A flexible approach to the way we provide capital
In contrast with some other investors in our space, we don’t have pre-determined views about minimum target returns. This helps us take a flexible approach to the way we provide capital and make the right type of investment into the companies we back. We can tailor our funding to a company’s specific situation, whether that be taking an equity stake, non-dilutive capital, or both.
We tend to focus on how big our investment is relative to the size of the company, and what that implies about the level of risk. By doing this, we can tailor the cost of capital to the individual needs of the company which may often result in lower dilution.
Companies generally use our funding for one of three things:
- Scaling up their sales and marketing activities to fuel their growth
- Incremental research and development to improve their product or processes
- Expanding their business geographically or into new activities within their sector
Efficient growth is important
We like to back businesses that are looking to grow in a sensible, scalable way, rather than those pursuing growth at all costs. That’s why unit economics are very important to us. Good unit economics suggest the company can grow in an efficient way.
Some key areas that we look at are:
- Customer acquisition costs
- Payback and profitability of those customers
- Cash burn rate relative to the size of the business
Above all, we take a partnership approach to investing. We are in it for the long term. Our open-ended fund structure means we have no time constraints on when we exit an investment, and we can and do back our winners with follow-on capital.
We also recognise that managing a scale-up business will involve some difficult times, which is why we are always on hand to give non-financial support on top of the capital we provide.
For professional advisers only. Not to be relied upon by retail investors. Personal opinions may change and should not be seen as advice or a recommendation. Issued by Octopus Investments Limited, which is authorised and regulated by the Financial Conduct Authority. Registered office: 33 Holborn, London, EC1N 2HT. Registered in England and Wales No. 03942880. Issued: October 2020. CAM010310.