very successful. We then decided to do our own thing and we set up SEP. We opened for business in August and raised £100 million for our first fund within three months.
“One of our first priorities was to extend our footprint across the UK, so we quickly opened an office in London. We made a number of key initial hires including two former colleagues David Sneddon and Andrew Davison who had moved to Bridgepoint and 3i respectively, as well as Jan Rutherford, who joined us from Dresdner Kleinwort Capital. All three remain partners at SEP today, along with four of the six co- founders.”
Paterson describes these as “heady days” with venture capital and technology gathering strength simultaneously. Valuations were at record levels, yet picking winners required cool heads, as many of the businesses had foundations built on sand.
It taught Paterson the essential lesson to seek out the fundamentals of strategy and value as the investment landscape and the economy lurched wildly in capricious winds. SEP’s model evolved steadily over time and today it specialises in growth equity investments of up to £25 million in companies with what he describes as “exceptional potential”.
“We invest once technical and commercial viability has been demonstrated and the focus has turned to growth and scaling up,” he says. “We look for a good track record of revenue progression and for companies at, or on a clear path towards, profitability. We see our role as helping them reach the next level. We have a lot of experience to bring to the table for companies at that stage.”
For Paterson, private equity and venture capital investors have a unique opportunity to fund not just promising businesses, but the prosperity of nations. He sees the sector as an engine room of growth, fuelling value creation that delivers jobs, taxes and goods and services that benefit all.
“I like being in an industry where you can combine doing good and doing well. As well as being a strongly performing asset class, the private equity and venture capital industry is a force for good, in overall terms. It is hugely important for economic development and is a significant driver of growth. It really matters to the UK economy in terms of innovation, exports and jobs.”
Opportunities and risks
This, in a nutshell, is his prime motivation in leading the BVCA during his term as Chair. In the coming months his plan is to encourage more UK scaleups and to promote the interests of the wider industry, incorporating those who invest in the asset class.
Another priority will be to encourage more women into the sector and greater diversity more generally, building on the important work that the BVCA is doing in this area. “This is high up on the BVCA’s agenda and something that I am very committed to supporting,” he says.
Paterson also believes that the industry is still suffering some residual damage from the banking crisis of more than 10 years ago, which he says has had undeserved ramifications for how business and enterprise is perceived by society more generally. It is important to tackle this, he argues, and to ensure that the significant contribution PE and VC makes to economic prosperity is properly understood and appreciated.
All of this work will come against a backdrop of uncertainty fueled by the process of UK detachment from the European Union. Paterson pledges to progress the interests of members to ministers, MPs, officials and regulators. He points out that UK private equity and venture capital is second only to the US globally and that this position must be protected in the face of political upheaval.
The good news is that technology, innovation and investment are continuing apace and this momentum has fostered a large and growing pool of dynamic, agile companies across the UK and Europe. He sees growth equity opportunities being driven by new business models, convergent technologies and ambitious entrepreneurs looking to achieve scale.
“I think the UK is well positioned. Five of the world’s top-20-ranked universities for computer science are based here and we are developing a global reputation in areas such as AI,” he says.
“As well as ensuring that there is support for start-ups, I think the focus has to be about supporting scale-ups, making sure that companies are aware of their funding options and correcting any regional imbalances in the UK.”
