Equity Investment


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A guide to equity investment

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Equity Investment

  1. 1. finance 4 business equity investment
  2. 2. private equity <ul><li>Private equity provides long-term, committed share capital, to help unquoted companies grow and succeed. </li></ul><ul><li>If you are looking to start up, expand, buy into a business, buy out a division of your parent company, turnaround or revitalise a company, private equity could help you to do this. </li></ul><ul><li>Equity finance is provided by angel investors and venture capitalists. </li></ul>finance 4 business
  3. 3. equity investment could be suitable for a business that answers yes to the following: <ul><li>Does the business have significant growth potential in terms of turnover and profitability </li></ul><ul><li>Is the business prepared to turn this growth potential into reality by raising finance on terms which may reduce your equity share in the business </li></ul><ul><li>Can the business show potential investors that the business has a unique selling point or commercial edge which distinguishes its products and services </li></ul><ul><li>Can the business define exactly why investment capital is being sought and what it will be used for </li></ul><ul><li>Will the business help the investor achieve a return on investment and propose an exit route </li></ul><ul><li>Is the business prepared to accept input into the management of the company </li></ul>finance 4 business
  4. 4. angel finance <ul><li>Investment ranges between £10,000 & £2 million (average £20,000 to £50,000 per angel) </li></ul><ul><li>Angels are generally wealthy entrepreneurs, will tend to invest in industries where they have previous experience </li></ul><ul><li>Can be quicker & less formal than other types of equity investment </li></ul><ul><li>Many angels expect close involvement with the business they invest in </li></ul><ul><li>More than 90% of proposals are rejected </li></ul>finance 4 business
  5. 5. angel expectations & costs <ul><li>Most will seek an exit in 3-5 years </li></ul><ul><li>Will expect capital growth of at least 25% </li></ul><ul><li>Management team may need to show significant commitment in terms of finance </li></ul><ul><li>Most will expect to contribute to the direction of the business </li></ul><ul><li>Costs & charges approximately 10% of the funds raised </li></ul><ul><li>Independent angel network will charge presentation fees (£hundreds), success fee can be 3-5% of the sum raised </li></ul>finance 4 business
  6. 6. venture capital <ul><li>Investment ranges between £150,000 & £5 million (average £1 million) </li></ul><ul><li>Will normally look for at least 20% of equity in the company </li></ul><ul><li>Can be a lengthy process </li></ul><ul><li>Will normally have veto rights in key decisions; eg. significant items of expenditures; key personnel recruitment </li></ul><ul><li>More than 95% of proposals are rejected </li></ul>finance 4 business
  7. 7. venture capital expectations & costs <ul><li>Most will seek an exit in 5 years </li></ul><ul><li>Will expect an annual return of 40% on the sums invested (often dividends) </li></ul><ul><li>Management team may need to show significant commitment in terms of finance </li></ul><ul><li>Most will expect input into key business decisions </li></ul><ul><li>Will expect to receive a regular flow of monitoring information eg accounts </li></ul><ul><li>Typical legal fees £20,000 to £30,000 </li></ul><ul><li>Corporate financiers typically charge 5% of the money raised </li></ul>finance 4 business
  8. 8. key areas of the business plan <ul><li>The market (very important to detail; market analysis, marketing plan, pricing, distribution channels, promotion, competition) </li></ul><ul><li>The product or service (very important to detail the competitive edge) </li></ul><ul><li>The management team (equity firms invest in people, therefore very important to detail senior management skills and what they bring to the business) </li></ul><ul><li>Business operations (detail how the business operates, locations and also cover research & development and IP) </li></ul><ul><li>Financial projections </li></ul><ul><li>Amount and use of the finance and exit opportunities </li></ul>finance 4 business
  9. 9. exit strategies <ul><li>Trade sale of the companies shares to another company </li></ul><ul><li>Re-purchase of the private equity investors share by the company and/or management </li></ul><ul><li>Purchase of the private equity investors shares by re-financing </li></ul><ul><li>Stock market flotation </li></ul><ul><li>Involuntary exit – receivership or liquidation </li></ul>finance 4 business
  10. 10. types of equity investment <ul><li>Ordinary shares </li></ul><ul><li>Preferred ordinary shares or “A” ordinary shares </li></ul><ul><li>Preference shares </li></ul><ul><li>Loan capital </li></ul>finance 4 business
  11. 11. our service, how we can help? <ul><li>Facilitation and assistance to help you acquire equity investment for your business </li></ul><ul><li>Preparation business plan in a form required by equity investors </li></ul><ul><li>Preparation executive summary to submit to equity investors </li></ul><ul><li>Preparation of summary of business opportunity to submit to potential investors </li></ul><ul><li>Identification of potential investors to approach </li></ul><ul><li>Assistance with providing information to potential investors and attending meetings with the investors throughout the process </li></ul><ul><li>Advice and assistance throughout the investment process </li></ul>finance 4 business
  12. 12. contact details <ul><li>Richard Watts </li></ul><ul><li>telephone: 07872 033804 </li></ul><ul><li>e-mail: richard@finance4business.biz </li></ul><ul><li>www.finance4business.biz </li></ul><ul><li>offices cover Yorkshire, Humberside and the North East </li></ul><ul><li>administration address: </li></ul><ul><li>10 Corby Park </li></ul><ul><li>North Ferriby </li></ul><ul><li>East Yorkshire </li></ul><ul><li>HU14 3BA </li></ul>finance 4 business