Founded in 1982, Newable provides business premises, advice, equity and lending to around 12,000 small and medium-sized businesses every year.
Newable is the rebranded name of Greater London Enterprise, which itself took over the business enterprise assets of the old Greater London Council.
Four years ago, Newable’s board decided it needed to change tack to better reflect the needs of SMEs, hiring Chris Manson as chief executive in January 2016.
Prior to joining Newable, Manson launched, scaled and sold three businesses including TV shopping channel Sit-up, which was sold to Virgin Media for £194m.
Manson previously ran Chelsea Football Club and Andrew Lloyd Webber’s Really Useful Group, where he looked after the overseas productions.
He won an EY Entrepreneur of the Year award for London in 2005.
Manson says: “Joining Newable was very appealing to me because as an entrepreneur, I was aware of the difficulties facing owners of small businesses such as the paucity of financial assistance and the paucity of support. I thought this was a powerful opportunity.”
Newable is limited by guarantee, which means all of its profits are ploughed back into the company.
In the year to March 2018, Newable as a company reported operating profit of £9.0m and a net asset value of £56.9m.
What is Newable’s strategy?
Over the course of the last three years, Newable has reconfigured into three areas:
- Small business locations
- Business advice
- Business finance
It has two purposes: to make money for itself and to help small and medium-sized businesses to grow.
Nick Wright, Newable’s marketing and communications director, says: “We’re available to companies as when and needs arrive. We provide a holistic service so it all knits together. It’s an ecosystem of services from premises to business advice to finance.”
Small business locations
Newable’s business premises arm redevelops industrial estates, taking brown-field or contaminated land and turning them into sites regenerating economic activity.
It has just sold its property development portfolio of 10 sites but still has another four in development.
In November 2018 Newable bought flexible office provider Citibase, which manages office space on behalf of landlords. Citibase offers 40 sites across Britain and Newable plans to more than double that offer to 100 sites within two years.
Small business advice
The second prong of Newable’s activity is providing business advice to small businesses either exporting for the first time or into a new overseas market, on behalf of the Department for International Trade.
In 2018 Newable supported nearly 10,000 UK businesses with their export drives, generating £2.5bn of new business.
It also helps run a programme for JPMorgan Chase helping small businesses plug into bigger supply chains.
Other business advice clients include the European Regional Development Fund (ERDF) and European Enterprise Network.
Its latest initiative is offering a turnkey service for UK companies that want to export to the US for the first time, which is a joint venture with HR provider Avitus Group, which handles payroll and medical insurance requirements for about 8,000 small businesses in the States. Newable sources a business representative who works on behalf of the UK company setting up in the US, working under the auspices of Avitus, which enables small British businesses to scale-up easily.
There are also three prongs to Newable’s equity and lending side:
- Lending money
- Organizing management buyout finance
Chris Manson, CEO of Newable, says: “At Newable, we’ve been supporting young businesses across Britain for more than 35 years … we see their potential, we understand the challenges they face – in particular, the widening gap between seed and Series A – and we are building innovative investment products to help them address those challenges.”
Newable Business finance
Newable Business Finance began life as a joint venture with Liberis in January 2017.
NBF provides loans to small businesses with turnover of £1m-£5m, having lent just over £30m to date to just over 350 businesses.
It can lend anything between £25,000 up to £150,000, although the average loan size is around £65,000.
NBF describes itself as the largest supplier of “responsible finance” in the UK, which in practice means simple and transparent loan terms and access to business mentors covering everything from accountancy to marketing.
The loan arm receives between 100-150 loan applications a month and that number is growing – NBF had a record level of loan applications in June to the tune of £20m, reflecting the growth aspirations of the UK’s SMEs despite the challenging Brexit landscape.
Between 15-20pc of applications convert into loans.
The majority of NBF loans go to companies in the service sector, which are often rejected by high-street banks because they have no physical assets to act as collateral. What digital businesses have is intellectual property, not bricks and mortar.
Phil Reynolds, managing director of lending at Newable, says: “You may have been rejected by scorecard lenders but we’re going to give you a decision as quickly as possible. You either get a quick yes or a quick no.”
Reynolds previously worked at Travelex, Barclays and LEK Consulting.
A proportion of NBF’s loan book is underpinned by the Enterprise Finance Guarantee scheme, which provides lenders with a Government-backed guarantee for up to 75pc of the outstanding balance of eligible facilities, potentially enabling a “no” credit decision from a lender to become a “yes”.
“This is going to become a bigger problem for banks as most of these businesses don’t have physical assets but what they do have is intellectual property,” says Reynolds. “Shifting away from hard assets to soft assets is a theme where the whole market is going to have to adapt.”
Newable Private Investing
NPI acts as an introducer of start-ups to angel investors and runs tax-efficient funds for investors who want to back a range of innovative businesses.
Named by Beauhurst as the UK’s most active early stage investment network, over the last two years NPI has facilitated 51 EIS investments raising a total of £36m.
Angel investors can either invest directly or through the Newable Scale-Up Fund 3.
“We saw 1,500 business plans last year, which we whittle down to 70 that we put before our network of 500 active angel investors,” says Wright.
Out of this, around 20 receive investment.
This process has resulted in a failure rate less than half of the average for London start-ups; one third of previous NPI investments have been deemed a success.
Exits include Hallmarq Veterinary Imagining, a specialist in advanced diagnostics for horses and companion animals, which yielded five-fold returns when it completed a management buyout led by August Equity in December 2018.
The current NPI portfolio includes Rezatec, a cloud-based analytics platform for satellite data; Sphere Fluidics, which facilitates advanced screening and characterisation of cells for applications in biotech and pharmaceuticals; and Hummingbird Technologies, an agritech company using drones to provide farmers with sophisticated insight into crop development.
Newable Scale-Up Fund 3
Over the years, Newable has raised £10m through various legacy EIS funds.
In January, NPI launched a £10m evergreen EIS fund targeting tech companies hoping to scale.
Newable Scaleup Fund 3 is aimed at high-growth businesses in knowledge-intensive sectors such as electronics, automation, medtech, and spacetech to bridge the gap between seed and Series A funding as they look to scale up.
The fund targets high-growth early stage companies that have moved from concept to a working business model but don’t yet have the numbers to attract VC or private equity money.
Newable’s latest initiative Newable Capital finances management buyouts of healthy companies whose owners want to exit.
There are 77,000 companies a year in the sub-£10m enterprise-value range that need to sell because either their owners want to exit because they want to retire or for other personal reasons.
It used to be that a management team would buy out the owners and they could do that either through borrowing from their high-street bank or through a venture capital trust (VCT).
However, VCT legislation has changed stopping VCTs from investing in management buyouts and banks are not interested in small businesses because the deal costs are uneconomic.
Newable has committed £25m to its new MBO finance programme, buying five businesses itself as a test, building them up and helping their management buy the businesses over a three to five-year time period.
Business participating in the trial scheme so far include an insulation -component manufacturer, a factory machinery-installation company, a medical equipment manufacturer and an aluminum-window-frame manufacturer.
Wright says: ““These are all solid businesses that we can support in the next stage of their journey.”
Adds Mason: “We’re specifically looking for businesses that have specialist sector expertise and the ability to export. It’s not a particularly new idea. It’s what 3i set out to do 40 years ago.”
Newable surveyed 263 potential companies before settling on the first five, three of which are about to complete.
It plans to launch a management buyout fund within the next 12 months, initially raising £50m.
Mason says: “We want to be the bridge between where you’ve got management running businesses but not owning them. Otherwise, their only other route is a trade sale, which is often not in the interest of founders and means loss of jobs.
“Private equity is not interested because although these are good solid businesses, they’re not capable of tripling turnover, which is what PE is looking for.
“It’s supporting businesses by putting them in drydock for a few years and refitting them before releasing them down the slipway again.”