Comment: Capital investment can build surprising returns

Growth capital investors – who lend money to organisations seeking to expand in the hope of earning a healthy return on their investment in either cash or equity – are now well established.

The link between investor and investee is even more of a two-way street than we envisaged, says McAninch. Picture: Contributed
The link between investor and investee is even more of a two-way street than we envisaged, says McAninch. Picture: Contributed

Often the focus is on the recipient companies and how the cash injection will enable them to develop their idea or grow their business. Less attention is paid to what these companies may be able to offer to the investing organisation – over and above the normal cash or equity returns.

In my view, there’s another potential ­benefit, something that could give ­investors a competitive edge in their own business sector, particularly in digital transformation or productivity.

Sign up to our daily newsletter

Mention Mactaggart & Mickel and most people think about our housebuilding arm, which is understandable given that we have been building new homes across Scotland for 94 years. Fewer people know that we also have a growing investment arm, providing growth capital for technology and other companies in Scotland, as well as those further afield. What we are seeing is that this relationship between investor and investee is even more of a two-way street than we had envisaged.

An example. Earlier this year we were the lead investor in a £600,000 funding deal to enable Glasgow-based iOpt to implement ambitious scale-up plans. iOpt uses data and specialist tech to enable owners and managers of large rental properties to monitor the internal environment of their assets from afar. It’s a great idea and we are confident of earning a solid return on our investment in four or five years’ time.

But there’s more. If this device proves its worth – and we think it will – our investment puts us at the head of the queue to secure this technology for installation in the portfolio of Mactaggart & Mickel ­properties for private rental. That’s almost 400 homes in Edinburgh and in London.

As a responsible landlord, the onus is on us to preserve the built fabric of our properties and enable a positive experience for our tenants. iOpt’s clever device could undoubtedly help us do this.

Furthermore, its installation would remove the need for a physical inspection of each property two to three times a year, resulting in significant reductions in our carbon footprint. That is huge advantage to any landlord.

Another advantage is that we know the founder and the company inside out, and we understand the technology; indeed, we are in a position to potentially influence future iterations of the technology.

We may even go one stage further and approach our social housing and ­other customers – for whom we build new homes and premises – with a view to installing the iOpt device during construction. This would be a clear USP when ­tendering for contracts in future and would allow us to assess the impact on the home from the changing building regulations.

In the same vein, we’ve undertaken a pilot project with a company that has invented a widget that sits on, for example, a travel agent’s website and makes it easy for the ­customer to book a telephone call at a time that suits them. Evidence has shown that a customer who receives a call back at an agreed time trusts the company more because it has delivered on its first promise. This, in turn, generates higher conversions. It’s early days but we are assessing whether this widget is something we could use for potential house buyers.

Would this have occurred to us, had we not learned about the company during its application for funding? Probably not.

Competitive advantage is sometimes hard to come by in traditional sectors like housebuilding, but our investment fund recipients are bringing a welcome fresh perspective and improved productivity to our business ­strategies and will undoubtedly help us ­identify new avenues to explore in future.

- Paul McAninch, group finance director, Mactaggart & Mickel.