How Northern Gritstone is inspiring next generation of entrepreneurs

"I started off as a receiver and trained as chartered accountant but I spent my first three years working with bust businesses, mainly in the East End of London,’’ Mr Johnson recalled.

"It was the best job I've ever had. At 22 I was being sent off to run businesses in a pretty hard-nosed area for cash for two to three months. You certainly grew up. You learned about life and money, and having come from a relatively cosseted background, it was a bit of a baptism of fire. I couldn't have had a better start.”

This work on the business coalface sparked his interest in venture capital and private equity. Mr Johnson, who went on to spend a decade as head of Caledonia Private Capital, aims to inspire a new generation of Northern entrepreneurs in his latest role.

Northern Gritstone was established with support from the universities of Manchester, Leeds and Sheffield with the aim of commercialising businesses from these institutions, as well as funding the development of similar enterprises across the North of England. It certainly has the financial firepower to turn business dreams into reality.

Northern Gritstone has £312m in capital, £150m of which is from local authority pension funds in South Yorkshire, West Yorkshire, Greater Manchester, Merseyside and the East Riding of Yorkshire. Other major investors include the asset managers M&G and Colombia Threadneedle.

"We have a phrase that binds everyone together in this: ‘Profit with purpose.’” said Mr Johnson.

"We have to deliver the right level of returns to our shareholders for the risk they're taking. If we do that successfully, the economic and social impacts will be enormous.

"That starts with creating the world-class businesses of tomorrow but it also creates a big money multiplier effect in terms of job creation and the services that those employees and companies then need. There's this focus on driving ambition and aspiration."

For example, Northern Gritstone has invested into adsilico, a University of Leeds spin-out which aims to be at the forefront of computational medicine. The company has received £3.5m in seed funding from Northern Gritstone and Parkwalk Advisors which will support its work to revolutionise the way medical devices are developed, tested, and brought to market.

Northern Gritstone has also invested in Phlux Technology, a semiconductor technology company which is a spin-out from the University of Sheffield. Phlux is growing and has become the first company in the refitted Pennine Five building, which is part of Sheffield’s investment zone, The Innovation Spine.

Careful consideration is always required before Northern Gritstone takes the plunge and backs fledgling entrepreneurs.

"This research is brilliant and we've backed 24 businesses so far, the majority of which are based on research from the universities,’’ said Mr Johnson.

"These inventions are all amazing, but we have to ask if each of them is solving a big enough real-world problem and is the timing right for that business to be launched? Will it get the commercial traction that makes it successful? How can we get the right team and talent around it to launch it?

“We also have Northern Gritstone Innovation Services which includes our accelerator venture building programmes which is all about getting the spin-outs to be 'match ready'.

"We also want to make sure we have the right team at the beginning of the journey,’’ he added. “We have a talent plan which looks at how we're going to expand the teams and make sure we are connecting with the best possible people. We also have a community of mentors. We're trying to bring people from a much bigger geography who have experience of building and exiting businesses. We want them to get excited by the opportunity here in the North of England.

"Data from the US indicates that you need a portfolio of at least 80 seed investments to provide you with a 95 per cent chance of at least one unicorn (a start-up or early-stage business valued at $1billion plus.)

"We are looking to make 10 to 15 new investments a year. So after five years, we would expect to be at a portfolio of 80 positions.

"We've got an investment team of 11 people. We launched Gritstone three years ago so it is incredible that we've built a world-class investment business in that time to build on our promise to shareholders and stakeholders."

Mr Johnson is aware of the importance of providing positive role models for young people.

"We do outreach into local schools to try and tell young people about the amazing jobs around the corner,’’ he added.

"There could be a world-class business near them. A lot of this is story telling, so you go to talk about some of the great venture capital-backed businesses that exist like Apple, and SnapChat and Facebook."

He recalled going to speak to a class of 16-year-olds in Sheffield, and initially, receiving a lukewarm reaction.

"Some of them were sitting with their headphones on and not really engaging,’’ he recalled. “Halfway through there was suddenly a light bulb moment. They said: "How can I come and get a job with you?

"It's all about having local stories to tell the kids,’’ he added. “If one of these kids picked up the phone in a few years and asked if they could do an internship with us I would be delighted." If Mr Johnson achieves his goals, there should soon be dozens of uplifting stories to share.