From juice bars to online betting, Tim Levene has always thrived on entrepreneurship. Now, as head of private equity fund Augmentum Capital, he is targeting technology deals-with a blast of financial firepower from the Rothschilds

Some people have an eye for a trend. Tim Levene is one of them. For expanding businesses starved of finance by the banks, growth injections from private equity have become an attractive proposition. So Levene has co-founded Augmentum Capital, whose first £50m fund is backed solely by RIT Capital Partners, the FTSE-listed investment trust in which Lord (Jacob) Rothschild and family are substantial holders.

As usual, Levene, who launched juice bar Fresh 'n' Smooth (now known as Crussh) and was the founding employee of Flutter.com (which merged with Betfair.com), is taking a punt on an emerging need.

From his office in Spencer House—the 18th-century stately home in St James's, London, that has been restored by RIT—Levene recalls how a lunch meeting with Lord Rothschild in the summer of 2008 laid the foundations for his new business.

"I said I was planning to come back from Hong Kong and was looking for one or two businesses to invest in. He asked whether I would like 'a little more firepower'. To be backed by somebody like that, in terms of brand and reputation, was incredibly compelling."

Levene was given funds under management to target £50m of private equity deals among break-even or profitable firms in the e-commerce and tech sectors (his choice), as well as office space and the full support of RIT.

"Even when the end of the world happened [the credit crisis], they were still supportive," he says. "They said it was a long-term game—'here's some money, off you go'."

It's a move that echoes the launch of Better Capital last year by Jon Moulton, but where Moulton is a veteran in the field, Levene had no experience in private equity. He brought in his old friend Richard Matthews as his partner. Matthews was chief financial officer at Flutter with Levene, then went to media investor Benchmark Capital and private equity group Manzanita Capital before rejoining his pal.

"I needed someone who knew what they were doing in private equity because clearly I don't," explains Levene. "Someone to keep me on the straight and narrow. That's worked really well."

Even so, was it not a huge leap of faith on RIT's part? Not according to those who know Levene. David Yu worked with him for several years at Flutter and Betfair, where he is now chief executive. "Tim is one of those fortunate individuals who combines drive and intelligence with charisma and flair. You just feel compelled to back him and his ideas," he says.

And if RIT was looking for someone with a business background to invest its money sensibly, then David Giampaolo, chief executive at Pi Capital, reckons Levene was a good choice. "I've met Tim a few times and really liked him. I think he's probably a very smart investor," he says.

Apart from being affable and sincere, Levene has a strong entrepreneurial background. Steve Currie, partner at corporate advisory firm Catalyst, says those skills will be an asset to the portfolio companies in which Augmentum invests.

"Some private equity firms have historically been guilty of recruiting and respraying accountants and bankers, and that brings a certain approach to investing money," he says. "When people come from a more entrepreneurial background, they bring a different approach. I'm sure it will be a fantastic success."

Levene agrees that he's in a good position to impart advice, having been through it all himself, and confirms that Augmentum is not about financial wizardry. Everything it invests is equity. "I'm not your usual private equity guy," he says. "I think when you've done different things, and you've been part of a high-growth story, there are lots of lessons, good and bad. You learn much more from the bad ones. That's given me variety. I'm applying lots of learning and putting it to good use."

Looking at his CV, and given that his father is Lord Levene, the influential chairman of Lloyd's of London, you might wonder where the bad times were. But the former Bain & Company consultant is candid about where he went wrong, and what he bailed out from. Take Fresh 'n' Smooth, where, he says, "There was some bad luck in terms of timing."

Having spotted a trend for healthy smoothies in Sydney and California in the late 1990s, Levene decided to bring an "anglicised version" of the concept to the UK. He raised external financing, put in his own money and found a prestigious site at Canary Wharf with a captive audience. But Levene admits his business plan was naïve, and the "coffee wars" between brands such as Starbucks and Costa pushed up rent for the type of prime space he was seeking.

"Replicating what we built at Canary Wharf was a huge challenge. I saw that early. Although I'd sunk all my time and money into it, I recognised we weren't going to roll this out as anticipated. I said 50 stores in three years. Twelve years later, we're 24 stores."

Note the "we". Levene is proud that the concept has proved popular but his best option then was to sell. "I think we were a little ahead of our time. So when someone [James Learmond] came along who had opened a similar bar in the City, I thought, 'Fine, someone else will fund this and have the commitment to ride it out.'" These days he is "an irritant shareholder" and a regular customer at Crussh.

He refers to those couple of years as his "real-life MBA", and a rude awakening to the realities of running a business. But it didn't deter him from getting involved in another start-up before the century was out. He admits he wasn't up to speed with the Silicon Valley tech boom in 1998-99, but when ex-Bain employees Josh Hannah and Vince Monical came to him with an idea for a peer-to-peer betting exchange, his ears pricked up all the same.

When the pair raised $5m (£3.2m), from Bernard Arnault, chief executive at LVMH, Levene joined them as the first UK employee at Flutter. By 2000, the founders had raised $24m (£15.5m), and were being described as "the Yanks with a bank". Levene admits it was an extraordinary amount for a business that hadn't yet generated a cent of revenue, but it proved that, conceptually, Flutter was a great idea.
Yet its future started to look shaky despite a "mean business plan", a strong technology platform, a large market share and an expert internet team. This time, says Levene, they lacked experience in execution and didn't fully understand the trading market. "We saw Betfair.com launch and what we had felt was too complex a product for the consumer [pure exchange betting, allowing anyone to put a bet on anything] gained traction. Over time we gravitated to their model. We had gone down a path that wasn't particularly successful."

So with Betfair struggling for funding, and its technical platform "creaking", the two competitors merged in 2001. Levene has no regrets, describing it as a fantastic deal for both parties. Betfair is now the world's largest sports betting exchange. "Had they not merged," he says, "the business today would be looking quite different. It was great fun trying to steal their market share, but frankly, for the position of the company, this was a no-brainer. It worked out for all the shareholders because of the success it's had since."

It also gave Levene the opportunity to learn more about doing business in Asia. As commercial director, he was tasked with growing international revenues and in 2004 he moved overseas to set up Betfair Asia. The continent was not without its challenges and Levene saw many organisations from Europe and the US seek the big prize and fail. It wasn't because their product wasn't right, he says, "but because they didn't localise or fully appreciate what was required to succeed there".

He spent time identifying potential markets and then the lobbying that would be required. For as he explains, while Asians generally love gambling, the governments have "major social, political and religious issues for why they don't want to regulate it". He says: "These countries have extraordinary illegal markets. Where there's regulation it tends to be monopolistic." While there has been traction in some of these places for Betfair, he adds, it's a long-term strategy.

Levene remains a shareholder and says he enjoyed his six years in Hong Kong but the entrepreneurial urge to do his own thing brought him back to London. He has decided that he needs to be part of more than one high-growth business at a time.

"If I look at the Betfair story, the most exciting bit was probably the two years after the merger, where we were on this great trajectory and were flying by the seat of our pants," he reflects. "I can say to companies, 'I've been there,' and that really resonates."

Colin Ellis, chief economist at the British Private Equity and Venture Capital Association, believes that Levene's entrepreneurial background will be particularly useful in light of the fact that his fund will be investing in hi-tech internet and small-to-mid cap deals.

"His experience and great track record will stand him in very good stead," says Ellis. "You can loosely characterise private equity guys as two types. The bankers or ex-bankers, who are fantastic at financial engineering and 'inorganic' growth. And the entrepreneurial guys who are much better at taking a business and growing it the old-fashioned way. Tim falls into that category."

One of the three companies in which Augmentum has invested since the inception of the fund is SRL Global, an investment data management boutique that spun out from Man Group in 2009. As its chief executive, Neil Puri, explains, he met Levene on an informal basis through the Rothschild network, when the first funding round was already oversubscribed. But the chemistry between them, and his "extremely impressive history" convinced Puri to "shuffle down all the shareholders who were already in the round and turn away the new ones to let Augmentum in". He says: "What we've built is a financial technology firm. Financial knowledge is key—we're all ex-traders—but Tim had the track record of knowing how to commercialise technology and that was what attracted us. As an entrepreneur, I think it's important to have shareholders who are true partners in your business. Tim hasn't even built in an exit. He's long-term and strategic."

Levene says he has looked at more than 100 opportunities so far this year, and reckons Augmentum can manage eight deals before it has to "beef up and raise another fund". He says: "Where you go next is to demonstrate success in the investments that you've made. Until you've done that there's a question mark next to your name—and that's the way it should be."

He describes Augmentum as "sector agnostic" but remains intrigued by disruptive technology. As a fan of what Skype and Spotify have achieved online (with communications and music respectively), he believes there are too many spheres of business that still live on past glories.

"It's no secret that the music and film worlds have been struggling for years with how to evolve to the 21st-century digital age," says Levene. How about a little flutter on him turning one of these industries on its head before too long?