From the top · 16 May 2016

Hambro Perks CEO: “Funding early stage businesses should be through equity and not through debt”

Dom Perks

As co-founder of an incubator and investment company, Hambro Perks, Dominic Perks knows the small business funding landscape inside out – as well as being one of the most enthusiastic players in the small business investment space.

His company – “set up by a collection of entrepreneurs to understand entrepreneurs” – stands out from other players in the early-stage investment space by co-founding promising companies as well as providing seed investment. Perks described the model as “definitively people-led. We’re not a fund, and that makes us very different – more flexible and better able to take more risk.”

He is also an ardent advocate of the opinion that equity rather than debt is the best way to support such businesses. “I don’t think banks should be lending into this space – there’s too much risk,” he argued. “When there might not be revenue for months or even the first few years, having a loan to pay back in regular instalments doesn’t make sense.”

It is also clear that Perks relishes the opportunity to be involved in growing the businesses he has invested in. “We are financially motivated, but our genuine key drivers are mentoring people and growing businesses. It’s the joy of supporting an exciting project which everyone can be proud of which really drives us – we love it when great people arrive at our office with an interesting idea” Perks explained.

Yet despite this positive attitude to investing in entrepreneurship, Perks is under no illusions about the challenges that the leaders of young firms seeking funding face. “In this country you have a very ill-defined and hard to access angel community that has really struggled to fill the gap between talented teams and series A funding in an organised fashion.”

Asked if crowdfunding has an important role to play in the small business funding space, Perks was more ambivalent. “It’s exciting that’s there’s so much interest in it – it’s indicative of the times we live in that people are willing to put their wealth into early stage businesses, although it’s also reflective that other asset classes aren’t earning a great return. My only concern is that the valuations could be too high.”

Even with adequate financial backing, he believes there are plenty of hurdles for small business founders to jump over. “Our challenge with the Hambro Perks portfolio has been giving the young firms we work with enough support to make sure they’re first past the post – it isn’t just about funding, but making sure you’re learning and adapting to what the data tells you,” Perks explained.

Laundrapp – the laundry and dry-cleaning app which Perks co-founded in 2014 – appears to have achieved this. It had six or seven competitors when it was a very young company, but is almost alone in the market now. “I think there’s definitely a first-mover advantage when it comes to innovation,” he explained. “But it’s also quite Darwinian – typically, the best young companies are the most pragmatic ones.”

For the serial investor, those entrepreneurs who want to follow in the footsteps of those he has backed and access a slice of the modest investment pie which is available to them, having a clear purpose is key. “Really great businesses need to solve a problem, but often business plans for new ventures are actually solutions looking for problem, rather than the other way round,” Perks explained.

The Hambro Perks co-founder is an enthusiastic proponent of the idea that having right team is key to turning good business plans into entrepreneurial reality. “Success is largely down to execution,” he argued. “It’s more about people than it is about brilliant ideas.” One of the most striking aspects of the way Hambro Perks works with the young companies it incubates is to match up people with different skills to those of the promising business founders who come to them.

Perks believes that this approach can delivers better results than co-founders who are already friends can achieve. “If you have two people who have started a business because they know each other already, then the fact they are doing it together is more due to circumstance than analytical evaluation of skills,” he explained.

“There’s some truth in not mixing businesses with pleasure. Successful teams become friends, but when it comes to choosing a co-founder, skills are actually more important than chemistry, because without those, the rest won’t work.”

Yet for those young companies which do have the right leaders at the helm Perks thinks 2016 is an exciting time to be in the small business world. “There’s a growing wave of talent from all generations looking to work in early stage businesses – and the pace at which technology is making it possible to scale a business is incredibly exciting and attractive.”

Enjoy getting a different perspective on small business funding? Find out how they approach it in Norway.

Sign up to our newsletter to get the latest from Business Advice.


 
TAGS:

ABOUT THE EXPERT

Hannah Wilkinson is a reporter for Business Advice. She studied economics and management at Oxford University and prior to joining Business Advice wrote for Kensington and Chelsea Today about business and economics – as well as running a tutoring company.

Procurement