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Show Me The Money London 2014 - Presentation by John Spindler Ceo of Capital Enterprise
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Show Me The Money London 2014 - Presentation by John Spindler Ceo of Capital Enterprise

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John Spindler is the CEO of Capital Enterprise. John has had over 15 years’experience as an entrepreneur and business advisor/consultant and as well as being responsible for the day to day management …

John Spindler is the CEO of Capital Enterprise. John has had over 15 years’experience as an entrepreneur and business advisor/consultant and as well as being responsible for the day to day management of Capital Enterprise is also a director and co-owner of audio designer and manufacturer Ferguson Hill.

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  • 1. Financing Entrepreneurs - Raising your first round of seed investment in London . . John Spindler CEO of Capital Enterprise
  • 2. Why start because….?
  • 3. …the world is changing…
  • 4. ..So now is the time to..
  • 5. …to start you need.. • But to move fast, learn quickly, maximise customer value and capture the market opportunity you may need investment to…
  • 6. “There is an opportunity gap when the scope for growing income at a very fast rate is limited for those who have too little to invest , but expands dramatically for those who can invest a bit more.”- i.e. to win requires scale Banjaree &Duflo- Poor Economics ….SCALE
  • 7. Scale focused start-ups are…different • Ambitious: want to be worth at least £20M+ in 3 years. • Solve a big problem for target customer . • Build on or leverage new technology/ business model innovations • Acquire and exploit as many “Unfair Advantages as possible”- team, key partners, resources etc • Move very FAST • Are Rare (less than 2% of all start-ups even try)
  • 8. To create them there is a Process! Advance in Stages… ..using the Lean Start-up Method
  • 9. ..So a Start-up in want of investment needs.. • Team, Tech & resources that is FIT for the task of creating an awesome company • Product that is the best solution FIT for the target customers problems. • Business Model that is FIT to be scaled. • Smart Ass Team • with a Kick Ass Product • With a Business model that can “capture” a Big Ass Market ( Jeff Clavier 3 Ass-es rule) + Capital Efficient to Scale.
  • 10. Smart Ass Team is… Balanced • Hipster (Designer) • Hacker (Developer) • Hustler (Distributor)
  • 11. Kiss Ass Product… has evidence that it solves a customers problem
  • 12. A Big Ass market … is fine but you need to find an initial Beachhead.
  • 13. …which means you need “Business Model” innovation http://www.youtube.com/watch?v=QoAOzMTLP5s
  • 14. Business Model Innovation Examples • Subscription – Salesforce – cost of customer acquisition, lifetime value and churn • Market Place – Alibaba – average transaction, commission on transaction • Lead Generation – AllStarDirectories – traffic, form data, price per lead • Productizing a Service – MOZ – adding scale to a service business. This includes building tools and business process automation over time into a scalable model. • Transaction Fees – Flattr, KickStarter – average transaction fee, commission • Commerce – AmazonSupply – Physical Goods – wholesale, cost of goods, retail, average margin, physical good • Combinations – Multisided markets – hardware sensors, software services with data analytics. These are usually manifested in more mature startups vs. startups at launch. • Non-profit – UP Global – generate the majority of our revenue from corporate and foundation sponsors.
  • 15. ..why you and why now?
  • 16. …because you have some Killer “unfair advantages” such as.. • Team – That is “Fit for Purpose”! • Technology that is relevant and hard to replicate.. • Knowing your first 5 customers personally.. • Completed Customer Development- Knowing your target customers and understanding what they want. • A “personal brand”/ credibility that means something to your early adopting customers.. • Access to a Uncontested Channel to market.. • Access to “Hard to get” resources or an ability to “steal” them… • A funded runway… “ Time to Learn” • A roadmap so you undersatand key tasks, milestones and metrics to achieve..
  • 17. Sources of Start-up Help for Tech Entrepreneurs Information: • Capital Enterprise; www.capitalenterprise.org • Meet-up - http://www.meetup.com • Mobile Academy- http://themobileacademy.org.uk/ • Makers Academy- http://www.makersacademy.com/ • GoGowo- http://www.gocowo.com • Skills Matter- http://skillsmatter.com/ • Start- up Britain - http://www.startupbritain.org • British Library- www.bl.uk/bipc • Google Campus- http://www.campuslondon.com • General Assembly- https://generalassemb.ly/locations/london • Innovation Warehouse- http://www.theiw.org • IC Tomorrow - https://connect.innovateuk.org/web/ictomorrow • UCL Decide- https://www.ucl.ac.uk/decide • Start-up Weekend- London- http://london.startupweekend.org/ • Launch 48- http://launch48.com/ • Start-ups on Air at Google Campus- https:// docs.google.com/spreadsheet/viewform?formkey=dEpuYlRFRFJ6SUVDdHVLRms3YmdBcmc6MQ • Hubventurelabs - http://hubwestminster.net/hubventurelabs • 3 Beards- http://www.3-beards.com/ • Tech Hub- http://www.techhub.com/events/ • Dreamstake- http://www.dreamstake.net/events • Capital List Get Together- http://www.capitallistblog.co/our-monthly-monday-get-together/
  • 18. Idea to Tech Business- Three Chasms.
  • 19. Market BusinessTechnical Start-up challenges… raising money to “prove”… Do the Target Customers care..? Does the product work…? Can team deliver and business make money…?
  • 20. Proof of Concept? Does it work? Does anyone care?
  • 21. Funding Product Development & BETA Testing Grants & Awards General • Technology Strategy Board ( R&D Funding) - http://www.innovateuk.org - http://www.innovateuk.org/content/competition/grant-for-rd-single-business.ashx • Knowledge Transfer Networks- www.innovateuk.org • IC Tomorrow- https://connect.innovateuk.org/web/ictomorrow • NESTA- http://www.nesta.org.uk/ • London European Enterprise Network- http://www.een-london.co.uk • E Funding for SME R&D - http://www.eurostars-eureka.eu/what.do • EU Funding for R&D collaborations: http://ec.europa.eu/research/participants/portal/page/calls • Knowledge Transfer Partnerships funding support- http://www.ktponline.org.uk/ktp-what-will-it-cost-my-business • J4B- Portal for grant finding http://www.j4b.co.uk Translation/ Follow on research funds. • www.rdfunding.org.uk/bulletin/queries/Search.asp?TheCloseMonth=July&TheYear=2011. • http://www.rcuk.ac.uk/kei/ktportal/Pages/Followon.aspx • https://ktn.innovateuk.org/web/145175/overview • http://www.ahrc.ac.uk/FundingOpportunities/Pages/BrowseOpportunitiesOld.aspx • http://www.ahrc.ac.uk/Pages/default.aspx • http://www.theculturecapitalexchange.co.uk/
  • 22. Crowdfunding ( Reward) Crowd funding Platforms- Reward based Crowdfunding platforms- will help you to raise funding to build a proto-type and market test a great idea or product.- Great for pre-selling cool tech hardware. • www.kickstarter.com • www.indiegogo.com (USA) • www.peoplefund.it • www.sponsume.com • https://www.buzzbnk.org • www.pleasefund.us • www.wefund.com • www.pozible.com • www.crowdfunder.co.uk • http://spacehive.com • https://www.banktothefuture.com
  • 23. Funding the Runway…? • How much/ little money is needed to build and test MVP/ demonstrate viability. ? • Usually required to fund co- founder “Ramen” salary • Going to need a Budget, Cashflow forecast and “burn rate”
  • 24. Need Less than £10K to Launch a business No Funds Grant- www.j4b.co.uk Unemployed? New Enterprise Allowance Scheme Self Fund Borrow Write a simple Business Plan & 12 month cashflow Community Development Finance Institution Start-Up Loan Bank Need less than £20K to get to Build and test MVP? - Sources of Grants- www.j4b.co.uk - Competition funding £1000 issued to 10+ businesses per month- http://www.shell-livewire.org - Princes Trust http://www.princes-trust.org.uk/need_help/enterprise_programme.aspx - £1000- £20,000 Enterprise Loans for Under 25’s- www.startuploanslondon.co.uk or www.startuploans.com - New Enterprise Allowance Scheme – Check who delivers the scheme in London by e-mailing Capital Enterprise. - Community Development Finance Associations- http://www.cdfa.org.uk - Also check out North London Community Finance - ELSBC Access to Finance – Business Plan support for those looking to raise up to £10K • Soft loans for Creative Businesses- http://www.creativeindustryfinance.org.uk/
  • 25. Proving the Key Assumptions and hitting milestones • Human Resources - Hiring key people that will make a huge impact on your organization (not just employees for workload purposes, but like a shit-hot marketing person, for example). • Product – MVP- Beta- First Pivot-Full Launch- On-going Iterations • Market – Market validation. As in, first customers, or first paying customers, etc • Funding – Maybe some money being committed to a round that the investor in question can lead or participate in. Other examples of milestones include*: • Proof that you can work together as a team, usually historical evidence • Proof that you can build something, i.e. working prototype • Proof that it’s useful to someone – first users and clients • Proof that you can talk to investors – every financing round, even small ones • Proof that you can talk to audiences – 10000 followers or 1000 users… • Proof that the initial team is able to attract talent • Proof that ecosystem agrees with your ideas – bringing respected industry advisors partners on board • Proof that there is market – £1M annually/ Proof that the market is big! – £25M annually and beyond • Proof that you can manage your finances – cash-flow positive operation • Proof that you can scale – Bessemer’s 5C’s
  • 26. Idea to Tech Business- Three Chasms.
  • 27. Accelerators help by .. Offering early Stage Entrepreneurs… • Fellow Community of entrepreneurs & supporters • Runway support & funding (£15-£100K at standardised investment terms. ) ( 3-6 months on average) • Physical Space & Facilities • Mentors ( 1st Industry- 2nd Investors) • Help to Rapid Field Trail with users & customers. • Demo days- Introductions to Investors/ customers …so that they can test.. • Product- Assess Functional use/ improve design & UX • Market Reaction- interest/ usage/revenue - AARRR • Revenue/ profit Potential- pricing, market timing, LTV/CCA • Business Model- “To Pivot or Not To Pivot” • Investor reaction- interest and valuations • Team- ability to work together and deliver.
  • 28. Accelerators In London http://www.f6s.com/ https://capitallist.co
  • 29. Investment Readiness Test
  • 30. Are you Investment Ready?
  • 31. Part 4 The Funding Process
  • 32. Idea Problem/ Space Exploration Design/ Prototype Beta Test Adapt/ PivotX2 Launch Bootstrap- FFF Innovation Awards Start-up Loans Crowdfunding i.e. Kickstarter Seedrs/ Crowdcube SEIS Super Angels/ Angel Groups Early Stage VC’s Start- Up Funding road –map. MVP Factories Hackathons/ Hatcheries/ Meet-ups. Accelerators Accelerators
  • 33. 1 Idea Stage 2 Commitment Stage- Secure Co-Founders 3 FFF funding round –Build & Beta Test Minimum Viable Product 4 Seed Investment Round (Angels + Early VC’s) - Prove Business model & acquire metrics to prove scalability 5 Series A Round (Angels, VC’s & Strategic Investors) – Go for scale, build out team, technology- EXECUTE 6 Exit (Average 7 years and after many rounds) – Trade Sale or IPO ££££££££££££££ How Start-Up Funding Works ?- Why 100% of Nothing is worth Less than 10% of something big
  • 34. Investment Essentials Round Amount Purpose London Pre-Money Valuation Guideline Source of Investment What investors like to see Pre Seed £25K-£150K (SEIS eligible) Assemble Team/ Build & Test MVP/ Proof of Concept R&D Zero- £500K Own Money/ FFF/ Crowdfunding/ SEIS Funds/ TSB Unfair Advantages Seed £150-£350K BETA Test/ Launch into Beachhead/ Proof of Product Solution Fit £500K-£1.5m Business Angels/ Crowdfunders/Seed VC's/ Co-Investment Funds SMART Team- Early Evidence of Product/ Solution Fit- Validating customers/ users Super Seed (Bridging round) £500K- £1m Working Business Model/Proof of Product/ Market Fit/ Demonstration of Growth £1.5M-£4m Super Angels/ Seed VC's Product Solution FIT Proved- Early Indications of Product- Market Fit ( i.e. revenues) Series A £2m-£15M+ Scale £8m- £50m VC's/ Family offices and Corporate Ventures Revenues & METRICS proving scalability.
  • 35. Importance of Tax breaks • EIS • SEIS • ECF’s • Co-Investment Programmes
  • 36. Seed Enterprise Investment Scheme-SEIS is a tax break launched in April 2012 for UK tax payers to encourage them to buy shares in start-up companies registered in the UK The Facts: • SEIS investors can input £100,000 in a single tax year rising to a maximum £150,000 over two or more tax years in to a single company • Investors cannot control the company receiving their capital • Investors pick up 50% tax relief in the tax year the investment is made, regardless of their marginal rate. • In the 2013-14 tax year, tax payers can roll 50% of a chargeable gain in the tax year in to a SEIS with a full capital gains tax exemption (another 14%) • The business must be a start-up company -registered in the UK within 2 years of claim. • The company must not employ more than 25 workers. • The company must have assets of less than £200,000. • The company has to trade in an approved sector – generally not in finance or investment, for example, a property company raise capital as a SEIS. SEIS is…… “a game changer”?
  • 37. Thinking like an Angel! Why Do Angels Invest? Where to find them?
  • 38. Key to being s Successful Business Angel? • Good Reputation – “Track Record” • Great Source – “Having good introducers” • Good Selection – “ Sticking to what you know” • Adding Value- “ Offering more than money to increase the chance of success” • Ability to Follow on Successes/ Walk Away from Failures. • Getting Value – “ Getting a Good deal at all stages”
  • 39. Investors Dilemma • Even the best performing investors find over 60% of investments return to zero. • Average time for investments to mature is 7-10 years • Most investors want exits in 3-5 years • Most can only invest for 1-2 rounds • If investing someone else's money (e.g. VC’s)then they make their money from arrangement fee, management fee and % of the capital gains ( e.g. 2 and 20 % rule).
  • 40. Valuations & Dilution rates Dilutions – (N.B. Never take a down round and always avoid ratchet clauses) • Bootstrap – Accelerators 5-10% • Seed – Round 20-25% (+ 10% option pool) • Series A – Round 20-25% Crunchbase Valuations
  • 41. Capital List – The Minimum Viable Introducer “ Showcasing and connecting Entrepreneurs to champions and investors” beta.capitallist.co
  • 42. Send a slide deck and get introducedhttp://www.slideshare.net/slidesthatrock/how-to-pitch-a-vc-redesigned Ten slides. Ten is the optimal number of slides in a PowerPoint presentation because a normal human being cannot comprehend more than ten concepts in a meeting—and business angels are very normal. If you must use more than ten slides to explain your business, you probably don’t have a business. The ten topics that an investors cares about are: 1. Summary and call to action/ what do you want? 2. Problem 3. Your solution 4. Business model 5. Underlying magic/technology 6. Marketing and sales 7. Competition 8. Team 9. Projections and milestones 10. Status and timeline Send to : magdalena@capitallist.co
  • 43. Airbnb pitch deck http://www.businessinsider.com/airbnb-a-13-billion 1
  • 44. 7 Types of Early Stage Investors in London Market 1. Crowdfunders/ Platforms 2. Tax Relieve Seeking SEIS/EIS Funds 3. Government Backed ECF’s 4. Traditional Angel Syndicates 5. Super Angels 6. VC’s 7. Strategic Investors ( Corporate Venture)
  • 45. Seed/ Early stage Investment Platforms Crowdfunders. www.crowdcube.com www.seedrs.com www.f6s.com Angel Platforms - www.angel.co - www.syndicateroom.com
  • 46. “Pay to Play” Funds. Top SEIS Funding Syndicates 1. Jenson Solutions- www.jensonsolutions.com 2. Ingenious Media- www.ingeniousmedia.co.uk 3. Ascension Ventures- http://www.ascensionmedia.com/ascension-ventures.php 4. Start-up Funding Club- http://www.startupfundingclub.com/ 5. Ascot SEIS – www.ascotwm.com Top Traditional Angel Syndicates 1. London Business Angels: http://www.lbangels.co.uk/ 2. E100 (LBS) 3. Oxford Angels: http:// www.oxei.co.uk 4. Cambridge: http:// cambridgeangels.com 5. Envestors- www.envestors.co.uk 6. Angels Den- www.angelsden.com
  • 47. Super Seed Investors • Playfair Capital- http://playfaircapital.com • Angel Lab- http://angellab.co.uk/ • Kima Ventures- http://www.kimaventures.com • Boundary Capital - www.boundarycapital.com • Venerex ( Fashion Tech- see Capital List) • Jam Jar Investments- http://jamjarinvestments.com • No 1 Seed - www.number1seed.co.uk • Warner Yard Associates - http://www.warneryard.com/ • Angel List Syndicates – www.angel.co
  • 48. Active Seed VC’s in London. Big 5 • Accel Partners: Stage agnostic, see their portfolio here. • Balderton- Stage Agnostic- See there portfolio here • Index Ventures: Stage agnostic, see their portfolio here. • Wellington Partners: Stage Agnostic, see there portfolio here • Octopus Ventures: Early to mid-stage, see their portfolio here. ECF’s/ Public funded. • Notion Capital – SAAS and Cloud specialist- See portfolio here • Passion Capital: Early Stage, see their portfolio here. • Sussex Place Ventures- Early stage - • Episode1: Early Stage Software Companies • Longwall – Oxford Based – Science backed Start-ups focus Cool Cats • Profounders: Early and mid-stage, see their portfolio here. • Amadeus Capital: Early and mid-stage- just launched new fund. • Piton Capital: Early and mid-stage specialize in market places. • DN Capital : Early and mid-stage, see their portfolio here • DFJ Esprit: Early to mid-stage, see their portfolio here. • Spark Ventures : Stage Agnostic- See there portfolio here • White Star Capital- Early stage – See portfolio here • Arts Alliance: Minimum investment £500K in Media related tech- see portfolio here • EC1 Capital: Early stage, see their portfolio here • Connect Ventures- Early stage and very cool. • Hoxton Ventures – New and focus on seed with next move to USA.
  • 49. Specialist Funds Social/ Tech for Good - NESTA - www.nesta.org.uk/investments - Unltd – www.ubltd.org.uk - Big Society Capital- http://www.bigsocietycapital.com - Sources of Social Finance- http://www.bigsocietycapital.com/finding-the-right-investment - Bridges Venture Fund http://www.bridgesventures.com/social-entrepreneurs-fund - Big Issue Investment- http://www.bigissueinvest.com - Social Finance- http://www.socialfinance.org.uk - Social Investment Fund- http://www.thesocialinvestmentbusiness.org Women - Stargate Capital- Trapezia- http://www.stargatecapital.co.uk/trapezia_1.aspx - FSE- Incito- http://thefsegroup.com/investors/business-angels/incito-ventures/ - Aspire Fund - http://www.capitalforenterprise.gov.uk/files/Aspire%20Information%20Leaflet%20(v%202)%20Flyer%20brochure.pdf Green - Bridges Sustainable Fund- http://www.bridgesventures.com/sustainable-growth-funds - Ingenious Media- Cleantech Fund http://www.ingeniousmedia.co.uk/investments/investment-opportunities/clean-energy - Carbon Trust- http://www.carbontrust.com/about-us/our-investments - Low Carbon Accelerator- http://www.lowcarbonaccelerator.com - CT Investment Partners- http://www.ctip.co.uk - Wellington Partners- http://www.wellington-partners.com/wp/index.html
  • 50. Corporate Players
  • 51. Investment State of Play 2013 Deals Under £0.5M • SEIS Deals £6-7m per month - 82 Deals p.m - £72K Average • EIS & SEIS - £600M in New Companies in 2012-13. - Estimated 1,116 New Companies received EIS/SEIS investments in 2013. Deals Over £0.5m
  • 52. Thank You Contact: info@capitalenterprise.org