After early success as a youth footballer, Parminder Basran MBA2010 didn’t quite make the grade for the adult game. Undaunted, he changed focus, studying first at Rutgers University in New Jersey and then taking a business degree at the University of Leeds. After graduating, he worked for seven years in his family’s food manufacturing business, but an ambition to set up his own investment business led to him taking an MBA at London Business School in 2010.
A year after he graduated, Basran founded VGC Partners. It grew rapidly, with a series of highly successful investments. Eight years on, the firm has £100 million under management across several funds and investment vehicles.
As a growth capital investor, VGC Partners takes significant minority stakes in private companies in the consumer, media and technology sectors, then helps them reach the point where they can sell to private equity or trade purchasers. The business’s particular talent, Basran believes, lies in its use of a network of corporate partners such as Nike, Amazon, WPP and Adidas to help drive growth for portfolio companies.
Digital penetration in a lot of the markets we’re investing is still pretty low. For example, in the UK, 49% of all sales of white goods are done online. But if you look at cosmetics, it’s only about 8% to 10%, so there are still a lot of nascent sectors. The businesses that win are often the ones that use physical activations for digital growth. For example, when we opened clothing brand WIT Fitness in Paris, we launched a pop-up on the Rue de Rivoli for 10 days - funded by Nike - and used it for a global launch of the Nike Metcon 5 training shoe. The data from people who came into the store to try on the shoe was then used to grow the digital side.
If you are developing a strategic investment partnership, it could be with private equity or venture capital, but it can also be with corporates. Finding the right partner isn’t just about the money. If you get out and meet enough people, you tend to find there’s a process of self-selection, because you match up with investors who are a good fit for your business. But you have to get out of there to meet the people in the first place. I made 550 cold calls for my second fund, which resulted in me finding between 20 and 30 investors.
My chairman, Iain Slater, ran CBPE Capital, a large, mid-market private equity firm. That relationship is worth so much to me, not just in terms of knowledge and advice, but also moral support. The right person can have a hugely positive impact on your business – and that applies not just to my business, but the firms that we back. You must pick the right person. It’s difficult, but really important.
‘Don’t do too much too early – really do the research on the markets you want to go into. But at the same time, if it goes wrong, pull out, and don’t throw good money after bad’
Even if you’re aiming to grow across borders, you have to try and be focused. It’s too easy to spread yourself very thinly very quickly if you’ve got limited capital, especially in Europe where there is a lot less money available than in the US. You have to focus on growing profitably here.
Don’t do too much too early – really do the research on the markets you want to go into. But at the same time, if it goes wrong, pull out, and don’t throw good money after bad.
If you’ve got a luxury consumer base, then Facebook marketing isn’t for you. If you’re more lifestyle-led, then physical activations in local markets can drive digital growth. The marketing mix for a lot of firms is very different to what it was three to five years ago, when everything was Facebook and AdWords. In some of the businesses we look at the Facebook marketing element is zero just because their demographic doesn’t really play there. For brands focusing on the younger markets, Snapchat and TikTok are two platforms that show a lot of potential.
Taking an MBA at LBS gave Basran the knowledge he needed to set up an investment firm. He approached the programme with a single-minded focus on taking the most complex finance modules and passing the exams he needed to gain Financial Conduct Authority accreditation. At LBS he learnt it was possible to invest on a deal-by-deal basis – which is how he made his first three investments.
His first investment was in independent recording studio Metropolis. Basran raised the money from Helical, a FTSE 100-listed property fund. After a year, he sold his initial stake, generating a 4.3x return. Another early investment was Iconic Images, the archive of photographer Terry O’Neill. Within 15 months, Basran achieved a return of twice his original investment.
A big breakthrough was winning backing from Facebook co-founder Eduardo Saverin, who provided Basran and colleagues with an anchor investment of $40 million to set up the Velos Partners Fund I. VGC’s second fund was supported by a £30 million commitment from the British Business Bank through its Enterprise Capital Funds programme for early-stage venture capital, enabling VGC to target UK-based consumer, media and tech companies.