New company focuses on lesbian and gay sector
Published in:
Financial Times
26.04.10
The “pink pound” (or euro) is by now a familiar concept. The purchasing power of lesbian and gay consumers has long been recognised. For gay men in particular, the tag “good job/no dependants” often adds up to that marketing man’s holy grail: high disposable income. Consequently, companies have sought to target this lucrative market segment.
When it comes to turning things round, however, and investing in "pink" businesses rather than simply seeking sales from gay consumers, there is little to report. Nobody has sliced the investment universe up in this way – at least, not until now.
Even in the enlightened 21st century access to mainstream corporate advisory services is not a given for LGBT sector companies
“For many years we’ve felt that the LGBT [lesbian, gay, bisexual and transgender] consumer segment is a huge developing market, but nobody focuses on it,” says Paul Thompson, co-founder of LGBT Capital, the first company to try and change this. “LGBT” is a self-designation used by lesbian, gay, bisexual and transgender communities in English-speaking countries
Launched in February 2010 by Galileo Capital Management, a London and Hong Kong-based firm that manages bespoke investment fund concepts, LGBT Capital is a corporate advisory and investment management company focused on the LGBT consumer market.
The new company has two purposes, both of which are revolutionary. First, it aims to provide corporate advisory and business development services to companies that serve the LGBT sector. Second, it hopes to launch a fund investing in companies providing products and services to the LGBT community globally.
The two arms of the business are symbiotic. “We started with the corporate advisory business by default,” says Mr Thompson. “When we were doing research into companies with a view to pulling together a portfolio for the fund we saw the need for corporate advice.”
Even in the enlightened 21st century, it seems, access to mainstream corporate advisory services is not a given for LGBT sector companies. A recent survey commissioned by LGBT Capital found 30 per cent of LGBT sector businesses felt they needed to adopt a degree of secrecy when setting up and seeking funding. However, even without this element, Mr Thompson believes a specialist service provides unique advantages.
“There is a benefit that comes from being in the space and talking to people,” he says. “As well as helping companies to raise finance, we are talking to businesses that want to expand in non-organic ways by acquiring or merging. Because we know the companies we can bring them together.”
This service really comes into its own when companies want to expand outside of an existing sector or geographic area. All the companies responding to the survey commissioned by LGBT indicated they wanted to do this, but 80 per cent lacked specialist advice on how best to secure funding. Expansion into the developing Asian markets is a particular theme, and here Mr Thompson, who is based in Hong Kong and was the first foreign chief executive of a Chinese asset management business, believes LGBT Capital can provide invaluable support.
“We expect there to be a significant increase in LGBT-oriented companies in the developing markets, coupled with greater openness within the developed markets,” he says.
“This will provide significant opportunities for corporate activity, including cross-border investment opportunities requiring industry specialists.”
The fund LGBT Capital plans to launch later this year will be a private equity fund. At the moment, most LGBT sector business is too small for any other kind of vehicle. LGBT Capital has identified a universe of about 100 LGBT companies spread across sectors such as travel, entertainment and property, of which 15-20 fit its criteria.
There are also plans to launch two other funds, including a public equity fund. Mr Thompson is tight-lipped about how and when this will happen, other than to say that the public equity fund “will invest in companies that derive a significant piece of their business from the LGBT consumer sector”. We may assume, however, that he hopes his own company’s corporate advisory activities will move the LGBT sector in the right direction.
The company will be looking for good quality businesses that give investors – gay or straight – access to a market segment whose already substantial potential is set to be boosted by expanding gay liberation
Like all investors not exclusively motivated by the rabid pursuit of profit, Mr Thompson is keen to emphasise the hard-nosed financial case for his company’s proposition. LGBT Capital will not, he says, be investing in businesses “because they are run by nice people with good aspirations”. The company will be looking for good quality businesses that give investors – gay or straight – access to a market segment whose already substantial potential is set to be boosted by expanding gay liberation in both the developed and developing markets.
Similarly, although the future public fund could take an activist stance and invest in gay-unfriendly companies to get on to the board and try and change things, Mr Thompson plays this aspect down. If that happens, it will be a minor part of the fund’s activities, he says. He is likewise reluctant to criticise the gay-rights record of developing markets, such as China and India. “There is little to be gained from going out and criticising,” he says. “There is a lot to be gained from investing in businesses that give people somewhere to go.”
That is not to say that LGBT Capital does not have a motive beyond profit. The company has committed to donating 10 per cent of its profits to LGBT charities, but just as some emerging markets investors believe investment in an emerging markets fund is a better way to assist developing economies than a charitable donation, Mr Thompson believes the real benefits his company can bring to the LGBT community will come from the investments themselves. “Investing in good quality businesses will by default benefit the community,” he says.
© Financial Times, 2010