Foresight targets regional venture funding gap as parent group’s profits soar

Investment business Foresight is targeting more venture capital fund raisings and sees opportunities in the secured lending and private credit market.

As small and medium sized businesses look for alternatives to the high street banks for borrowing, Foresight sees a gap in the market.

“We are well placed to capitalise on the SME funding gap and cyclical nature of banking appetite,” the company said at its annual results presentation.

In the results, published this morning (July 4), Foresight which also invests in infastructure reported that due to “exceptional growth”, its Assets Under Management reached £12.2bn by the end of March this year, an increase on £8.8bn last year while revenue increased to £119.2m from £86.1m in 2022.

It made EBITDA of £50.2m, up from £31.8m last year.

Foresight chair, Bernard Fairman, said: “This was a record year of highly profitable growth for Foresight.

“We are now focused on further organic growth and have a strong pipeline of fundraising across asset classes scheduled for this year and beyond.

“We also continue to assess the market for accretive M&A opportunities, although the timing of these remains unpredictable.”

The private equity and venture business has a Manchester office and most recently Foresight took a stake through its venture fund in Manchester data business Red Flag Alert.  

Venture and seed investments can be into high tech, pre-revenue companies, which include university spinouts, the annual report said.

It has deployed capital through different business lines: Growth Private Equity: £78m (FY22: £61m)  Venture Capital: £27m (FY22: £20m)  Private Credit: £69m (FY22: £49m)

On the private equity side Foresight currently invests through designated funds such as The Foresight Regional Investment III Limited Partnership which secured additional capital of £4 million from both existing and new investors, enabling it to further its impact and support of established, profitable small cap companies in the North-West region, which is one of it smaller funds.

Claire Alvarez

Foresight Partner, Claire Alvarez, commented: “Across the North of the UK, the Foresight team has had a very busy start to 2023. We have made a number of new investments on both sides of the Pennines and, most notably, we announced the second close of our North East Fund and launched our Newcastle office.

“We see significant opportunity in the marketplace, despite the continued economic headwinds. We’re continuing to see promising growth companies and – through our three funds dedicated to the North of the UK, alongside our VCT money – we’re in a strong position to support Northern companies.

“We recently invested in Greater Manchester based, KSL, Manchester based, Red Flag Alert, and MSL Property Care Services – a fast-growing Yorkshire based company that is supported by our North West, North East and West Yorkshire Combined Authority funds. Our teams based in Manchester, Leeds and Newcastle have a strong pipeline of deals and we look forward to sharing more updates on our progress.”

They were also appointed by the West Yorkshire Combined Authority to manage a new £20 million fund to support SMEs throughout West Yorkshire; Allied Irish Bank commissioned Foresight to manage a new SME equity fund, the AIB Foresight SME Impact Fund, which is aiming to raise €75 million; the Foresight Regional Investment Fund V LP, our second fund focused on SMEs in Scotland, achieved a £62 million first close from institutional investors; Foresight manage part of the Midlands Engine Investment Fund, focused on the East Midlands, and received a further £16 million additional commitment this year from the British Business Bank.

Its annual report also features a case study on the exit from restaurant group Mowgli which it sold in January 2023, delivering a 3.5x cash-on-cash return to Foresight managed funds. Having supported the group to grow from three sites to 15.

Foresight targets investment in sectors with “favourable long-term trends and structural growth drivers”, in the revenue range of £2 million to £20 million a year.

It’s sweet spot for UK deals are investments of up to £10 million.

Last year Foresight backed Manchester-based digital e-commerce agency, Space 48 in its acquisition of the York-based Brave the Skies and acquired the technology ventures division of Downing, which includes the the management of Downing’s venture capital trusts and Downing’s Ventures Enterprise Investment Scheme for an initial £13.6m with add ons of up to £4.2m payable over a three year period.

The annual report features a case study on the exit from street food business Mowgli, led by the Manchester private equity team.