As Panoramic embark on raising their third Fund, Partner and co-founder of Panoramic, Malcolm Kpedekpo, provides his experience of starting and raising multiple institutional Private Equity Funds.
Prior to 2009 and starting Panoramic, I had no idea about what it took to start a fund – working in a large bank, our capital came from the banks’ balance sheet and therefore we had limited insight to this aspect of the world of private equity. Our focus was purely on investing into companies at this time.
It is the time when the shoe is on the other foot. Rather than being approached for investment, we are seeking investment and trying to prove our worth – the core fundamentals are the same – team, track record, market fit and opportunity, prospects – all the areas we spend so much time interrogating on a new investment opportunity are replicated by investors assessing us.
Our first fund took 15 months to raise; we had no income, no office for large parts of that period (working from home long before it was fashionable!) and no real certainty that we were going to raise money in what was the middle of the Global Financial Crisis – our first fund was effectively our seed raise, we were a pre-revenue spin out with a great track record but doing it for ourselves for the first time. Going through that process gave us incredible empathy for entrepreneurs raising money that sticks with us to the current date – treat people well, give honest feedback quickly and openly and a stark realisation of what it was like on the other side of the table.
The focus from investors was on whether we could do it as a standalone entity, how much of the track record belonged to us (and could we prove it) and was the team cohesive enough to stick together for the duration of fund (10+ years).
Our First fund
The British Business Bank (known as Capital for Enterprise at the time) supported us via their Enterprise Capital Fund programme (we were their 9th recipient) and that provided c65% of the capital – something we will always be grateful for as without that support we wouldn’t have got up and running. We were able to bring on other supportive LPs, mainly institutional, who were willing to give us a chance that this team could continue to deliver. March 15th 2010, was an incredible day when we closed Fund 1 at £34m, oversubscribed against a £32.5m target.
Evolution for Fund 2
By the time we got to Fund 2 in 2015, we had evolved, with 5 years of track record as Panoramic – numerous reference points, a robust auditable track record with some great exits and strongly performing assets and all importantly, details about how we performed when things didn’t go to plan with the portfolio. Effectively, the second fund became our ‘Series B’.
As a result, our Series B was a much shorter process, although challenging in a different way as we juggled managing the portfolio, originating new transactions, aligning timing of new fund closing and transactions closing and looked to bolster the team. Nevertheless, give me these challenges any day compared to having no income and working from home.
Given our positive track record, all our existing investors supported us again and we were able to bring some new investors to the Fund – very much a testament to our philosophy of always over delivering for our investors. While Fund 2 closed at £65m, it was key for us to retain our focus on the lower mid-market where we perceived a gap in funding.
Launching Fund 3
We are currently in the process of launching Fund 3 for spring 2022 and this represents the next challenge in Panoramic’s evolution. With an ever-changing landscape amongst LPs (new entrants, some consolidation and some exits from the market), and launching off the back of the terrible past 18 months of Covid and its effects on all aspects of our life, but (positively) with 11 years track record to look back on.
As we set out on our ‘Series C’ – with the same anticipation that potential investee companies set out on their fundraising – to raise our Fund 3 and continue investing in UK SMEs there are so many dynamics at play, both within and outwith our control. Nonetheless, with exceptional investment performance, a strong settled team and an unrelenting focus on investing in growing regional UK SMEs we set off with the same optimism we did all those years ago, when we were a team of 3 working from home with no income, and a dream of setting up a new independent PE firm focussed solely on UK SMEs.