The Funding LadderThe Funding Ladder
Bristol & Bath Enterprise Network
Monday, 22nd
November 2010
1
Brian Dorricott
Busine...
Finding MoneyFinding Money
General principles
◦ Terminology
◦ Things to sell
◦ Enhancing chances of success
Funding type...
TerminologyTerminology
Return on Investment
Equity
3
Return on InvestmentReturn on Investment
Also known as:
◦ Cost of money
◦ Internal Rate of Return
Inflation + Costs + Ri...
EquityEquity
Company is a legal entity
Company has value
◦ Equity is name given to that value
Company has owners
◦ Equi...
Things to sellThings to sell
Assets
◦ Cars, vans, computers, property
Immediate future
◦ Customer purchases
◦ Invoices
...
Enhancing Chances of SuccessEnhancing Chances of Success
Sales process
◦ Selling company’s assets / future
◦ Not just the...
SCOTSMANSCOTSMAN
Solution
Competition
Only me / uniques
Time bound
Size
Money
Authority
Need
8
SolutionSolution
9
CompetitionCompetition
10
Only me / uniqueOnly me / unique
11
Time BoundTime Bound
12
SizeSize
13
MoneyMoney
14
AuthorityAuthority
15
NeedNeed
16
The Funding LadderThe Funding Ladder
Overview
◦ Quick review of each option
You choose!
Contact information
◦ Website
17
Funding LadderFunding Ladder
18
Your choice...Your choice...
Friends & family
Grants & competitions
Crowd sourcing
Loans & debt
Hire Purchase
Factor...
Friends & FamilyFriends & Family
20
Friends & FamilyFriends & Family
Based on personal relationships.
Little or no sale of equity required.
Immediate cash.
Li...
Friends & FamilyFriends & Family
Deal size
Term
Collateral required
Business valuation required
Sales Required
Sell equity...
Grants & CompetitionsGrants & Competitions
23
Grants & CompetitionsGrants & Competitions
No requirement to pay back.
No sale of equity required.
Can include press cover...
Grants & CompetitionsGrants & Competitions
Deal size
Term
Collateral required
Business valuation required
Sales Required
S...
Crowd SourcingCrowd Sourcing
26
Crowd SourcingCrowd Sourcing
Credit profile different.
No need to value company.
No sale of equity required.
Bad debts pur...
Crowd SourcingCrowd Sourcing
Deal size
Term
Collateral required
Business valuation required
Sales Required
Sell equity
Bus...
Loans & debtLoans & debt
29
Loans & debtLoans & debt
No sale of equity required.
No need to value company.
Money available immediately.
Failure to rep...
Loans & debtLoans & debt
Deal size
Term
Collateral required
Business valuation required
Sales Required
Sell equity
Busines...
Hire PurchaseHire Purchase
32
Hire PurchaseHire Purchase
Can be used to assets.
Asset available immediately.
Can reclaim VAT immediately.
Personal guara...
Hire PurchaseHire Purchase
Deal size
Term
Collateral required
Business valuation required
Sales Required
Sell equity
Busin...
Factoring & CIDFactoring & CID
35
Factoring & CIDFactoring & CID
Immediate cash.
The customers don't know.
No need to value company.
Significant turnover (u...
Factoring & CIDFactoring & CID
Deal size
Term
Collateral required
Business valuation required
Sales Required
Sell equity
B...
Trade FinanceTrade Finance
38
Trade FinanceTrade Finance
Funding for all purchases.
No need to value the business.
Funding increases with business.
Used...
Trade FinanceTrade Finance
Deal size
Term
Collateral required
Business valuation required
Sales Required
Sell equity
Busin...
Revenue Based FinanceRevenue Based Finance
41
Revenue Based FinanceRevenue Based Finance
No security or equity required.
No need to value company.
Investors want compan...
Revenue Based FinanceRevenue Based Finance
Deal size
Term
Collateral required
Business valuation required
Sales Required
S...
Business AngelsBusiness Angels
44
Business AngelsBusiness Angels
BAs may help the business grow.
Money available immediately.
No security required.
Deals ca...
Business AngelsBusiness Angels
Deal size
Term
Collateral required
Business valuation required
Sales Required
Sell equity
B...
Venture CapitalVenture Capital
47
Venture CapitalVenture Capital
Large sums of money available.
Minimum investment is £2M.
Team of experts available.
Equity...
Venture CapitalVenture Capital
Deal size
Term
Collateral required
Business valuation required
Sales Required
Sell equity
B...
Useful websitesUseful websites
Business Link
◦ http://www.businesslink.gov.uk
Meteorical
◦ http://www.meteorical.co.uk
...
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Brian Dorricott Presentation

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BCS/BEN event, Core 5: Funding. Monday 22nd November

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  • What can you offer that other’s can’t?
  • Brian Dorricott Presentation

    1. 1. The Funding LadderThe Funding Ladder Bristol & Bath Enterprise Network Monday, 22nd November 2010 1 Brian Dorricott Business Mentor, Coach and Investor http://www.meteorical.co.uk brian.dorricott@meteorical.co.uk
    2. 2. Finding MoneyFinding Money General principles ◦ Terminology ◦ Things to sell ◦ Enhancing chances of success Funding type summary More information 2
    3. 3. TerminologyTerminology Return on Investment Equity 3
    4. 4. Return on InvestmentReturn on Investment Also known as: ◦ Cost of money ◦ Internal Rate of Return Inflation + Costs + Risk premium 4 Years 1% 5% 10% 50% 100% 1 1.01 1.05 1.10 1.50 2.00 2 1.02 1.10 1.21 2.25 4.00 3 1.03 1.16 1.33 3.38 8.00 4 1.04 1.22 1.46 5.06 16.00 5 1.05 1.28 1.61 7.59 32.00 10 1.10 1.63 2.59 57.67 1024.00 Return = ( 1 + IRR) years
    5. 5. EquityEquity Company is a legal entity Company has value ◦ Equity is name given to that value Company has owners ◦ Equity is shared between owners Shares in company ◦ Dictate rights to company assets ◦ Control over company proceedings 5
    6. 6. Things to sellThings to sell Assets ◦ Cars, vans, computers, property Immediate future ◦ Customer purchases ◦ Invoices Ability to pay ◦ Loans Dreams ◦ Equity 6
    7. 7. Enhancing Chances of SuccessEnhancing Chances of Success Sales process ◦ Selling company’s assets / future ◦ Not just the MD / CEO! Be prepared ◦ One chance... Learn from others ◦ AngelsDen ◦ Collegues ◦ Advisors 7
    8. 8. SCOTSMANSCOTSMAN Solution Competition Only me / uniques Time bound Size Money Authority Need 8
    9. 9. SolutionSolution 9
    10. 10. CompetitionCompetition 10
    11. 11. Only me / uniqueOnly me / unique 11
    12. 12. Time BoundTime Bound 12
    13. 13. SizeSize 13
    14. 14. MoneyMoney 14
    15. 15. AuthorityAuthority 15
    16. 16. NeedNeed 16
    17. 17. The Funding LadderThe Funding Ladder Overview ◦ Quick review of each option You choose! Contact information ◦ Website 17
    18. 18. Funding LadderFunding Ladder 18
    19. 19. Your choice...Your choice... Friends & family Grants & competitions Crowd sourcing Loans & debt Hire Purchase Factoring and CID Trade Finance Revenue Based Finance Business Angels Venture Capital 19
    20. 20. Friends & FamilyFriends & Family 20
    21. 21. Friends & FamilyFriends & Family Based on personal relationships. Little or no sale of equity required. Immediate cash. Little or no valuation of idea itself. Can sour personal relationships. Generally low value (<£50K). 21
    22. 22. Friends & FamilyFriends & Family Deal size Term Collateral required Business valuation required Sales Required Sell equity Business Development Help Cost of money Deal time to £50K No No No May be May be 0% months 22
    23. 23. Grants & CompetitionsGrants & Competitions 23
    24. 24. Grants & CompetitionsGrants & Competitions No requirement to pay back. No sale of equity required. Can include press coverage Generally low value. Targeted at dis-advantaged. Availability changes. 24
    25. 25. Grants & CompetitionsGrants & Competitions Deal size Term Collateral required Business valuation required Sales Required Sell equity Business Development Help Cost of money Deal time to £50K n/a No No No No Often 0% Many months 25
    26. 26. Crowd SourcingCrowd Sourcing 26
    27. 27. Crowd SourcingCrowd Sourcing Credit profile different. No need to value company. No sale of equity required. Bad debts pursued. New, untested form of financing. Partial success... no funding at all. 27
    28. 28. Crowd SourcingCrowd Sourcing Deal size Term Collateral required Business valuation required Sales Required Sell equity Business Development Help Cost of money Deal time to £50K 3 to 5 May be No No No No 7% to 12% months 28
    29. 29. Loans & debtLoans & debt 29
    30. 30. Loans & debtLoans & debt No sale of equity required. No need to value company. Money available immediately. Failure to repay... foreclosure. Evidence how loan will be paid back. Secured against tangible assets. 30
    31. 31. Loans & debtLoans & debt Deal size Term Collateral required Business valuation required Sales Required Sell equity Business Development Help Cost of money Deal time any 5 to 10 years Yes No Yes No No 2% - 5% months 31
    32. 32. Hire PurchaseHire Purchase 32
    33. 33. Hire PurchaseHire Purchase Can be used to assets. Asset available immediately. Can reclaim VAT immediately. Personal guarantees needed. Can’t fund cash flow. May be challenged by HMRC. 33
    34. 34. Hire PurchaseHire Purchase Deal size Term Collateral required Business valuation required Sales Required Sell equity Business Development Help Cost of money Deal time any 3 to 10 years Yes No Yes No No 8% - 20% month 34
    35. 35. Factoring & CIDFactoring & CID 35
    36. 36. Factoring & CIDFactoring & CID Immediate cash. The customers don't know. No need to value company. Significant turnover (usually £1M+) Can be expensive. Still need to collect payments. 36
    37. 37. Factoring & CIDFactoring & CID Deal size Term Collateral required Business valuation required Sales Required Sell equity Business Development Help Cost of money Deal time £50K + No No Yes No No 10% - 15% 1 month 37
    38. 38. Trade FinanceTrade Finance 38
    39. 39. Trade FinanceTrade Finance Funding for all purchases. No need to value the business. Funding increases with business. Used against firm orders. Back to back with Invoice Finance. Two charges increase overall costs. 39
    40. 40. Trade FinanceTrade Finance Deal size Term Collateral required Business valuation required Sales Required Sell equity Business Development Help Cost of money Deal time £50K+ Yes No Yes No No 8% to 25% 1 month 40
    41. 41. Revenue Based FinanceRevenue Based Finance 41
    42. 42. Revenue Based FinanceRevenue Based Finance No security or equity required. No need to value company. Investors want company to grow. Need revenue stream. Cost higher than bank loan. New class of funding in the UK. 42
    43. 43. Revenue Based FinanceRevenue Based Finance Deal size Term Collateral required Business valuation required Sales Required Sell equity Business Development Help Cost of money Deal time £50K - £250K 3 to 5 years No No Yes No Yes 20% - 30% 1 – 3 months 43
    44. 44. Business AngelsBusiness Angels 44
    45. 45. Business AngelsBusiness Angels BAs may help the business grow. Money available immediately. No security required. Deals can take a long time. Equity must be sold. High growth potential and exit. 45
    46. 46. Business AngelsBusiness Angels Deal size Term Collateral required Business valuation required Sales Required Sell equity Business Development Help Cost of money Deal time £50K - £250K 3 – 10 years No Yes No Yes May be 30% - 60% 2 to 9 months 46
    47. 47. Venture CapitalVenture Capital 47
    48. 48. Venture CapitalVenture Capital Large sums of money available. Minimum investment is £2M. Team of experts available. Equity must be sold. High growth potential and exit. Deals can take a long time. 48
    49. 49. Venture CapitalVenture Capital Deal size Term Collateral required Business valuation required Sales Required Sell equity Business Development Help Cost of money Deal time £2M + 3 to 10 years Yes Yes No Yes May be 30% - 60% 2 to 9 months 49
    50. 50. Useful websitesUseful websites Business Link ◦ http://www.businesslink.gov.uk Meteorical ◦ http://www.meteorical.co.uk  Funding section  Business Angel Network listing 50

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