Why I am setting up my own private equity fund...with zero experience

Toby Dixon‍ sold his recruitment company for £30m. Now he's storming into equity investing
Toby Dixon‍
Toby Dixon

Despite every advisor telling me I was mad, I started my first business, Marlin Green, in 2010. I’m not one of those people who can’t take advice, nor do I purposely take a contrarian view for kicks. I firmly believe that following your instincts is crucial when running a business, even if it means going against popular opinion. And my gut was telling me this was the perfect time to start.

Yes, the outlook was uncertain. The world was reeling from the 2008 crash, investment was in short order, and economic growth in the UK was flat. Austerity was in full force. Inflation was on the rise. As was unemployment. Perhaps, it was true. Only a fool would start a business in such an environment. But I took a different view.

I saw the difficult economic situation as an opportunity. I knew that many people duck and cover during a recession. They prefer to pull up the drawbridge and wait out the storm. It’s about damage limitation. Essentially, they exit the market, leaving those of us willing to work hard and push through with a clear road.

Markets may shrink during a recession, but the European staffing market was still worth a massive £156bn. Therefore, it was up to me to find the opportunities in front of us. The gamble paid off. After a decade in business, my business partner and I sold our recruitment company for over £30m.

Not that it was easy. It never is. But, through a commitment to hard work, a focus on profit, and creating a dynamic culture, we tamed one of the most challenging decades.

I put our success down to three critical factors. First, we had the right plan and stuck to it. When things get tough, and Plan A isn’t working, work Plan A harder. Don’t panic and change the entire business. When you pivot too hard, you start from scratch.

The best businesses do just as well during a recession as they do in a healthy market and often increase market share. They don’t change who they are or how they do it. They believe in their model, stay true to their process and make small tweaks to adjust when necessary.

Second, we didn’t wait to take big decisions. We assessed the situation and acted fast. Building a successful business is about making quick decisions. This is vital during economic uncertainty or unforeseen events. When your business is rocked by circumstance, you don’t have time to wait, you have to respond.

When Brexit hit, we didn’t panic. We didn’t re-engineer our business. Instead, we opened a European office and shifted our focus to providing local candidates.

Third is belief. Significant events such as recession or Brexit will occur. Your ability to navigate them and succeed will depend on your mindset and how you act.

The businesses that succeed in every market are built on strong physical and mental foundations. Your success will depend on a rock-solid belief in the success of your business. Nothing will kill it quicker than the wrong attitude.

Building Marlin Green during such a turbulent decade taught me that your business is your greatest weapon against economic headwinds and the most effective tool for creating value for you and others.

There is no other investment that you have complete control over. Whether it’s the stock market or climbing up the corporate ladder, in every other scenario, you rely on the actions of others and, in doing so, give up control of your destiny.

Having made it through a recession, Brexit, and navigated the sale of our business during the pandemic, I believe I can make a difference in the lives of other founders. That is why my next venture is the creation of my own Private Equity fund.

Once again, there are those that think I’m mad. I have no PE experience, and the black clouds of recession are gathering once again. As before, I respectfully disagree.

According to research from Harvard Business School, 3 out of 4 venture-backed businesses fail to provide a return on investment. I believe I know why.

While at the top end of the PE market, businesses are well served, it is my experience that those in the lower mid-market (businesses valued up to £10m), who often need more help, but don’t get the support they need because some PE funds can only offer capital and a relatively inexperienced monthly board presence.

Having met with the owners of many of these funds, I found the skills and experience present differed from the needs of scale-ups and growth businesses, who often require hands-on experience to help them hit the next level.

I’m not talking about a 10 % YOY growth plan. I’m talking about rolling up our sleeves and tripling bottom-line profit within 24-36 months and kicking things on from there. Now that needs a little magic that only comes from experience.

Business costs are relevant too. I’ve noticed that some PE houses at the market’s lower end are not used to a low-cost environment. Every founder/owner worth their salt will sit in bed at night addressing their cost base. So often, the upside to the bottom line lies here. I’m cut from the same cloth.

Conversely, most PE fund managers come from a banking/advisory or private equity background. They have excellent PE or advisory experience, but none have been a scale-up or growth founder.

As investors, we should be more embedded and ready to get our hands dirty. It’s why I’ll sit on the board of all of Growth Fund 1’s portfolio investments.

This is what will create my unfair advantage. Anyone can win in a buoyant market, but you need people with experience to navigate choppier waters.

I believe experience is the key to success, particularly when the going gets tough. By focusing on the right plan, making decisive decisions, and maintaining unwavering belief, businesses can not only survive but thrive in any market condition.

As I set out to assist entrepreneurs in realizing their professional and personal aspirations, I am committed to providing the support, expertise, and unique perspective that comes from having been in their shoes.

At Growth Fund 1, there will be no room for institutional investment. It is exclusively for entrepreneurs and self-made money only. I like to think when the storms come, or bottlenecks arise, I won't have to hope the team has the answer or hunt for a third party to help find it. As an incoming investor and experienced partner for growth, helping to deal with the hard stuff will be my and my investment team’s responsibility.

About Toby Dixon

Toby Dixon is a man on a mission. Having sold his recruitment business for over £30m in 2021, despite the fallout from the 2008 crash, Brexit, and Covid, he now has his sights set on bending Private Equity to his will.

His new venture, Growth Fund 1, will be a disruptive fund with a new type of leadership. Unlike other funds at the lower mid-market that prioritise PE experience, Growth Fund 1 is backed by leading entrepreneurs and supported by a panel of experienced and self-invested advisory members, all with a proven track record of succeeding in business.

Written by
Toby Dixon‍
August 1, 2023
Written by
August 1, 2023