WBS Entrepreneurship Mentoring Workshop -28 July 2011 - John Griffiths


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Sources of funding: Grants (MAS. UKTI), FF&F, Banks, Angels and VC’s

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WBS Entrepreneurship Mentoring Workshop -28 July 2011 - John Griffiths

  1. 1. Funding for Entrepreneurs and <br /> How to Raise It <br />John Griffiths, <br /> Director, Connect Midlands<br /> WBS Entrepreneurship Mentoring Programme 28 July 2011<br />
  2. 2. Objectives<br />Options for funding your business<br />What funds are best for you at the time<br />Understand mindset of funder or investor.<br />How to create a winning plan and pitch <br />Understand how to raise money !<br />
  3. 3. Agenda<br />Connect and our track record<br />Types of finance: grants, debt, angels, VC<br />What do investors look for? <br />Are you investment ready?<br />Connect model <br />Strategic & Business cases<br />Interacting with investors<br />Summary<br />
  4. 4. Leading technology and growth network providing access to<br />finance, innovation, professionals, successful entrepreneurs.<br /> Helps build route to market, management capability, <br />and commercialise innovation<br />
  6. 6. Investment<br />Readiness<br />£200m to date!<br /> Connect Midlands is recognised as market leader in helping innovative,technology & high growth businesses become investment ready<br />....then showcasing them to the investment community to raise money they need to grow<br />Growth<br />….and assisting them to grow shareholder value, create jobs,<br />become world-beaters .<br />
  7. 7. From idea to market – the rocky road of realisation<br />The Goal. <br /> Growth<br /> & Profit <br /> market need<br />funding<br />management<br />Potential for growth<br />Ideas + <br />concepts<br /><br />Growth<br />Time <br />†† Graveyard for start-ups & businesses ††<br />
  8. 8. Types of Finance<br />Main Stock Market<br />AIM<br />Plus<br />Availability of Funds<br />Venture<br />Capital<br />Grants<br />Debt<br />Business<br />Angels<br />3 Fs<br />Size of Company<br />8<br />
  9. 9. What do investors look for ?<br />Experienced & ambitious management team<br />Sound business case & plan<br />High growth prospects<br />High market share potential<br />IPR<br />Sustainable competitive edge & USPs<br />Sales already or close to market ?<br />Shares & enough to be attractive<br />Exit route – money out in 3-7yrs ?<br />
  10. 10. Management ?<br />investors back the jockey - <br />not the horse<br />
  11. 11. The basics – Your Turn<br />a). 5 minutes discussion in pairs on:<br />What is the vision of your business?<br />How much £ do you require?<br />What do you need it for ?<br />What type of funding & when?<br />Grants; Debt and Banks; Equity, Angels, VCs<br />Who might you sell to ?<br />b). 2 minutes feedback each<br />
  12. 12. Grants<br />Upsides:<br />Free Money<br />Don’t have to pay it back<br />Great way to kick start business<br />Some validation for matched / follow on funds<br />Downsides:<br />Beaurocratic<br />Don’t chase unless fits your growth plan<br />Targets and outputs and outcomes<br />
  13. 13. Grants<br />TSB – Grants for R&D<br />Proof of Market: is there a market ? 60% grant to £25K<br />Proof of Concept : NP & PD, 60% grant to £100K<br />Development :to pre-production,35%-45% grant to £250K<br />MASWM–Manufacturing & NPD Reviews / Projects<br />Short tem improvement or strategic change<br />Reviews, free<br />Projects, 50% grant to £10K by no money left until 2012 ?<br />UKTI – Advice and help with exporting<br />Advice, strategic reviews, info from Trade Advisers<br />Market research and visits, 33% to 60% grants<br />
  14. 14. Debt<br />Many types eg:<br />Loans & Overdrafts<br />Factoring / Invoice Discounting<br />Asset Finance<br />EFG – up to £1m, 75% Govt guarantee<br />Alternatives to banks egs:<br />CDFI, to £50K (ART/ BCRS/CWRT..)<br />Thin cats, £50K - £3m<br />Funding Circle, £5K - £50K<br />
  15. 15. Banks and Debt<br />No share of ownership<br />Always repayable<br />Carrier interest payments<br />Availability depends on<br />Viability<br />Serviceability<br />Security<br />Balance sheet & trading history <br />
  16. 16. What Banks look for<br />Strong management team<br />Sustainable competitive advantage<br />Decent scale <br />IPR and or USPs<br />Growth sectors often favoured<br />Business growth<br />PLUS :<br />Regular interest/capital repayments<br />Trading business<br />Security- debentures, personal guarantees<br />Interest cover<br />
  17. 17. Business Angel Finance <br />Risk money (unsecured) invested by individuals<br /><ul><li>Exchanged for a share of the business
  18. 18. Reduces risk for other providers of finance
  19. 19. Often accompanied by investors skills / knowledge
  20. 20. Typically invest in range £20K to £1m+
  21. 21. Often in networks and syndicates but can be alone
  22. 22. Tim Powell – Minerva, later</li></li></ul><li>Angels in the West Midlands<br />Networks:<br />Minerva<br />Beer & Partners<br />Central England Business Angels<br />Advantage Business Angels<br />High-Net Worth Individuals<br />BBAAwww.bbaa.org.uk<br />See www.westmidlandsfinance.com<br />
  23. 23. What Business Angels look for<br />Strong management team (which they can strengthen)<br />Proposal with sustainable competitive advantage<br />Decent scale<br />IPR (sometimes)<br />Growth sectors (sometimes)<br />Capital growth & exit<br />More from Tim later<br />PLUS:<br />Fun, stimulation, involvement<br />Sector they know & understand<br />Non Executive Director<br />
  24. 24. Venture Capital<br />Money at risk<br />Mostly shares – sell a percentage ownership for a cash investment<br />Money does not need to be repaid<br />Investor objective - capital gain<br />An exit has to be planned<br />£100K to £5m+ for early stage, (5-10x)<br />West Midlands: Midven, Mercia Technology<br />National: many more<br />
  25. 25. What Venture Capitalists look for<br />Strong management team <br />Proposal with sustainable competitive advantage<br />Decent scale (essential)<br />IPR and or USPs<br />Growth sectors <br />Significant capital growth, (5-10)<br />An exit<br />PLUS<br />Shareholder<br />Board position or appoint Director<br />Take a business from platform A to B<br />Exit agreed as part of investment<br />
  26. 26. Differences between grants, debt, equity<br />What are they ?<br />
  27. 27. Be Prepared – Get Yourself Ready <br />to Raise Finance and Investment!<br />Strong <br />Proposition<br />+<br />Proof Points<br />Compelling<br />Business Plan<br />Focussed<br />Pitch<br />£<br />+<br />+<br />=<br />
  28. 28. Key areas for business development and “investability”<br />
  29. 29. Strategic & Business Case<br />Strategic Case:<br />Exec Summary (2 pages)<br />10 slide presentation<br />Does the investor like you & your proposal?<br />Business Case:<br />The business plan (BVCA guidelines)<br />Further due diligence<br />Can you defend your assumptions?<br />Does the investment case make sense?<br />
  30. 30. CMIC<br />Springboard<br />Roundtable<br />Green<br /> Coaching <br /> Pathfinder Workshops<br />Corporate Finance Support<br /> Amber<br /> Amber 2 day workshops<br /> Assessment Panels<br /> Networking<br />Right Funds for You, Events, Presentations<br />Connect Midlands’ investment readiness programme, InvoRed<br /><ul><li>Showcasing
  31. 31. (Pitching to investors)
  32. 32. Preparation
  33. 33. Education
  34. 34. Awareness</li></ul>26<br />
  35. 35. FUNDING STAGE<br />Pre-Start<br />Existence<br />Survival<br />Success<br />Take-off<br />Maturity<br />LIFE CYCLE STAGE<br />LIFE CYCLE STAGE<br />Springboard<br />SMEs seeking up to £500k pitch to an audience of investors and support intermediaries<br />Investment Conference<br />SMEs seeking up to £5m to pitch to an audience of investors and intermediaries<br />Roundtable<br />SMEs seeking early stage finance to present to target investors over an exclusive lunch or dinner<br />InvoRed<br />Supports SMEs to help them shape propositions and become investment-ready<br />
  36. 36. Timetable for Equity<br />Draw up plan/pitch: 1 month<br />Approach VC and get a meeting: 1-3 months<br />Further meetings: 1-3 months<br />Due diligence: 2-4 months<br />Final negotiations/legal's: 1-3 months<br />Conclusion: min 6 months,can take 12 months<br />Connect Investment Conferences: great way of meeting many investors at once – 22 Nov London<br />
  37. 37. Interacting with Investors<br />Be Realistic<br />getting it wrong loses credibility <br />about valuation<br />Be Honest<br />trust is a big part of the financial industry; it is a deal breaker <br />Be Prepared<br />you might only get one shot at fundraising<br />you will be challenged!<br />
  38. 38. Some Successes !<br />£2.8m since 2005<br />Monica Healthcare<br />£1.04m since 2004<br />£88K since 2004<br />FDAS<br />£4.72m since 2003<br />Prime Principle<br />Haemostatix<br /> £5m +<br />
  39. 39. Review Session Objectives<br />Options for funding your business ?<br />What funds are best for you at the time ?<br />Understand mindset of funder or investor ?<br />How to create a winning plan and pitch ?<br />Understand how to raise money ?<br />Have we done these ?<br />
  40. 40. Summary and ConclusionsConnect Midlands and Connect InvoRed<br />Understand finance options and best for you<br />Strong Proposition, Proof points, Plan, Pitch<br />Think like an investor !<br />Connect worked with 2,000 SMEs, <br />Assisted >1,000 on investment readiness (IR)<br />Over 300 entrepreneurs raised £200m <br />Used by BIS to set national IR framework<br />