Ahead of the inaugural Cambridge Independent Business Awards, being held on 26 September, editor Paul Brackley speaks with Paul Hughes, caring for supervisor, life scientific analysis and innovation, at BDO, which is funding the Scale- up of the Year group.
Paul Hughes was interested in BDO by its want to buy the life scientific analysis and innovation space in Cambridge.
And, after a job invested in these industries, he acknowledges a degree or 2 regarding the obstacles and probabilities previous to them.
Paul obtained to the book-keeping and firm consultatory firm in June complying with larger than 5 years at BIOS Health, the Cambridge- primarily based neural design therapies chief, the place he was major working police officer and first financial police officer and assisted the agency shield appreciable financing, vary and enhance proper into the United States.
Prior to that, he invested larger than 6 years at Allia, encouraging corporations and supplying its Serious Impact help program for impact enterprise house owners and endeavors.
“I’ve always worked in the tech and life science sector and I love that it’s a very dynamic set of industries. They are constantly evolving,” claims Paul.
“And I’ve at all times actually favored working with a wide range of companies concurrently.
“At BIOS I cherished each second of being within the depths of the start-up world. One factor I maintained was at all times working with others – Cambridge Enterprise, the Judge Business School and different start-ups.
“BDO needed to spend money on Cambridge and create a targeted exercise on the life science and tech sector. They had been making important investments like bringing Richard Watson on board who had been a accomplice and head of tax at one of many ‘Big 4’ in Cambridge and who himself has been working with many main tech and life sciences companies within the metropolis for numerous years. And for me it was very clear that they had been dedicated to doing this long run.
“So for me it was about how I can help BDO build the support for those kinds of businesses, which I love working with.”
That help takes quite a few semblances.
“Most people will think of us as accountants,” acknowledgesPaul “And we do have a lot of accountants. But we have five core areas of our business.”
In enhancement to tax obligation, audit and assure, the corporate offers firm outsourcing options, providing sources corresponding to pay-roll and accounts prep work for these that may not pay for, or don’t want, to take care of that in-house.
“The fifth area is ‘advisory’ and this is everything else,” describesPaul “What we’re here to do is help you understand your business and make the right decisions to help you grow it.”
This can encompass help for mergings and procurements, fundraising help, due persistance and ESG (ecological, social and administration) points. BDO likewise offers with corporations on their people and skill– their framework, precisely easy methods to make up and precisely easy methods to look at boards.
“It’s about advising a business and their key stakeholders on how they can optimise and grow in a strategic and tactical manner,” claims Paul, whose perform is caring for supervisor of life scientific analysis and innovation.
“BDO is full of experts. I don’t consider myself to be an expert. But I am highly experienced. Having a level of experience over – I hate to say this – decades, across multiple life science and tech sectors, puts me in a fairly small group of people. And I understand the challenges that come through,” he claims.
Paul started his occupation as an accounting skilled in your house pc chief Sinclair, which he acknowledges “lots of people today won’t even have heard of”, previous to relocating proper into agritech monetary funding monetary inNew York In 2002– prolonged previous to there was such think about the world– he co-founded TMO Renewables, a cleantech and biofuels innovation programmer.
“Start-ups and scaling business go through very similar growth trajectories and understanding that, and being able to apply that to different industry sectors, comes from experience,” observes Paul.
“We’re trying to match experience from people like me, coming from industry, with businesses in the ecosystem rather than trying to sell services.”
While corporations at their earliest phases will not be possible to make use of the answer of an enormous book-keeping firm like BDO, Paul claims his door is considerably out there to all.
“What I’m really interested in doing is establishing relationships,” he claims. “I’m very happy to invest my time and our experts’ time into those businesses in the hope that they may want to continue to work with us as they grow. I’m always hungry to learn about new businesses and if I can help them, I will.”
Here’s a reality that may shock you: BDO has 8,000 people within the UK, all through 18 workplaces, together with its web site on Cambridge Business Park.
“In all of our areas, there are specialists of their fields and folks like me who’re sector skilled and targeted.
“We have every kind of experience. It means I can work with purchasers and take a look at, for instance, the way you value a product. I can get somebody from our business due diligence staff to have a chat.
“We have plenty of scientists and engineers to help folks. If somebody needs to us to assist with R&D tax, we now have PhDs in physics and pc science who may also help consider and optimise that work.
“And we have people who have worked in industry who bring that experience across. If, for example, you are thinking of expanding globally, what are the 15 things you need to know that you don’t know today?”
From neighborhood sources on the bottom, to a worldwide community, Paul claims BDO has the flexibility to make hyperlinks.
“For a whole lot of Cambridge expertise and life science companies, the holy grail is to develop within the US and go public within the US if they’re that type of enterprise.
“We are an affiliate of a worldwide enterprise that has greater than 115,000 folks and we’re in 166 international locations, with 1,776 workplaces. If somebody is focused on an Initial Public Offering within the US, we now have a Boston staff that may work with life science corporations. We have a UK staff that may assist with all of the preparation, so we now have actual breadth and depth.
“If you want to start selling your medical device in Australia, we have a team that can help you with that. We are able to connect people on very focused pieces of work but also very large strategic pieces of work, that require not only multiple sets of expertise, but require geographic diversity as well.”
That worldwide community of expertise may confirm very helpful to a scaling Cambridge firm.
But are the town’s life scientific analysis and innovation industries within the good situation we presume them to be?
“In the broadest sense, yes,” responds Paul, reassuringly. “But they’ve numerous challenges. It was once generally known as the valley of demise due to the dearth of funding round for A-round companies.
“Covid retracted a whole lot of capital and we haven’t come out of that but. In life science, except you may have actual traction, then it’s actually troublesome to lift an A spherical in the intervening time. There have been exceptions, like Healx, however they’ve already obtained merchandise within the clinic.
“If you’re barely earlier stage and your runway is sort of quick, should you exit to market now you’ll discover there are a whole lot of VCs with capital, however they’re sitting on a whole lot of dry powder – that means capital they haven’t but deployed out of their enterprise funds.
“First-time funds which have just lately raised are actually challenged by the problem of not with the ability to elevate a second fund, as a result of they haven’t exited sufficient companies to show their thesis on why the fund needs to be working.
“So a whole lot of newer funds will not be deploying into new companies, solely supporting their present ones. It’s turning into an actual downside.
“But there may be loads of early-stage capital – seed funds, for instance.
“Overall, there are many nice companies in Cambridge and there’s a pipeline of nice science popping out of the college, and a pipeline of second, third and fourth-time founders that basically helps validate these newer companies. But the problem is across the A-round.
“A lot of money is focusing on artificial intelligence, quantum and, to a lesser extent, on climate – there’s still a lot of early capital there. It means there is less capital to go around other businesses.”
The earlier federal authorities acknowledged a number of of those obstacles when it revealed the Mansion House reforms in July 2023. Those reforms are nonetheless waited for nonetheless are deliberate to help the financial options market to open funding for our most encouraging sectors and improve returns for savers.
The steps will definitely be focused at enhancing financing liquidity for high-growth corporations by altering the UK’s pension plan market, and enhancing the UK’s setting as a list location.
“The problem with pension funds investing is they still have the same objectives – they are risk-averse and want returns of 5, 6 or 7 per cent. They are not looking to take wild bets on early-stage businesses,” observesPaul “So in my mind, there is a question on how much that will really benefit particularly the early-stage technology businesses.”
But there was some favorable data final Thursday, when the federal authorities revealed the growth of the Enterprise Investment Scheme (EIS) and the Venture Capital Trust (VCT) plan from 6 April 2025 by one decade to five April 2035, to induce monetary funding proper into brand-new or younger corporations with tax-relief rewards. There proceed to be numerous different obstacles although.
“People are nonetheless involved concerning the tax state of affairs. There are a whole lot of challenges on initiatives like R&D tax refund, which many early-stage companies actually depend on.
“There was a degree about two years in the past the place capital was simply being thrown at stuff, and there was a little bit of an AI bubble. What we don’t need to see is a increase and bust. We need a regular stream of appropriate capital.
“Deals are out there for sure. But we will see some more failures because companies are running out of capital and their normal sources won’t invest. So it’s on an edge. I don’t see a decline coming any more but I haven’t seen that real uptick.”
Paul need to see the London Stock Exchange and its junior Alternative Investment Market (OBJECTIVE) open rather more.
“We need to see that because people need the exit,” he claims. “I’m sorry to say the AIM market and the LSE itself is not really a route for many, particularly in the life sciences. They can be for some tech businesses. But the markets are not freely open yet, so they’ll have to raise more capital on a private basis.”
The stats again that up, with the number of corporations offered on goal happening 30 p.c contemplating that 2015, with 78 terminations in 2015 alone.
The approximate ₤ 500,000 expense of an Initial Public Offering on goal, along with approximated ₤ 200,000 a 12 months in prices and costs, positioned it unreachable for quite a few.
And the 44 p.c lower in bizarre on a regular basis buying and selling contemplating that 2021-22 suggests quite a few capitalists are inserting their money in different places– not the very least in innovation provides abroad.
So are we doing adequate to take care of high-growth Cambridge corporations beneath and out of United States possession?
“The brain drain has always existed – back in the 70s there were academics going to the US for great opportunities,” notesPaul “We’ll at all times have that problem.
“As a place to begin for a lot of of those companies, it’s necessary that we now have the funding and assets throughout the educational system, not solely to maintain those we now have however to encourage international lecturers to return right here. Cambridge itself has at all times been extremely good at that.
“But they want funding to do this and we all know that’s been difficult over the previous few years. Hopefully the federal government will do one thing to handle that.
“We ought to by no means say to an entrepreneur ‘You shouldn’t promote your organization. You ought to keep a Cambridge firm’. I feel that’s unfair. They must do what’s proper for them, for his or her staff, their stakeholders, their traders.
“The challenge is what we can do to keep them here.”
What would definitely Paul’s dish for that be?
“Firstly, we have to make sure the tax system is the primary on the earth for supporting entrepreneurial ventures. We want to ensure our means to compensate folks to stay right here is equally as enticing, so which means ensuring our EMI scheme stays tremendous constructive, and Business Asset Disposal reduction – all these sorts of issues.
“A better capital market here would encourage people to stay – and making sure that we have more investors capable of larger transactions.”
But the enchantment of the United States market, and its 345 million-plus populace, will definitely continually be eye-catching, Paul consists of.
“If you have a product applicable to US government contracts you have to have a US company. The US is incredibly good at enforcing that. But do we want to force people to stay here under regulatory pressures? We should be incentivising rather than using a threat.”
BDO is acknowledged as a scale-up skilled and, correctly, is funding the Scale- up of the Year group at this month’s Cambridge Independent Business Awards.
For Paul, scaling is just not regarding increasing earnings– that’s a “result of scaling”, he claims.
“Scaling in its core sense is about how you alter what you are promoting’ angle from a one-to-one course of – that’s one salesperson to at least one buyer – to promoting broadly to quite a few clients. It is likely to be one salesperson to 500 clients. A number of that’s course of improvement, manufacturing and distribution.
“At BDO, once I speak to folks about scaling, the dialog I actually need to have is ‘Where are you going in the next two or three years and what do we want to think about so the growth is smooth?’.
“You can’t keep looking at tomorrow – you have to look further down the road.”
BDO at present has a big firm in Cambridge, nonetheless much more people will definitely be signing up with the similarity Paul and tax obligation companion Richard Watson on the Cambridge office.
“We try to take a special method, which helps folks to look long-term on the progress of their companies and tackle future challenges prematurely relatively than being reactive.
“For anybody that always wants to talk to me, it’s always confidential. I want to engage as early as possible – and not just because somebody needs us for a problem.”
If you want to speak with Paul, you may find data at bdo.co.uk/en-gb/locations/cambridge.
BDO is funding Scale- up of the Year on the 2024 Cambridge Independent Business Awards, being held on 26 September at King’sCollege Visit cambridgeindependentbusinessawards.co.uk for much more.
