The Big Interview: venture capitalist and serial investor Paul Atkinson

Looking back over his career, venture capitalist and serial investor Paul Atkinson highlights the many “twists and turns” on a route spanning everything from engineering and recruitment to assisting some of Scotland’s most high-profile start-ups.

Looking back over his career, venture capitalist and serial investor Paul Atkinson highlights the many “twists and turns” on a route spanning everything from engineering and recruitment to assisting some of Scotland’s most high-profile start-ups.

“It’s been an interesting journey,” says Atkinson, one of the founding partners at venture capital firm Par Equity, and executive chairman of Taranata Group, which houses four brands in the recruitment space, namely Head Resourcing, Head Medical, Change Recruitment and Atkinson Macleod.

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The Edinburgh-based group – named after the Maori word for talent – was unveiled in November and Atkinson says the rationale behind uniting the brands was “creating a substantial business from a group of good existing businesses”. He acquired Change earlier in 2017 after the firm fell into administration, the industry veteran having founded Head Resourcing in 2001.

“What we wanted to do was bring together the best players to create something of real scale and opportunity, but actually keep the leadership teams intact and make it more of a federated model rather than try and bring it all together under one brand,” he says. Consequently, the Taranata Group “is really more of an investment committee” and provides support, finance, direction and strategy.

Atkinson has laid out plans to grow the organisation, which has about 150 permanent staff and turnover in the region of £65 million, to become a £100m business by 2020. Such expansion is to come from both organic growth and further acquisitions, with other specialist recruitment brands among targets in its crosshairs, and as part of a “grand vision of a recruitment supergroup” in what is an increasingly fragmented sector. Sectors covered by Taranata’s firms include accountancy and finance, energy and infrastructure, IT, executive search, construction and global medical recruitment.

“We are looking for what we term ‘white space’, which is businesses that are complementary but not competitive with what we’re already doing,” he says. “That could be either complementary services or it could be a different geography.”

A market listing is also at the forefront of his mind, after group developments including expansion into China, Head Medical securing a contract to recruit GPs from overseas to work in London, and Head Resourcing opening in Manchester as part of its English expansion strategy.

Requirements for a listing are being studied, and any such step would follow in the footsteps of fellow Scottish firms such as Edinburgh-based wrap platform specialist Nucleus Financial, which unveiled plans to this month float on the Alternative Investment Market (Aim) in a move that could reportedly raise £25m and value it at up to £150m. Other initial public offerings include housebuilder Springfield Properties debuting on Aim in October, raising £25m.

Atkinson is keen to join such a list. “Quite a number of our leadership team are actually stakeholders and shareholders in the business and our intention is to increase that very significantly over the next few months.

“It’s the ambition of all our team to build a high-growth business with great opportunities for the people in it, and a sustainable long-term future.”

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And he says Taranata is overall ahead of plan. “I think we are very much where we want to be at this point,” he adds, although he notes that there is still much more work to do. There is also the major skills shortage, particularly digitally (“in my view it’s getting worse rather than better at the moment”), and continued uncertainty over the post-Brexit immigration landscape, although he says the group is examining various initiatives such as getting new entrants into the market.

His role at the recruitment group, which taps into his investment and M&A knowledge, is also proving complementary with his work at Par Equity, with the latter still taking up the lion’s share of his time.

The timing of the boutique investment firm obtaining its licence to trade funds coincided with Lehman Brothers collapsing, triggering global financial turmoil. “It was a pretty tough start, I have to say,” adds Atkinson.

But despite setting sail in such choppy conditions, the business has in the past decade led more than £100m worth of investment into 50-plus early-stage technology-related businesses.

About 70 per cent of its portfolio investments have been in Scotland, “so I think we have been very additive to the Scottish start-up scene, which I see as being very buoyant… I think we’re actually very well-placed and we’ve had some very notable successes”.

One such triumph he highlights is the sale this year of ICS Learn, the Glasgow-based digital learning platform, with Par Equity saying it gave investors a 75-fold return in a little over five years. It also brought the total exits for Par Equity investors to 12, “both positive and negative”.

While the business also runs funds investing in property and forestry, its main theme is venture capital investment into early-stage technology companies. “What differentiates our model is the combination of access to capital and access to highly competent skilled people who are making investments alongside us, and help us with those selection decisions… bringing the right people together with the right money to do great things.”

It has also worked with some of the most glittering names on the Scottish tech scene, including multi-retailer shopping app Mallzee; finance and accountancy recruiter iMultiply; PureLifi, which uses light to provide wireless communications; and QikServe, the food ordering and payment innovator that recently opened a US base in Atlanta as it seeks to scale in what is now its largest geographic market.

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“A lot of the companies are making very significant progress,” says Atkinson, who also believes Par Equity is one of the few investment businesses in Scotland that will invest in companies that are “making devices and engineering things”, such as compressor specialist Vert Rotors.

As for how Par Equity more broadly chooses how to invest – with the green light given to as few as one in 100 of the business plans it reviews – he cites some kind of global market context as a key advantage as a likely exit point will be a buyer from the US, Europe or Asia.

Technology that is “defensible” and hard to replicate is another plus, with the majority of its investments business to business, and a good cultural fit with the firm’s management also key. “These days we generally only invest in things that have got at least some early commercial traction… and then we look to our extended family of investors in the syndicate to see who we have who could help them both invest in the company but also help support it in terms of their development and growth.

“In each case we generally have an investor-director drawn from our investor base that sits on the board working with management to build out the success.”

Also among the firm’s portfolio is Snap40, which is behind a device to monitor patients’ vital signs in real time. And Atkinson sees health tech as “one of the really hot areas for us – we’ve had some very good investments in that space and we’ll continue to look at things in that space”.

Artificial intelligence is also a key area of focus, and efforts are in hand to try to identify businesses in the robotics area.

Such an interest harks back to Atkinson’s childhood love of reading sci-fi, singling out I, Robot, a collection of short stories by Isaac Asimov, as a particular favourite. The future entrepreneur’s scientific leanings led to him studying physics at university, and he was subsequently offered the chance to do a PhD in radio astronomy, but turned it down in favour of a “real job”.

He started his career as a semiconductor engineer for Philips Electronics, and later fell into recruitment “by accident”, working for Computer People. When it opened its first Scottish office in Edinburgh in the late 1980s, he followed, and has remained here ever since.

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But he had always harboured a desire to have his own business, which he attributes to growing up the son of a Yorkshire farmer and spending his summers driving combine harvesters and tractors.

In the mid 1990s Atkinson launched Direct Resources, which was acquired by Nasdaq-listed iGate Corporation in 1999, and founded, which was acquired by another Nasdaq-listed business, TMP Worldwide, in 2000. Such exits led to him investing in early-stage firms, and a desire to professionalise this paved the way for Par Equity’s creation.

As well as a series of successful firms under his belt, his angel investing has seen him personally back more than 50 companies run by other people, and he has also ploughed his own cash into the majority of Par Equity’s portfolio companies

But when asked to choose a pivotal moment in his career, he singles out the first business he started – which ran out of cash in three months. “I was absolutely determined to build a business and I didn’t let [that business failing] stop me starting another one.”