Euan Baxter CA on investing in female-led businesses
Some businesses are born lucky, some have luck thrust upon them. Others just need someone to believe in them. If Euan Baxter CA has faith in your business, you must be doing something right. Kitty Finstad catches up with one of Scotland’s most optimistic investors
Within the grand Georgian proportions of very smart Edinburgh townhouse offices, Euan Baxter CA is not what I expect. I try to resist, but the environment conjures up a stereotype: traditional, suited and booted, media-trained VC dude. Instead, here’s a guy in a jumper, denims and trainers – warm handshake, broad smile, softly spoken. Now I’m thinking: plays bass in an indie band and volunteers at an animal charity. I really must stop thin-slicing.
What Euan Baxter CA actually does is lead investments into scale-up companies in Scotland’s Central Belt – primarily Glasgow and Edinburgh city regions – with BGF. He’s responsible for sourcing, identifying, converting and assessing good investments for the regional arm of the national growth capital fund.
One of those investments is a “fantastic Edinburgh technology business” – Euan has just come from lunch with its founder. “I first met this chap around five years ago when they were turning over around 10 grand a month,” he says. “Now it’s a multimillion-turnover business looking for investment. Those stories of growth are what we love to hear about. We love finding those companies, trying to be additive and also getting to know them to help them with capital as well as expertise.”
Euan says he never fails to be amazed by the number of interesting businesses there are across the region, from traditional manufacturing to cutting-edge tech to luxury accessories. What makes BGF different from other growth funds goes beyond numbers. But here are some for context: it’s a £2.5bn fund investing between £1m and £20m. The difference is BGF only ever invests as a minority stakeholder.
Euan explains why that matters: “Because we’re a balance-sheet investor – investing from committed capital – we don’t have the same time pressures around our funding life cycle or exits. If you’re an entrepreneur looking for scale-up capital, this can be very attractive. We take a longer-term view, which allows us to be a more flexible partner than some traditional funds.”
Because investments can start at £1m, volume is also a USP. With multiple investments – BGF has backed over 550 companies across the UK and Ireland to date – there’s a network of expertise united by a common ambition. Baxter describes BGF as “multi-sector specialists” who don’t limit themselves to one niche. “With such a wide network, we bring a lot of expertise to the table, especially in the form of non-execs – we have an excellent talent network, for example, which connects business to non-execs and board-level expertise.”
BGF typically takes a board seat on businesses they invest in. Living proof of the multi-sector specialist model, Euan is a non-executive director or observer in a manufacturing business, a high-growth technology business and a fancy-dress costume business: “three great, growing companies – I love it!”
In a landscape where getting more women onto boards is no longer a new topic, BGF is going further, actively backing women-led businesses at scale. Since 2011, the fund has invested £400m in women-led ventures, including the Edinburgh HQ’s neighbour, Strathberry, which makes luxury leather handbags and other high-end accessories – a brand whose progress Euan and his team had been tracking for two years before they completed the deal.
Asked to elaborate on the reasons for focusing on women-led businesses, Euan's idealism and sense of fairness are evident, and his soft voice gets louder: “There’s simply not enough money going into female-led businesses. There’s a lot of work to be done to make sure there are more female-founded businesses, more scale-ups and more that are attracting and actually getting capital. And so to do that, it’s our job to put our focus there.”
That focus has led to BGF being recognised as the most active investor in female-led businesses in the UK by the ScaleUp Institute for the past four years. The impact of not investing in women is profound, says Euan: “If you’re not able to commit capital into businesses run by half the population, that’s a pretty fast way of holding back economic output.”
Although the numbers are moving in a positive direction, Euan and his BGF colleagues want to see more. Government legislation, employment law and leading by example all have a part to play. “Seeing it to believe it is powerful,” he says. “We need to see and hear success stories. Shout about them. Get those great female entrepreneurs in front of younger women so they can see for themselves what’s possible.”
The other side of this visibility coin is in ensuring the make-up of BGF itself reflects society. “The investment industry is still very male,” Euan observes. “We need more diversity and we actively recruit for it.” This is not lip service: in 2022, 76% of all new hires at BGF were female and/or from a black, Asian or minority ethnic background.
Encouraging diversity is a particular passion point for Euan, who championed a cultural change in BGF’s internship programme shortly after he joined the company in 2015. A structured approach meant being able to bring in as diverse a range of people as possible into the private equity industry.
“When I think about my own background, I had no awareness of private equity. And when you look at how internships had been handed out in the past – unpaid, based in London, awarded based on who you know, not what you know – it was just completely wrong.” Now, says Euan, the internship scheme at BGF is “well thought through, casts the net wider and brings people from different backgrounds into our business. It’s one way we can make a tangible impact in terms of people’s awareness – and initial experience – of private equity.”
Euan feels immensely proud to be part of the team at BGF for these reasons, and over his nine years’ tenure, his talent for spotting the talent of others has been honed. He spent the previous seven years at KPMG, working initially in tax audit before progressing to private equity and corporate deals with the transaction services team. It’s a time Euan fondly recalls as “transformational”, and a long way from his student days in summer jobs doing accounts for piano teachers, restaurants and a Fife bowling club. The knack for numbers – and an admiration for small businesses and entrepreneurs – was bedding in.
A degree in maths from Glasgow University was followed by his ICAS qualification. He keenly remembers doing the final exam of his final course: “It was a paper where you’re asked to make calls and use your judgement. It was about having the confidence to trust what you’d learned and question your decisions. I remember realising that this was the core of what being a professional is. It’s not that you can’t find the answer in a book – it’s about knowing whether you’re doing the right thing.”
Knowing which businesses are the right ones to invest in isn’t an exact science, but Euan and the BGF investor committee meet three times a week to review and discuss current and potential deals. Is it a creative process?
“Absolutely,” he says. “When you think about structuring a deal, it’s not just a case of giving someone £2m. We delve into what motivates people, what their real ambitions are. Do they have a company structure in place – or do they need help with refining their board? You have to challenge yourself, reflect on what’s appropriate – and what isn’t. I think that’s a good thing. It keeps us really engaged and it’s a really fun part of this job.”
Equity in the UK
The Small Business Equity Tracker 2023 Report has been published, providing a comprehensive picture of equity funding for UK SMEs
£16.7bn = The total UK small business equity finance in 2022, an 11% year-on-year decline – the trend has continued into 2023
65% = London’s share of the total investment value
£10.5bn+ in VC investment was raised by UK life sciences companies during 2020-22, more than Germany, France and Canada combined
£900m of equity investment went to cleantech, a rise of 50% in one of few sectors to buck the downward trend
223% rise in VC finance in the space sector during 2020-22 compared with 2017-19
Read the ICAS business start-up guide