Steve Bartlett has a habit of making headlines – this article is no exception – but there is another entrepreneur looking to shake up the investment market.
Toby Dixon was one of the first investor-advisors on the BBC Dragon’s Flight Fund. Having sold his recruitment business for over £30 million in 2021 – 11 years to the day that it was launched – he is launching a fund of his own, Growth Fund 1, after driving his wife mad in the 12 months following the completion of his earnout.
“I’m not someone who likes to take a back seat. I get bored quickly. ‘Take some time out!’ my wife said when the sale was complete,” he recounts for BusinessCloud.
“However, without a business to keep me occupied – I’d played quite enough tennis – I became very annoying and started bossing people in and around the house – much to my wife’s chagrin.
“It was clear there was room for only one boss at home. We quickly got to ‘I need to go and set up another business!’”
Before we get on to the new venture, I’m intrigued to hear more about his relationship with Social Chain co-founder and Diary of a CEO host Bartlett.
“I like Steve. We’re cut from the same cloth. It’s a very natural collaboration,” says Dixon. “I love our high-energy meets and shared passion for success.
“Flight Fund is invite-only, but I liked the look of what he was doing and wrote to him. Having spoken, he felt I was the kind of person he was looking for and invited me in.
“We are both passionate about growth firms, backing really good people, and the absolute importance of culture in today’s business environments.”
Zero PE experience
Dixon has zero experience in private equity but says this will give him an “unfair advantage” as he launches his new fund.
According to research from Harvard Business School, three out of four venture-backed businesses fail. He is not fazed by this and says his business experience will be his secret weapon.
“The top end of the PE market is very well-served. The big funds typically have the skills and experience to take a thoroughbred and build it even bigger,” he explains.
“At the lower-mid market end, where the job is to select the right ponies and turn them into thoroughbreds, I found the skills and experience present in the PE funds were different from the needs of scaleups and growth businesses.
“I was staggered to realise so few in the lower-mid end of the market funds had people that have been there and done it. Most came from a banking background with lots of PE or advisory experience, but not one has been a scaleup or growth founder. That’s what creates our unfair advantage.”
He adds: “There are brilliant venture funds offering great returns. I’ve invested in a couple. However, there are a lot of amateurs burning their investors’ money. In my opinion, a major factor is that venture and PE businesses serving the lower-mid market so often lack the in-house skills and experience needed to drive scale and troubleshoot successful outcomes in smaller dynamic companies. But how could they if they’ve never done it?
“Speaking to smaller PE outfits, you often hear them say that they factor in that some of the businesses will do well, some won’t, and some will ‘surprise us and become a big success we didn’t see coming’.
“That’s a problem for me. Why are you investing in companies if you’re not sure they will be successful? How on Earth can a company’s success be a surprise? Surely you bet on these companies because you knew they would do well.
“If we want to see more smaller investor-backed businesses succeed and grow, as is our plan, we must ensure they are supported by skilled and experienced growth partners who can help them during strong economic markets and, more importantly, when things become tough.”
Headwinds
Dixon founded his recruitment business in the wake of the 2008 recession. Marlin Green quickly established itself as an industry-leading provider of highly skilled, niche technology consultants to in-need clients at short notice anywhere in Europe and beyond.
As CEO he guided it through Brexit then through COVID-19 as non-executive chairman.
“There will be no institutional money permitted in my fund,” he ascertains. “It is for entrepreneurs/self-made money only.
“I believe growth firms do better when there is growth experience in the room. Our fund will provide that experience.”
I ask why he opted to found a PE fund rather than investing as an angel and building his portfolio as a non-executive director.
“I’ve run some successful NED roles since exiting. It’s great to help other businesses get where they need to be, but I desperately missed being in charge,” he answers. “I’ve invested in some exciting tech businesses in electrical charging, consumer tech and carbon offsetting.
“There are brilliant angel investors out there. I met several. However, angel investing is different.
“I’m not a ‘hit and hope’ type of guy. I am a typical entrepreneur and a control freak. I don’t just want to lump money on a horse and watch from a distance.
“I want to be involved in the training. I want to see what it’s eating. I want to invest heavily and follow my money. I’m not trying to pick a winner from a card. I want to be part of the company’s success.”
He adds: “As an investor and partner in the business, when we get the next downturn, or Brexit or hiring drought, my job is to bring the experience to guide the company through the storm.”
Business experience
Unlike other funds at the lower-mid market that prioritise PE experience, Growth Fund 1 is backed by leading entrepreneurs and supported by a panel of experienced and self-invested advisory members, all with a proven track record of succeeding in business.
Dixon says Bartlett’s fund has similar characteristics to his but focused on very different market spaces. “Like me, he’s also going into businesses with genuine expertise and highly successful individuals. People who have grown their own mega businesses and can bring that experience to the table if needed.
“He’s also a proven winner, and that’s a core requirement for anyone I do business with.”