Strategy & Operations » Leadership & Management » Draper Esprit’s CFO on the public and private company blend

Draper Esprit’s CFO on the public and private company blend

Ben Wilkinson, finance head of the AIM-listed private company investment group, reveals his all round role driving value.

When you talk to Ben Wilkinson, CFO of Draper Esprit, you quickly realise that his role is so much more than running finance at the junior market-listed entity that invests in private firms.

As well as leading the finance function, he is also heavily involved in raising capital and investing in a portfolio of 60 companies, in addition he has to talk to analysts and investors about the group’s strategy. So what’s required is a good understanding of public and private company expectations.

Draper Esprit’s model offers the opportunity for investors to capture the value of high-risk, high-reward returns of earlier stage investing through a publicly-traded entity that has delivered of returns at least 20% over the last decade and was floated three years ago.

Its portfolio of privately-owned, mainly digital companies, worth nearly £700m, includes stakes in companies such as reviews site Trustpilot and online money transfer service Transferwise. “What we focus on with our investments is high growth, high profit margin businesses. The average of our core companies is over 60% gross profit margin,” says Wilkinson.

The continued success of its model saw last full year pre-tax profits of £111m on turnover of £121m, with a market value of £575m in the first week of January 2020.

Having a skill set to help drive the Draper Esprit model has come from a variety of positions. After qualifying with accountants BDO, Wilkinson started as an M&A banker in the oil and gas sector at ABN Amro, before undertaking an investor role in a family office, and then becoming CFO of a South America-focused oil and gas explorer President Energy. In the five years he was there, Wilkinson helped raise funds in the London market for projects in Argentina and Paraguay.

A new challenge

Looking for a fresh direction, Wilkinson was hired by Draper Esprit soon after the firm listed in June 2016. “They needed someone who knew the public markets and could help them navigate the City and grow the model and raise more capital,”he says.

“Where Draper Esprit invests, you have underlying risk in the companies, and it was quite similar to how you would appraise an oil and gas exploration. You have risk, syndicated partners, potentially large upside and you obviously need the capital, so there was quite a lot that came together,” he explains.

What also attracted Wilkinson was the Draper Esprit model of opening up the private asset class for public market investors, given the trend of companies staying private for longer and the public market missing out on that growth. “This model allows us to invest in entrepreneurs for a long period of time. We’re not like a limited partnership (LP) structure, where you invest for five years and then you time out, with our companies, if they’re still performing, you can continue to back them for the longer term and capture more value,” he says.

As CFO, he plays a pivotal role in driving the model. “I get to be in the public markets, speaking to the City for public market and equity raising side and financing. We’ve done three equity raises since I joined and raised £315m, and put a debt facility in place for £50m.

“But you also get the underlying investments, investing in really interesting growth companies at different stages, how you structure the investment and the portfolio management that goes alongside. I sit on the investment committee, so I get to marry both those two worlds. And I suppose the third part of that is the Board, the position and the strategy and supporting the CEO, along that journey. I feel quite fortunate to have a role that gives me so much breadth,” he adds.

Wilkinson says he has been working hard on building relationships with City institutions seeking to understand how the Draper Esprit business model is being developed. “I’m very keen to speak to brokers and advisers and attending conferences, and being proactive to go and see investors. I undertook more than 100 investor meetings last year, because with this model it is a bit different so you do need to be proactive to explain it,” he says.

An ongoing dialogue is also vital when addressing issues such as the implosion of the Neil Woodford set of funds that investors in portfolio companies are focused on. “You have to be attuned to your investor’s concerns,” says Wilkinson. “I always try and put myself in the position of the person across the table- what are they worried about, what risk are they taking in making a decision, who do they need to persuade in their own institutions.

“A good example of that is when we’re presenting to the sales teams of the brokers, I always ask them the question, what is the feedback that they are getting, what’s the negatives? What’s the pushback so you really understand where people are concerned and what things do you need to address? Wilkinson adds,

“When you get concerns such as the Woodford question or tech valuation, its really just about being transparent with them about what’s good about our model and making sure they understand the checks and balances we have in place from a governance perspective but also from having active management on the board of the companies,” he adds.

“I think with each of those questions and pushbacks there’s a positive because we can show how our model is differentiated, but we can also understand the negative that can go with that, from a fear perspective or them just wanting to see the model being proven out. Quite often with tech companies, they’ll be high growth, but they’ll be loss-making, so that’s a different type of skillset to understand,” says Wilkinson.

Contribution of finance

Since his arrival, Wilkinson has been building out Draper Esprit;s finance team with the competencies and resourcing from a human resource perspective but also seeking to exploit technologies to improve processes. “We’re moving some things into the cloud, improving some efficiencies, through the investment process, through to the collection of the underlying data, that allows us to do our reporting,” he says.

“With Microsoft Power BI we’re dragging the underlying data into actionable formats, so that we don’t waste a lot of time, creating efficiencies in the team, by using the enterprise software solutions that enable your team members to provide the higher value insights by analysing that data rather than doing the processing.

“We’re also bringing in people who can help automate and process the data, a skill set that’s really coming into the finance function. You can’t now just be an accountant, you’ve got to have a bit more of a broader understanding,” he says.

Wilkinson says he is also taking valuable guidance from companies in the Draper Esprit portfolio. “An examole is UiPath which  providesrobotic process automation (RPA) solutions for large enterprises, or the solutions we see from some of the fintech companies,” he says. “I am looking at the way each of these companies tackle the challenges of how to grow, how to get the business model right, how to address shifts in markets and regulation.”

He is also looking to enhance the skills of finance leaders in the portfolio companies by running a CFO club for them. “We’re able to have a dialogue around a table regarding their problems and concerns, but also discussing their solutions. Their experience is something we all get benefit from and I think that’s an important thing in any role- being able to use what’s around you and capture the experience of everyone,” he adds.

Does Wilkinson have a favourite investment in the portfolio? He’s rather diplomatic on this question. “With investments that we’ve made at an early stage and backed subsequently through rounds, you always feel an affinity with them because you’ve almost seen them grow up. To see the success of a lot of our core companies- that have seen investment and benefited from active management on the Board, and are now global leaders in the areas they are addressing, is really satisfying. To be part of that journey is a privilege,” he says.

Wilkinson doesn’t as yet sit on any of the Boards of Draper Esprit’s portfolio companies. “That’s a deliberate choice at the moment because I’m reasonably time poor with the current job, but it’s a possibility at some stage,” he adds.

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