Henri Songeur, Investment Executive at Puma Private Equity

Henri Songeur, Investment Executive at Puma Private Equity, looks at the growth investment opportunity for innovative SMEs during a downturn

As the end of the year approaches and we take stock of the recent number of challenges thrown at our economy, it’s clear that SMEs are having to be more innovative than ever. In what has truly been a disruptive year, Puma Private Equity has seen significant changes to the companies we speak to.

The SME advantage

Often described as ‘nimble’ and ‘flexible’, in 2020 UK SMEs have fulfilled these stereotypes. Forced to move their operations to remote working and find new ways of engaging commercially with their audiences, SMEs have had to embrace change. As with all change, disruption has been accompanied by opportunity.

Whilst many larger, staple high street brands have stumbled, we have seen e-commerce SMEs hit the headlines with impressive growth rates. Where big corporates have struggled to shift operations to virtual workflows, innovative tech platforms have capitalised on new sales opportunities. The disruption has, in many cases, galvanised SMEs looking to eat into established incumbents’ market shares.

An evolving funding landscape

This year has seen traditional lenders pull out of the market, leaving a gap in the funding landscape. As banks and venture debt providers retracted their lending for growth and tightened their terms, many companies turned to growth equity to finance their expansion plans.

Investing in change

The year began with signs that this could be one of the most active on record, with Q1 equity fundraisings amounting to £4.7bn in the UK, second only to Q1 2019 (£4.8bn). Then, as the pandemic struck, businesses were forced to pause and reengineer processes for operation in the new world, leading to a depressed Q2 and early Q3. 

Despite the negative press, since then, equity fundraising has recovered strongly – 2020 investment currently stands at £14.3bn, down on 2019’s record £18.3bn, but expected to be up on 2018’s £14.4bn as we await December’s deals to be announced. 

Adapt and grow

As many sectors have taken a hit and large-cap CFOs reign in spending, SMEs have the chance to take up the innovation mantle. As a growth equity investor, Puma Private Equity sees this downturn as the perfect opportunity for well-funded, well-managed and versatile SMEs to claim market share and tap into recovery growth over the next three to five years.

This sentiment is reflected in the wider market’s equity fundraising totals, as well as our own origination efforts, through which we have seen neither a drop-off in quantity nor quality in 2020. A well-capitalised scale-up will have every opportunity to be in the right position when uncertainty dissipates and client confidence returns to the market.

[1]www.beauhurst.com, December 2020

[1] Beauhurst, December 2020