01 Sep 2005

Making History, Starting Over

Sir Ronald Cohen pioneered venture capital investing in Europe. Now he plans to do the same with social investing.
by Roger Thompson


At age 26, Ronald Cohen (MBA ’69) planted the seed of a great idea in inhospitable British soil. With three HBS classmates, he cofounded a consulting firm to advise entrepreneurial businesses. Admittedly, it was a risk. Entrepreneurship wasn’t exactly a household word in 1972. England at the time was known as the “sick man” of Europe, with lumbering state-owned enterprises, high unemployment, and a crushing top marginal tax rate of 93 percent.

In an ominous sign of the times, the day after Cohen launched what was to become known as Apax Partners, a bitter coal miners’ strike forced the British government to declare a state of emergency and place businesses on a three-day workweek to conserve electricity. It would take more than luck to grow a business in such conditions.

By 1977, two of the founding partners had moved on, leaving Cohen and Maurice Tchénio (MBA ’70), the Paris-based partner. In what proved to be a fortuitous stroke, Cohen then recruited Alan Patricof, a pioneering venture capitalist based in New York, to join the partnership. Under Patricof’s influence, the firm shifted focus from advising to investing in start-ups just as the UK and Europe embarked on major economic reforms. Guided by Cohen, the firm has emerged over the past three decades as one of the world’s dominant private-equity investment groups, raising or advising funds totaling more than $20 billion.

At the peak of his game, Cohen bowed out last month as Apax’s executive chairman, confounding skeptics who figured he would sidestep company policy that requires retirement by age 60.

“I’m not really retiring,” Cohen pointedly explains in an interview at Apax’s Portland Place headquarters, a stately townhouse on a tree-lined street near London’s Regent’s Park. “I don’t like to use that word. I’m stepping down from management responsibilities for Apax, but remaining active,” an understatement that seems fittingly British.

Since 2000, Cohen has been increasingly involved in efforts to nurture social investment in disadvantaged areas of the UK and in the Middle East, where he was born. His commitment to these endeavors is as genuine as his lifelong devotion to entrepreneurship and free markets. In fact, his success in business led him to some profound, motivating insights.

“While entrepreneurship is great for the economy, it creates ever- greater discrepancies in income and wealth,” he says. “And in a system that requires low levels of taxation, free markets, and privatization of state assets, you have a paradox. The paradox is that the state is in less of a position to act. The state is no longer a redistributor of income and wealth.”

Thus, an unbridled free-market system that leaves more and more people behind will ultimately become unstable, Cohen fears. Which brings him to a pressing question: “How do we create a stable system?” His answer is his new mission. “The private sector has to assume the responsibility for making the system stable by spreading equality of opportunity and assuming a high degree of social responsibility.”

Cohen began his own journey down this road in 2000 when the British government asked him to chair a task force to study ways to boost the economic prospects of the nation’s most downtrodden areas. (The next year, he was honored with a knighthood, recognizing his contributions to the venture capital industry.) Out of that study came a series of policy recommendations aimed at creating a sustainable system for investments in deprived areas, including creation of community development venture funds. Cohen chairs the first such fund, Bridges Community Development Venture Funds, established in 2002 with roughly $35 million, half from the government and half from the private sector. The objective is to invest in businesses in Britain’s poorest areas while making a solid return to attract more capital for establishing other such funds.

Returning to his roots in the Middle East, Cohen created The Portland Trust in 2003 to fund investments aimed at easing tensions between Israel and its neighbors. For example, the trust is working to secure loan guarantees for Palestinian banks, freeing them to make risky loans to small businesses. “To bring lasting peace to the area, you have to strengthen the private sector, and the best place to start is the banks,” he explains.

Cohen compares social investment today to a small but building wave, much like venture capital three decades ago. Ultimately, he believes social investment will have just as beneficial an impact on society. Underlying his commitment is a firm belief that capitalism can’t create equality of outcome, “so we have to create equality of opportunity.” Throughout his own life, Cohen has been a master at taking advantage of opportunity.

Born in Cairo in 1945, he and a younger brother grew up speaking French and a smattering of Arabic. Cohen’s father, whose family traces its roots to the Syrian trading center of Aleppo, started a successful import/ export business at age 30. After the Suez Canal crisis in 1956, the Egyptian government expelled Jewish inhabitants, forcing the Cohen family to leave with only one suitcase each. His mother’s British citizenship enabled the Cohens to resettle in London.

“My parents were not broken by what happened in Egypt,” he says. “They saw it as a challenge, and they rose to it.” And so did he. In due course, young Ronald mastered English and advanced to the top of his class. His outstanding academic performance earned him a scholarship to Oxford University, where he became president of the Oxford Union, the world’s most famous debating society.

Upon graduation, Cohen followed his father’s advice and applied to HBS, where he found inspiration for his entrepreneurial inclinations from Professor Georges F. Doriot, a venture capital pioneer. “My father brought me up to work for myself, never to be part of a large organization working for a salary,” says Cohen. From HBS, he tried consulting, but it didn’t hold his interest for long. Sensing a coming wave of entrepreneurial activity in Europe, Cohen moved to get ahead of it with the launch of MMG (Multinational Management Group) on February 8, 1972. When Patricof joined the struggling partnership five years later, it became known as Alan Patricof and Associates — APA for short. The name later morphed to Apax — “unique” in Greek — an apt choice that reflects the firm’s investment style.

The partners each launched small venture capital funds in their respective countries in the early 1980s. Without a Nasdaq-style market for European start-ups to go public, “it was extremely difficult to make a profit on early-stage investments,” says Cohen. In 1989, he opted for a “balanced” strategy, adding corporate buyouts to the firm’s early-stage investments. It’s a strategy that distinguishes Apax from rival firms and continues to guide investment decisions.

By the time the go-go ’90s rolled around, Apax was poised for spectacular growth. The firm’s European funds, which focused on telecommunications, IT, retail and consumer goods, media, health care, and financial/business services, returned an average of 45 percent a year during the decade. Since 1995, Apax has taken public more than fifty companies with a combined market capitalization of about 25 billion euros.

Before stepping down, Cohen consolidated management of the firm’s far-flung offices, making London the headquarters and positioning the firm to be a leading global player in equity investing.

As a student at HBS, Cohen was fascinated and troubled by the thesis of a best-selling book, The American Challenge, that warned of American cultural, technological, and economic domination of Europe. “My feeling was that entrepreneurship was not just a U.S. phenomenon,” recalls Cohen. By the time he handed over the reins of the firm he cofounded 33 years ago, Cohen had more than proved his point. Now, he’s determined to be no less successful in making the case for social investing.

Featured Alumni

Featured Alumni

Class of MBA 1969, Section F
Class of MBA 1970, Section F

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