Gravitywell Meets: Mercia
In this series, Hugo chats with some of the tech world’s most exciting startups and services. Next up is Adam Watts, Investment Associate for the UK-exclusive, specialist asset manager, Mercia.
Adam, lovely to meet you. Why should a tech startup take notice of Mercia?
Mercia has a long track record of backing innovative businesses over the past 10+ years – and our roots go back even further in the North of England. We have now backed approximately 450 UK businesses and are looking to deploy over £100 million this year. Importantly, we are a regional investor at heart. We have a presence in London, and now have 8 regional offices across the UK after recently setting up offices in the Engine Shed in Bristol. Mercia build regional investment teams who know the local market, and, in many cases, grew up in the region - I am a proud Bristolian myself.
Welcome to Bristol! Engine Shed is a great place to be. What’s been the biggest milestone in Mercia’s journey so far?
Mercia has a long history. Some of the team have worked together for more than 20 years, from the outset of Enterprise Ventures (which Mercia acquired in 2016), so there’ve been lots of important milestones along the way.
I only recently joined, in 2021. From my perspective, I think a big milestone was evergreening our Balance Sheet, which gave us the ability to invest proprietary capital from our Balance Sheet alongside our managed funds. This makes us flexible. For example, we can invest in secondary transactions and provide an element of cash-out to founders at Series A, acknowledging the blood sweat and tears it has likely taken them to get to that point!
Okay, so what do you look for in an entrepreneur or business to invest in?
We are sector agnostic, but the key areas we look at are the market the business operates in, the differentiation of the product or service, and the management team themselves. On the market, what is more important to me is growth and where the market is heading, rather than just a specific figure for market size. For product, I think the most valuable businesses are those where the business can demonstrate its product/service is 10x better than existing solutions, not an iteration of something that already exists.
However, the most important aspect is the management team. In an ideal world, management will have founded and exited a business within the same sector, however, this is not a prerequisite and we understand this is not always possible. What is important is management with a strong technical and market understanding, and equally someone we can build good rapport with – I think investing is akin to a long-term relationship so you need to know you can get on with each other!
No bickering before bedtime! Why is regional investment so important?
Despite almost all of the UK’s regions showing growth in venture funding in 2021, the investment gap with London continues to widen – showing the continuing challenge regional businesses face to secure the investment they need. There is so much potential in the regions. For example, a recent Beauhurst report noted the South West region experienced the fastest rate of growth in the UK in 2021, with the number of companies backed increasing by 48% from 2020, and capital deployed up a whopping 232%. The region is now host to a growing number of unicorns – most recently Huboo, which not only demonstrates the investment potential here, but bodes well for the future continued growth in the ecosystem.
Absolutely, Huboo is a great example of what can be achieved in our region. What’s the best thing about working at Mercia?
While I only joined Mercia in 2021, it is clear that the Company values its people and this goes to the heart of everything the firm does. Small acts of kindness really demonstrate this – I was sent an advent calendar and Valentine’s day present despite only recently joining! But it’s not just chocolate... Mercia provides its teams with the tools to be successful in their work. Importantly the focus is on the outcome not the process – staff are trusted with autonomy to achieve their personal and professional goals, and drive growth for the firm.
Gravitywell has never sent me anything for Valentine’s Day. I might have a word… So, who are your one-to-one investment advice clinics for?
Our clinics have been set up in collaboration with SETsquared, so at present, those monthly sessions are only open to SETsquared companies. Our conversations to date have ranged from businesses with only a handful of employees that are pre-MVP, to businesses who have already secured funding and are looking to scale. The businesses have been across a wide range of sectors – including CleanTech, FemTech and Digital.
For any business nationally we host a ‘Meet The Funder’ session Friday weekly at Mercia, where any business can book time, through the website, with one of our Investment team to talk about business funding whatever stage they are at. I am hosting a session on 22nd April!
More widely, locally we are also more than happy to have informal conversations with entrepreneurs to lend our expertise and advice – you can find me on LinkedIn if you want to chat. Even if a business is not at the right stage for Mercia’s investment, we want to invest in the local ecosystem and give something back, alongside our funding.
Plenty of options for entrepreneurs then. What do you think is behind Bristol’s growth as a tech city?
I think, above all, it is the collaborative local ecosystem that is really facilitating growth here. The city’s start-up scene is underpinned by two universities providing high-quality research, however, arguably, the number of local not-for-profit organisations (e.g. TechSPARK, SETsquared, Tech South West... the list goes on) who provide important support and networks at the early stage to entrepreneurs are equally important. There are a number of advocates for everything tech in Bristol, who make important connections within the city and across the wider South West – there are too many to name but you know who you are!
I couldn’t agree more! What new trends are you excited about in the startup world?
As quoted by Black Rock’s CEO Larry Fink, “the next 1,000 unicorns will be in ClimateTech” – the climate emergency has become mainstream and entered the nation's consciousness, and I personally think there is huge investment opportunity investing in tech which can reduce carbon emissions and contribute to mitigating the impacts of climate change. Investment in CleanTech/ClimateTech increased 50% in the UK in 2021 – so investors are alive to this. I think carbon accounting/mitigation software, energy grid optimisation and precision agriculture are particularly interesting areas.
Great insight. Finally, Adam, what’s the best-kept secret in Bristol?
I think we have covered my view on the local investment ecosystem, so I will talk about one of my other passions – food and drink! Other secret bars and bakeries are available, but my personal favourites are Hyde & Co on The Triangle (secret bar) and Hart’s Bakery, which is tucked away near Bristol Temple Meads. I highly recommend!
A huge thank you to Adam for being interviewed. Want to know more about Mercia? Here you go.
