Investing into UK growth companies
Managed by: Octopus Development Capital Team (Octopus Investments)
Parent company: Octopus Group (founded in 2000)
Location: Various, UK
Investments managed: £130m
Investment size: £2m to £10m
Forward thinking for the long-term
The Octopus Development Capital team manages £130m of investments in UK growth companies. The team, made up of 10 people, invests from £2m to £10m into entrepreneurial companies. They look for companies that are already making money and that have the potential to significantly scale up in the future. At the same time, they look to back businesses that want to do more than make a profit and that have strong, cultural values.
Supporting small businesses to grow sustainably
The Octopus Development Capital team always seeks to build equal and positive partnerships with the companies it invests in, rather than follow the traditional approach of dictating to portfolio companies.
“Successful partnerships are built on trust and lateral thinking,” said Edward Keelan, Investment Director in the Development Capital team. “Our culture of supporting entrepreneurs runs through the DNA of Octopus. It’s not just a strategy but an ethos, and hopefully our portfolio companies see us as trusted partners rather than just passive funders.”
The team also has a strong focus on helping their portfolio companies achieve steady, sustainable growth. “We don’t look for the kind of hyper-scale growth that you find in some unicorn-focused C-rounds,” explained Keelan. “We’re passionate about helping growth businesses to scale-up sustainably. That’s why we’ll often stay on the boards of our portfolio companies for a long time as we help them to succeed. We’ve been involved with some of our portfolio companies for the better part of a decade.”
Investing in values and attitudes
Strong business values are also important to the Development Capital team, as they look to back companies that think beyond commercial gain. And once invested in these businesses, the team helps them nurture their commitment to good values as they begin to grow.
One example in the Development Capital portfolio is One Team Logic. The business provides safeguarding software, helping 25,000 carers protect the 1.5 million children in their care. Their software allows users to quickly identify and help children who are most at risk.
One Team Logic’s CEO, Martin Baker, explained that the idea of protecting others is close to the hearts of everyone in the company. “It’s very clear across our whole business that our ethos is about protecting people from abuse, harm, and neglect,” he told us. “Octopus has stood strongly behind that ethos and is incredibly supportive of us taking that forward.”
Actively building networks
Investing in companies with similar values has meant it can be possible for portfolio companies to help each other. “As our portfolio has grown, we’ve found more synergies between our partner companies,” Keelan noted.
Introductions within the Octopus network have helped portfolio companies to quickly build valuable partnerships with one another. Keelan went on to tell us, “We connected One Team Logic to another company in our portfolio, which operates specialist schools to help educate young people. The link was an obvious one here.” Baker is grateful for the chance to make connections like this. “It’s not always about the commercial relationship,” he explained. “These connections often yield valuable learning opportunities. It’s about one company doing something that would interest the other.”
Helping Businesses adapt during a crisis
Looking after a large, diverse portfolio has given the Development Capital team the ability to run scenario planning and create predictive modelling. “This often gives us intelligence that can help alert our partners to tough times,” explained Keelan. This intelligence was particularly helpful during the early days of the COVID-19 crisis.
When the crisis hit, the Development Capital team acted fast to support their portfolio. “We connected our companies with accounting experts to help them chart their path with cashflow planning, and we connected them with technology resources to help them plan work-at-home initiatives under lockdown. Our employment experts also advised them on critical, evolving strategies like furlough schemes.”
Beyond that, we committed ourselves early on to give our portfolio businesses breathing room as they adjusted.”
One Team Logic
The help and support provided by the Development Capital team allowed businesses to adapt to the crisis quickly.
“One Team Logic leaned into the crisis,” Keelan told us. “It gave away its software to schools that didn’t already have a remote working online solution, so that they could care for vulnerable students remotely during stressful times at home.” Support from their investors was key to giving the One Team Logic team the breathing room they needed to come up with solutions. Their CEO Baker explained, “We weren’t coming under pressure to slash and burn or make ridiculous cuts at a time when we actually need to think through the other side of this and begin with the end in mind.”
Another company that found support from the Development Capital team useful during the pandemic is Countrywide Healthcare. The company was founded in 1996 and supplies care homes with health products. Octopus helped its managing director, Alastair Kitching, expand sales and create an online offering in 2014, a move he was thankful for when the crisis hit.
When coronavirus hit the UK, Countrywide Healthcare were called upon to serve the country’s unprecedented need for PPE. Due to its record of steady growth and top reputation, Countrywide Healthcare were approached by Public Health England. The company was tasked with helping ship stockpiled pandemic products to the social care sector and delivered 2.4 million masks to more than 4,000 care providers. Countrywide Healthcare was also able to keep their prices reasonable in the face of demand, a decision Octopus was very much in favour of. Kitching told us, “Throughout the [pandemic] period we’ve spoken to Octopus on a regular basis. They have been highly supportive of our stance not to exploit the situation and to ensure we can do everything we can to support as many homes as possible”.