I t is not every day thatyou meet a man intenton investing e100 mil-l ion in small Ir ishbusinesses, but that isprecisely what Pete

Smyth, chief executive ofBroadlake Capital, plans to do.Smyth and his venture capi-

tal operation have kept a re-markably low profile so far.Now, though, Smyth is keen totell the world that he is readyand willing to open his chequebook and cut some deals.‘‘We think there are lots of

good businesses to invest inand, despite the fact that thereare economic headwinds outthere, we need to just get onwith it,’’ he said. ‘‘A lot of goodbusinesses were set up in thedepths of the last recessionand I think this will be thesame this time around.’’Broadlake has al ready

backed some wel l-knownnames. The company boughtwater business Deep River-Rock fromCoca-Cola in Janu-ary and has most recentlytaken a 47.5 per cent stake intanning companyVita Libera-ta.In total, it has invested about

e15 million over the past twoyears and is searching for com-panies which need e1 millionto e10 million in exchange forgiving Broadlake an equitystake in the business.‘‘We realise SME lending is

a whole debate in itself, but Ithink we bring more than capi-tal to the table,’’ said Smyth.‘‘That differentiates us in themarket: we’re not just passivecapital investors.’’Thebulkof the money in the

fund comes from the e90 mil-lion sale of cleaning companyNoonan Services to Alchemyin 2008. Smyth is the son-in-law of company founder NoelNoonan.However, the fund may be

opened up to bring in addi-tional investors, ranging frominstitutional investors to gov-ernment bodies.‘‘‘We’re looking at a number

ofoptions over time in terms ofscaling it up and taking in ex-ternal capital,’’ said Smyth.‘‘In 2009, that made no sense.The market availability of ex-ternal capital just wasn’t there.Now we’ve established our-selves.’’Broadlake has its origins in

Wild About Water, a watercooling company which wasspun out of Noonan Servicesin 2003. Now the company hasinvestments in three sectors:

food and beverage, servicesand consumer goods. WhenBroadlake was established in2009, Wild About Water be-came one of its investments.Although the company does

not chase distressed assets, thefirst business it bought was outof administration in Britain.Water business PowWow hadbeen owned by Nestle¤ , but wassold on before falling into thehands of administrators.Smyth said Broadlake imme-diately turned around the busi-ness by selling off part of it to atrade buyer.Smyth is keen to differenti-

ate Broadlake from traditionalequity funds.‘‘We have a much longer

time horizon,’’ he said. ‘‘Asbusinesses grow and develop,we will continue to invest andwork with the teams.‘‘We don’t have to say we’ll

need our money back in threeyears, because that is very,verydifficult for an SME.You don’tknow what speed bumps youare going to hit along the road^ who knows what the macro-economic climate can bring? ^and you need to have the flex-ibility tomake the decisions.‘‘In publ ic companies,

shareholders effectively wantto see performance on a six-monthly or quarterly basis ^that restricts companies’abilityto make a long-term invest-ment. In the businesses wework with, it’s all about sus-tainability. How do you investin things which will grow, cre-ate employment and create va-lue for the shareholders?’’

Smyth wouldn’t reveal howmuch Broadlake has investedin the various businesses inwhich it has become involved,saying only that e1 million to

e10 million was the parameterit set itself.‘‘All of the investments we

have made to date have beenin that category, albeit on the

lower end of that scale,’’ hesaid. ‘‘More of them have beenin the e1 million to e5 millionrange.’’Other acquisitions include a

coffee businesswhich it boughtdirectly from Nestle¤ and awashroom service businesscalled LadyMatters.Overall, Smyth is upbeat

about the prospects for Irishbusinesses, although he wouldlike to see more state supportfor SMEs.‘‘We talk to SMEs every day

and they are soworldly in theiroutlook; that wasn’t the caseten or 15 years ago,’’ saidSmyth. ‘‘They are talkingabout opportunities in Asiaand the US and jumping onplanes like people jumped onplanes to London ten yearsago.’’Sowhat is Smyth looking for

next?‘‘If there’s a good business,

but a bad balance sheet, thatdoesn’t bother us,’’ he said.‘‘What we’re actually lookingfor is good businesses whichrequire some investment togrow.We are looking for smallbusinesses that are nimble, thatcan grow and develop, that areexport orientated, that cangrow and develop.‘‘We look at the people very

oftenbefore we look at the pro-duct or the service.You tend tohave people who are very goodat sales or products, but theymight not have the finance oroperations people in place.When we go into business,there is a team of eight of us(in Broadlake).‘‘We’ve invested in 45 SMEs

in about 12 sectors in the last20 years or so.We’ve made alot of mistakes and we’velearned from those mistakesandwe’ve had adecent numberof successes.’’Smyth said each investment

opportunity was evaluated onits own merits.

‘‘Our approach is not a port-folio approach where we thinksomewillwork and somewon’tand might die,’’ he said. ‘‘Allthe businesses we put moneyinto are businesses we thinkwill work and have a highchance to succeed.‘‘SMEs are a pretty risky ca-

tegory.You can’t just fly in fromLondon and put e3 millioninto something and come backin a month.We do most of thework with these companiesoutside of a boardroom.‘‘We’re not experts on every-

thing,but as a team,we’vebeenaround the block enough thatwe know a little bit about a lotof things and enough to bedangerous.’’But how are his investments

holding up in the teeth of a re-cession?‘‘All profitable, all revenue

growing,’’ said Smyth.The recent investment in

Vita Liberata appealed toBroadlake because it had highgrowth potential which wasbeing limited by lack of accessto capital.‘‘It had done a great job in

getting towhere it was,’’ Smythsaid. ‘‘It needed investment. Itwas growing rapidly and grow-ing too fast ironically for itsdebt provider, which was anon-Irish bank. It is now in 17countries. This year the com-pany will double turnover. Interms of retail sales, it’s aboute15 million this year.We arelooking to bring that to e50million in five years.‘‘We came in to invest capital

to support that.We’ve broughtin Bank of Ireland as a funderfor that business. The bankswould be aware ofour track re-cord, not just as passive inves-tors, but being operators, andthatwe canworkwithmanage-ment teams and that de-riskstheir position because theyknow if there is aproblem,we’llbe all over it in terms of re-sources and helping the com-pany work through it.’’Smyth said SMEswere huge

employers and that Ireland’srecovery should not be justbased on life sciences and soft-ware companies.‘‘Look at the Irish success

stories,’’ he said. ‘‘We need toput more of a focus on theSMEs in terms of governmentsupport.We need to make suremoney goes in companieswhich can be the next CRHand the next Kerry Group orRyanair. Sometimes we lose alot of ourselves trying to getinto the sexy sectors.’’

TONY O’SHEA

Pete SmythRole: chief executive ofBroadlake CapitalAge: 37Lives: Milltown, DublinHobbies: cycling, sail-ing and coaching under-6s GAACurrently reading:Outliers by MalcolmGladwellFamily: married withthree young sonsSocial media: on Twit-ter at @broadlakecap;on LinkedIn

With e100million to investin Irish SMEs,Pete Smyth ofBroadlakeCapital clearlybelieves in thestrength of theIrish economyto survive andthrive

As businesses grow and develop,we will continue to invest andwork with the teams’’

The Sunday Business Post Interview: Pete Smyth

‘‘

1. Enterprise IrelandEvery year, Enterprise Ireland

picks out companies that it thinkscould be ‘the nextbig thing’ to comeout of the country.Through the high potential start-

up (HPSU) fund,the agency puts itsmoney where its mouth is by invest-ing in these companies.Qualifying as an HPSU can be

tough,Enterprise Irelandmust con-sider a company tobe introducing anew or innovative product or ser-

vice into the international market.The company must be less than

six years old, headed by an experi-enced management team and, cru-c ial ly, be deemed capable ofcreating at least ten Irish jobs andrealising exports of at least e1 mil-lion within four years of its founda-tion.For firms which are not quite at

the HPSU level, Enterprise Irelandprovides the competitive start fund.The maximum support available is

e50,000 for a 10 per cent ordinaryequity stake.

2. National DigitalResearch CentreLaunch PadAnyone looking to set up a digital

technology business based on theirown research could look at contact-ing NDRC’s LaunchPad. Based atDublin’s Digital Hub, the NDRChasworkedwith over 80 digital ven-tures to date. Run by Gary Leyden,the programme offers mentoring, aworkspace and crucial micro-seedinvestment, normally arounde20,000, over a 12-week tailoredprogramme.

3. County and CityEnterprise BoardsUnder the government’s action

plan for jobs initiative, the local en-

terprise boards won’t be around formuch longer, although the details ofhow they are to be dissolved havestill to be ironed out.Under proposals announced by

the government last year, the workof the 35 local boards will be takenon by units in local authorities. Aunit dedicated to small businesseswill be set up in Enterprise Ireland.Cebs were established in 1993 to

provide support for small busi-nesses with ten employees or fewer.They deal in smaller amounts

thanEnterprise Ireland and can suitsome smaller local businesses look-ing to get off the ground.

4.Wayra

Last month, Telefonica broughtits digital investment programme toIreland, investing in ten Irish start-ups.The programme received moreapplications per capita from Irish

hopefuls than in any of the 11 othercountries inwhich it operates.Each winner receives an invest-

ment, in the form of a loan whichconverts to equity, of about e50,000and six months’ access to a newWayra Academy workspace in O2’sheadquarters in Dublin’s dock-lands.

5. Ryan Academy’sPropellor programmeThe DCU-based Propeller Ven-

ture accelerator was established in2010 with funding of e1 millionfrom Irelandia Investments,with anemphasis on software,Web 2.0, ap-plications, informatics and clean-tech start-ups.The three-month accelerator

programme offers e30,000 invest-ment in exchange for a 7.5 per centequity stake. Start-ups receive men-torship, free office space for four

months and a service package withmarketing, sales, legal, IP and ac-counting with corporate partners.

6. Business AngelPartnershipAngel funding deals are facili-

tated by the national Business An-gel Partnership and, in the past fiveyears, have amounted to around e15million,with the average investmentof e180,000.The Business Angel Partnership,

a joint initiative between EnterpriseIreland, Intertrade Ireland and theIrish Business and Innovation Net-work, favours seed investments.

7. AIB Seed Capital fundand Bank of IrelandStartup fund (DeltaPartners)Established in 2007,theAIBSeed

Capital Fund’s purpose was to pro-vide funding across a range of sec-tors.Partof theEnterprise Ireland and

Venture Capital programme 2007to 2012 plan, it has e53 million un-der management, comprising e30million from AIB and e23 millionfrom Enterprise Ireland.Another option is the e17 million

fund managed on behalf of BankofIreland and Enterprise Ireland byDelta Partners.The fund targets investments in

the range of e100,000 and e500,000.Both funds are coming towards

the end of their investment cycleand are due to finish at the end ofthis year.

Groups that give start-ups a helping handBroadlake Capital is one companyoffering funding for young businesses.Philip Connolly takes a look at sevenother supports for start-ups

Tanning company Vita Liberatahad been struggling to keep upwith demand for its productswhen founder Alyson Hoggdecided to bring in a newinvestor.‘‘We realised we were hurtling

so fast past ourselves that wecouldn’t keep up. We needed tolook at our strategy for growth.Growth is great, but as every-body knows who has every beenin business, growth is expen-sive,’’ she said.‘‘We needed to look for

partners. We spoke to fourcompanies and the offers werenot dissimilar so it was reallyasking, from our perspective,who can bring the biggest smartsand that was Broadlake.’’Selling the business was

never an option for Hogg, whodeveloped the self-tanning pro-duct seven years ago. Broadlaketook a 47.5 per cent stake in thecompany, while Hogg has thesame holding (another directorholds the remaining stake).Hogg said keeping majority

control was not important forher. ‘‘What’s important is to finda partner and lock arms andmove on together,’’ she said.Vita Liberata, which has a

high-profile deal with the X-Factor, has been selling in Bootsfor five years and has recentlylanded a deal to sell intoupmarket beauty chain Sephora.‘‘Apparently it’s really difficult,but we managed to get intoBoots and then Sephora, whichis highly selective,’’ she said. Thecompany is based in the North.

‘‘When we look for business,we get it. One of our key fearswas almost to go looking forbusiness because we didn’t havethe stock and the components,’’said Hogg. ‘‘We are free now togo and capitalise on all theopportunities coming our way.We are being courted from allcorners. We have people coming

at us from Russia, America,South America, from every-where.’’Since starting to sell in

Sephora in March, Vita Liberatahas become the fourth-biggestself tanning brand in Europe,and aims to move up to third orsecond place next year.

Samantha McCaughren

Vita Liberata capitalises on growth

Alyson Hogg, founder of Vita Liberata TONY O’SHEA

SamanthaMcCaughren

See page 26Talking Point: How tech start-upscan get moving

n16 News Focus THE SUNDAY BUSINESS POSTOCTOBER 14 2012