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Institute of Physics Finance for technology-based small companies Introduction and overview David M c Meekin Chairman, the...
<ul><li>‘ Bankers: All rich. Sharks and swindlers.’ </li></ul><ul><li>‘ Innovation: always dangerous.’ </li></ul><ul><ul><...
Innovation and the Funding Ladder <ul><li>Problems for funders of early, small and technology deals </li></ul><ul><ul><li>...
‘ The Funding Ladder’ The different stages of funding for a new and innovative business Capital required Over £2m Expansio...
Proposed funds ‘ The Funding Ladder’ The different stages of funding for a new and innovative business Capital required Ov...
The ‘equity gap’ –  government-supported funds <ul><li>Regional Venture Capital Funds </li></ul><ul><li>e.g.,  www.thecapi...
The Capital Fund www.thecapitalfund.co.uk The Capital Fund is managed by YFM Venture Finance Limited. YVF Venture Finance ...
The Capital Fund <ul><li>£50 million Regional Venture Capital Fund </li></ul><ul><li>Investment focus: SMEs in Greater Lon...
What are we looking for? <ul><li>Management </li></ul><ul><li>Commitment, breadth, experience and realism – future require...
London Technology Fund www.londontechnologyfund.com The London Technology Fund is managed by Company Guides Venture Partne...
London Technology Fund <ul><li>£15m fund – launched summer 2005 </li></ul><ul><li>Investment focus: technology-based SMEs ...
<ul><li>Focus on technology: </li></ul><ul><li>- Communications </li></ul><ul><li>- Computer (hardware, internet, semicond...
<ul><li>Private sector matched funding </li></ul><ul><ul><li>European State Aid rules </li></ul></ul><ul><ul><li>Matched f...
What differentiates seed stage technology funds from other VC funds <ul><li>Same primary objectives </li></ul><ul><li>Whil...
COMPANY G uides 13 Christopher Street London EC2A 2BS Telephone: 020 7247 6300 Web site: www.companyguides.com Company Gui...
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Overview

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Transcript of "Overview"

  1. 1. Institute of Physics Finance for technology-based small companies Introduction and overview David M c Meekin Chairman, the London Technology Fund, The Capital Fund and Company Guides Limited 21 November 2005
  2. 2. <ul><li>‘ Bankers: All rich. Sharks and swindlers.’ </li></ul><ul><li>‘ Innovation: always dangerous.’ </li></ul><ul><ul><ul><ul><ul><li>- Gustave Flaubert, 1881 </li></ul></ul></ul></ul></ul>Perceptions – historical gulf between funders and innovators COMPANY G uides
  3. 3. Innovation and the Funding Ladder <ul><li>Problems for funders of early, small and technology deals </li></ul><ul><ul><li>Early: hard to evaluate new management and/or new business proposal without track record </li></ul></ul><ul><ul><li>Technology: hard to evaluate new technology </li></ul></ul><ul><ul><li>Small: not economic </li></ul></ul><ul><li>Result: risk and reward out of balance </li></ul><ul><li>Funders move up the ladder </li></ul>COMPANY G uides
  4. 4. ‘ The Funding Ladder’ The different stages of funding for a new and innovative business Capital required Over £2m Expansion Funding: Venture Capital / Bank Debt £750k-£2m £10k-£750k £0k - £10k Founders / University Trade Buyer / IPO / Bank Debt CONCEPT DEVELOPMENT COMMERCIALISATION STEP CHANGE Note: indicative only. Timescales and capital requirements vary. For example, some start-ups (e.g., with attractive technology and management in place) may move straight to early stage VC while corporate investors may invest at any stage. Note that grants may be available at any stage COMPANY G uides Venture Capital Trusts (VCTs) / Bank Debt STEP CHANGE Typical funding gap Regional Venture Capital Funds (RVCF) / Business Angel Networks / Early Growth Funds (matched funding) / Small Firms Loan Guarantee scheme (SFLG) ’ Family & friends’ / Nesta / Proof of Concept / Challenge / Seed Funds Early Stage Venture Capital Funds VCT Funds in Syndicates
  5. 5. Proposed funds ‘ The Funding Ladder’ The different stages of funding for a new and innovative business Capital required Over £2m Expansion Funding: Venture Capital / Bank Debt £750k-£2m £10k-£750k £0k - £10k Founders / University Trade Buyer / IPO / Bank Debt CONCEPT DEVELOPMENT COMMERCIALISATION STEP CHANGE Note: indicative only. Timescales and capital requirements vary. For example, some start-ups (e.g., with attractive technology and management in place) may move straight to early stage VC while corporate investors may invest at any stage. Note that grants may be available at any stage COMPANY G uides Enterprise Capital Funds / Venture Capital Trusts (VCTs) / Bank Debt STEP CHANGE Regional technology funds New funds Regional Venture Capital Funds (RVCF) / Business Angel Networks / Early Growth Funds (matched funding) / Small Firms Loan Guarantee scheme (SFLG) / creative fund ’ Family & friends’ / Nesta / Proof of Concept / Challenge / Seed Funds Early Stage Venture Capital Funds VCT Funds in Syndicates New fund
  6. 6. The ‘equity gap’ – government-supported funds <ul><li>Regional Venture Capital Funds </li></ul><ul><li>e.g., www.thecapitalfund.co.uk </li></ul><ul><li>Early Growth Funds - business angel matched funding </li></ul><ul><li>e.g., London Seed Capital, e-synergy </li></ul><ul><li>Community Development Funds - focus on deprived areas e.g., Bridges Community Development Venture Fund </li></ul><ul><li>Technology Seed Funds </li></ul><ul><ul><li>e.g., www.londontechnologyfund.com </li></ul></ul><ul><li>Enterprise Capital Funds (ECF) – latest development </li></ul>COMPANY G uides
  7. 7. The Capital Fund www.thecapitalfund.co.uk The Capital Fund is managed by YFM Venture Finance Limited. YVF Venture Finance Limited is authorised and regulated by the Financial Services Authority and is part of the YFM Group
  8. 8. The Capital Fund <ul><li>£50 million Regional Venture Capital Fund </li></ul><ul><li>Investment focus: SMEs in Greater London </li></ul><ul><li>Initial investment up to £250,000… </li></ul><ul><li>…with a further £250,000 after at least 6 months </li></ul><ul><li>…with potential to invest up to £5m in some companies </li></ul><ul><li>Must be the 1 st institutional investor/can co-invest with angels </li></ul><ul><li>Can invest in most sectors </li></ul><ul><li>Primary objective – VC rates of return for our investors </li></ul>
  9. 9. What are we looking for? <ul><li>Management </li></ul><ul><li>Commitment, breadth, experience and realism – future requirements </li></ul><ul><li>Demand </li></ul><ul><li>Clear need – differentiation - market drivers – growth and market share – channels to market – ability to find and sell to customers – competition </li></ul><ul><li>Products </li></ul><ul><li>Product development: time, costs and risks - specification versus need – ability to deliver the specification </li></ul><ul><li>Financials </li></ul><ul><li>Cashflow – future funding - growth - margins </li></ul><ul><li>The deal </li></ul><ul><li>Valuation – IRR% - exit </li></ul>
  10. 10. London Technology Fund www.londontechnologyfund.com The London Technology Fund is managed by Company Guides Venture Partners, which is authorised and regulated by the Financial Services Authority. It is funded by the London Development Agency and the ERDF COMPANY G uides
  11. 11. London Technology Fund <ul><li>£15m fund – launched summer 2005 </li></ul><ul><li>Investment focus: technology-based SMEs in greater London at seed/start-up/early stage </li></ul><ul><li>Can invest up to £1.5m – usually in tranches over the life of the investment </li></ul><ul><li>Must attract private sector matched funding </li></ul><ul><li>Primary objective – must invest on a commercial basis </li></ul>COMPANY G uides
  12. 12. <ul><li>Focus on technology: </li></ul><ul><li>- Communications </li></ul><ul><li>- Computer (hardware, internet, semiconductors and software) </li></ul><ul><li>- Other electronics related </li></ul><ul><li>- Biotechnology </li></ul><ul><li>- Medical (instruments, pharmaceuticals and healthcare) </li></ul><ul><li>- Emerging technologies (such as nanotechnology) </li></ul><ul><li>- Energy </li></ul><ul><li>- Environment </li></ul><ul><li>- Physical sciences and engineering </li></ul><ul><li>- New materials </li></ul><ul><li>- Value added manufacturing </li></ul>London Technology Fund COMPANY G uides
  13. 13. <ul><li>Private sector matched funding </li></ul><ul><ul><li>European State Aid rules </li></ul></ul><ul><ul><li>Matched funding means same terms – same instruments and yields, cannot be softer </li></ul></ul><ul><li>Why will private sector co-invest? </li></ul><ul><ul><li>No cost to access deal </li></ul></ul><ul><ul><li>Ease of identification </li></ul></ul><ul><ul><li>Selection based on current criteria </li></ul></ul><ul><ul><li>LTF prepares proposition </li></ul></ul><ul><li>Recognise their different drivers </li></ul>London Technology Fund COMPANY G uides
  14. 14. What differentiates seed stage technology funds from other VC funds <ul><li>Same primary objectives </li></ul><ul><li>While characteristics of ideal proposition remain identical, in practical terms significant differences: </li></ul><ul><li>Management – often incomplete and unproven </li></ul><ul><li>Demand – usually ill defined and no predictability </li></ul><ul><li>Products – need refinement and comparative costing/benefits </li></ul><ul><li>Financials – need for realism </li></ul><ul><li>The deal – expectation of founders and/or university </li></ul>COMPANY G uides
  15. 15. COMPANY G uides 13 Christopher Street London EC2A 2BS Telephone: 020 7247 6300 Web site: www.companyguides.com Company Guides Limited is Authorised and Regulated by the Financial Services Authority
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