Funding for Innovation - Citrus Mind, Jumpstart, Metis Partners, Lending Crowd

Bill Grant
Network Integrator Team, Digital Health & Care
Novotel Hotel - Edinburgh Park
2 March 2016
www.citrus-mind.com
V-0.3

2
AboutToday
1. Introduction & housekeeping
2. Context: the digital health and care opportunity
3. Crowd Funding: Ian Cunningham, Lending Crowd
4. IP: Stephen Robertson, Metis Partners
5. Research & DevelopmentTax Credits: Sandy Finlay, Jumpstart
6. Q & A
7. Wrap-Up
www.citrus-mind.com

3
Network Integrator, Digital Health & Care Scotland
www.citrus-mind.com

4
Digital Health & Care companies we work with
“Snapshot” excluding Life Sciences & MedTech
Telemedicine,Telehealth andTelecare: digital clinician-to-home comms, sensors and wearables
mHealth: integrating personal consumer hardware (phones/apps, wearables)
© Citrus Mind Ltd, 2014-16, Deloitte Report for Office of Life Sciences,September 2015;Tractica Report “ Home HealthTechnologies”, 2015.
Home HealthTechnologies
Analytics: Healthcare System OperationsGenomics Diagnostics
Stratified
Medicine
Digitised Health Systems: including patient- & health system recordsData

5
Context:
The Digital Health &
Care Opportunity
www.citrus-mind.com

6
The costs of health and care delivery will grow
Whilst the overall Scottish population is expected to grow by 9%.......
4.0
4.5
5.0
5.5
6.0
2012 2017 2022 2027 2032 2037
Population Growth, Scotland 2012-2037f
0.0
0.5
1.0
1.5
2.0
2012 2017 2022 2027 2032 2037
Growth in older population, Scotland
2012-2037f
Growth in # of people 60+ Growth in # of people 75+
…the rate of growth in the number of older people will be much faster
+43%
+86%
+9%
m
m
Source: http://www.gro-scotland.gov.uk/statistics/theme/population/projections/scotland/2012-based/list-of-tables.html

7
……..but the opportunity is very much bigger.
Changing mix of Population within “More DevelopedCountries” *, %, by age band *
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1950 1975 2000 2025 2050
More Developed Regions
Change in % of population by age band, 1950-2050f
33%
51%
16%
Age 60 +
Age 15-59
Age 0-14
12%
61%
27%
20%
62%
18%
* - More Developed Regions = Europe, Northern America, Japan, Australia, New Zealand
Source: “World Population Ageing: 1950-2050 »,United Nations Department of Economic and Social Affairs, Population Division, 2002
c.395.1m

8
What businesses can we help?
Businesses that have…
• An innovative product or service – be that idea, prototype, in-use
• Commercial potential – for the business, and the Scottish economy
• Something we may be able to connect/combine
• Ambition (and capacity) to help add to our national wealth
www.citrus-mind.com

TODAY’S EXPERTS…
www.citrus-mind.com

Crowdfunding: An Introduction
Digital Health and Care Innovation Workshop
Ian Cunningham FCIBS
10

LendingCrowd
www.lendingcrowd.com
@_lendingcrowd
Private & Confidential
Brief history of crowdfunding
Early crowdfunding
1713 1884
Mozart offers invitations and
manuscripts to people
donating to fund his concert
The New York World newspaper
fundraises for the base of the
Statue of Liberty, raising
$101,091 from 160,000 people
Modern crowdfunding
1997
British rock band Marillion
funds their US tour with
online donations from fans
2000
2008/20092010201120142015
First reward crowdfunding site ArtistShare
launches, inspired by Marillion
Launch of Justgiving, followed
by other crowd fundraising sites
in early 2000s
2005
2006
P2P consumer lending
takes off - launch of Zopa
First recorded use of
term ‘crowdfunding’
Rewards crowdfunding goes
mainstream – launch of
Kickstarter and Indiegogo
CrowdCube is the first
equity-based
crowdfunding platform
First UK peer-to-business
lending platform is set up
(Funding Circle)
Pebble Technology’s 2nd
Kickstarter campaign hits
$500,000 goal in record
17 minutes
October – launch of
LendingCrowd, first
Scottish P2P platform
New FCA regulations
on crowdfunding and
P2P come into force
Alexander Pope asks for
people to fund his work
translating Greek poetry into
English in exchange for being
acknowledged in his book
1784

Crowdfunding and non bank finance
Private and Confidential
LendingCrowd
@_lendingcrowd

Crowdfunding – A growing market
LendingCrowd
@_lendingcrowd
Source: nesta.org.uk

Growth of Online Alternative Finance
Market
LendingCrowd
@_lendingcrowd
Source – Pushing the Boundaries: The 2015 UK alternative finance industry report, NESTA

Equity-based Crowdfunding
Market
LendingCrowd
@_lendingcrowd
Source – Pushing the Boundaries: The 2015 UK alternative finance industry report, NESTA

LendingCrowd
@_lendingcrowd
What is driving the strong growth
of the Crowdlending market?
SMEs ﬁnding it difficult to
secure loans from traditional
lenders.
Greater convenience and
speed that Crowdlending
offers borrowers and
investors.
Competitive interest rates that
the platforms provide to both
investors and borrowers.
Range of offerings
crowdlending platforms'
can provide to borrowers.
The rapid growth of Crowdlending is being fueled by:
“With their low operating costs, minimal regulatory constraints and data-
driven models, marketplace lenders are giving borrowers easier access to
credit, and answering the needs of yield-starved investors.”
Morgan Stanley

Why are SMEs struggling
to raise funds?
LendingCrowd
@_lendingcrowd
SMEs are spreading their wings through Crowdlending. It is giving businesses a helping hand to secure finance.
Recently, SMEs have experienced difficulties in securing loan finance from traditional sources. Loan approvals
were slow and their competiveness was poor.
SMEs: a key component of the UK economy
60%
of private sector employment
(14.4 million people).
47%
of private sector annual turnover
(£1,600 billion).
Source: Department for Business Innovation & Skills, November 2014
SMEs are companies employing up to 250 people
.
FINANCE NOT EASY TO SECURE
79% of borrowers had attempted to get a bank loan
before turning to Crowdlending, with only 22% of
borrowers being offered a bank loan
MANY APPLICATIONS UNSUCCESSFUL
53% of loan applications were successful in the 18
months to Q2 2014, 10% took other funding and
37% ended with no facility
BANK DECLINES DETER BORROWING
5% of all SMEs said that a previous decline
by the bank had made them more
reluctant to apply for finance
LACK OF AWARENESS
Only 24% of SMEs were aware of
Crowdlending in November 2014
Sources: Nesta, Department for Business Innovation & Skills Oct. 2013, bdrc Continental SME Finance Monitor 2014
The solution?
Crowdlending has become an easy, fast and affordable option for SMEs

As the name suggests, Peer–to–Peer Crowdlending works using a crowd of investors who bid to fund a loan application
for a business (or on some platforms, an individual). The borrower has been credit-assessed and given a risk rating with
a minimum rate of interest for loan bids.
The result? A competitive and transparent funding model for companies seeking loan ﬁnance, and investors looking for a
return. P2P Crowdlending – A simple guide
Investors Borrower
Platforms
PRINCIPAL PRINCIPAL SETUP
FEE
PRINCIPAL
+
INTEREST
ANNUAL
FEE
PRINCIPAL
+
INTEREST
At the start of the Loan At the end of the Loan
Investors Borrower
Platforms
LendingCrowd
@_lendingcrowdWhat is Peer-to-Peer Crowdlending?

Borrowers’ Requirements
1. Limited Company, LLP, Partnership or Sole Trader
Limited or limited liability partnerships with four or more
partners, sole traders and partnerships borrower more than £25k
LendingCrowd
@_lendingcrowd
2. Have a turnover of approx. £100,000 per annum or more
By fulfilling this requirement it indicates a business is more
established meaning the likelihood the loan will be repaid is
higher.
To be eligible for a loan on LendingCrowd’s platform companies must meet the following requirements:
3. At least two years’ of accounts
We need at least two years of trading to be able to properly
analyse the business’ finances.
4. Strong credit history with no defaults or CCJs

Loan Evaluation Process
1. Initial Criteria
Meet the Borrower requirements and apply for a loan on LendingCrowd.com
LendingCrowd
@_lendingcrowd
2. Financial Information
Provide the required financial documentation and the application is
complete
3. Credit Assessment
LendingCrowd’s credit team will assess the application and run it through our bespoke models
4. Credit Band Assignment
If approved the business will be given a credit score which will range from A+ to C+
5. Security
A security such as a director’s guarantee or debenture may be required depending on
the entity
6. Identification
Identification checks are carried out on all Borrowers or significant shareholders
within a business

Credit Ratings
LendingCrowd
@_lendingcrowd
A+
Interest rates from 5.95% to 9.95%
A
B+
B
C+
Poor risk decline
High risk decline
Credit Assessment
Using the information provided on the business our credit team,
using our proprietary risk engine, determines a credit rating of the
loan application.

Government supports CrowdLending
• The British Business Bank has been
provided with £500 million to promote
finance to SMEs
• The first £1,000 of peer-to-peer earnings will
be tax-free from April 2016 (capped at £500
for higher rate taxpayers)
• Government has committed funding of
between £20-£40 million to Crowdlending
providers to create a more effective and
efficient finance market to SMEs
• Innovative Finance ISAs to be introduced
in April of this year
• FCA took regulatory responsibility on 1 April
2014
• Regulated by FCA Policy Statement 14/4
since April 2014 – reviewed in February 2015
• Financial promotion – rules on how benefits
and returns can be worded
• Emerging influence of industry bodies, e.g.
UKCFA, P2P Association
• Full post-implementation review of the above
market and regulatory framework in 2016
• Full FCA permissions to be granted early this
year
LendingCrowd
@_lendingcrowd
Supporting Initiatives Emerging Regulatory Framework

LendingCrowd
@_lendingcrowd
• Over 1750 signed up to
date with 470 actively
investing
• £5 million on loan to over 50
growing SMEs across the
UK
Award winning platform

LendingCrowd
@_lendingcrowd
One of the first P2P Lenders in the
UK to launch a Mobile App
Manage your portfolio Bid on loans Monitor your risk

Conclusion
LendingCrowd
@_lendingcrowd
• Is crowdfunding now mainstream rather
than alternative?
• Capital constraints, high costs and
prescriptive credit policy are still barriers to
bank lending
• Internet and on online platforms have
provided a democratised revolution in the
funding space
• SMEs will look at Crowdfunding as their
preferred choice?
• Increased flexibility and choice are opening
up opportunities for retail investors to look
at this asset class against a backdrop of
low yields for near liquid funds

Thank you and Questions?
Register
Recommend Contact Us
contactus@lendingcrowd.com
+44 (0)131 564 1600
/lendingcrowd
/_lendingcrowd
/lendingcrowd
26

© Metis Partners 2016
Taking the luck out of making IP FORTUNES!
Funding for Innovation 2-3-16

Agenda
Who are Metis Partners?
What’s IP & who’s interested?
How’s it recognised?
Using IP to leverage finance
Practical examples

Who are Metis Partners?
Award-winning boutique IP firm > 10 years trading
Broad presence: offices in Glasgow, London & Silicon
Valley, CA
Growing multi-disciplinary team
Industry recognised specialists
Creators of the UK’s first ever IP League Table

IP for SMEs - 92% of SMEs don't know what their IP
is worth!
In 2016 - top 3 concerns for SMEs are:
(1) Lack of access to finance and funding (32%)
(2) Finding new business and entering new markets (32%)
(3) Challenges & costs of employee rights/restrictions (26%)
We help with 1 & 2 - protecting and valuing IP so that they can use this knowledge to:
Attract finance & funding
Slow down and even crush the competition
Scale up quicker and enter new markets using robust IP backed processes and business
structures
Exit at much higher valuations
Negotiate better partnerships and JVs to improve market share

IP for SMEs - “Clydesdale and
Yorkshire Banks IP League Table”?
Free to enter - ranking of companies based on rating their IP assets
IP asset classes: brands, software, patents, trade secrets and critical
databases
IP100 Club for all entrants
Currently > 75 IP-rich companies entered and another 20 registered
Small companies with great brands and secret recipes to larger tech
companies with 80 patent families, £small to £30m turnover
Geographically split equally between Scotland and the rest UK

What does it mean for you?
Gain recognition for investment made in IP using it to:
Boost the exit valuation of your business - Microsoft acquired
SwiftKey for $250m in February 2016
Leverage new funding options – Sphere Fluidics secured $7m in
funding in February 2016
Differentiate from competitors & create new barriers to entry
Learn how to use IP to crush competitors and accelerate growth

We identify, assess and value all IP
assets
IP assets make up the majority of
company value in most sectors
IP underpins a company’s
competitive advantage
Tangible assets are the “tip of the business valuation
iceberg”

Even management struggle to identify IP at first
Patent
Applications
Trade SecretsGranted Patents
Organisational
Knowledge
Know-how
Customer
Relationships
Brand and
Reputation (TMs)
Key Partners Key Suppliers
Critical Business
Processes
Product 1
Switch controller
Software
2013 - $8.4m
Testing Software
ISO 9000 standard
project and
programme processes
Manufacturing
Specifications and
Manufacturing Tests
Solidworks CAD
mechanism &
technical design
Position Sensor
Software
ABC Co: for
development of Piezo
actuators
#’s 1 – 20 including
#2 (UK, PCT & Canada)
#9 (USA)
European Registered
CTMs:
“ABC Co” “ABC” and
“Co”
Sharepoint Data:
• Software
Development
• Customer
Deployment
• User Information
Key Databases:
• Software
Repository
• Software
Documentation
• Customer Sales
Information
5 Key individuals*
identified with know-how
including:
• Algorithms (AM)
• Software development
and deployment (PQ)
• Geo-location (SP)
• Hardware architectures
(PM)
• Databases (JB)
• Wireless networks (SR)
*Includes three individuals
named as inventors
Trade Secrets:
• Unique calibration
method
• Micro-positioning of
control loop
• Increased path
connections
Network Interface/
Network card
Software
Architecture know-how
including:
• Database Structures (JB)
• Summarisation Engines
(PQ)
• Loading Chain (PA)
• Data Management and
Indexing (PM)
Negative know-how:
• Positioning frequency
Granted Patents
#PF5, #PF33, #PF34,
#PF37, #CF14
User Manuals
Granted Patents
#PF34, #PF37, #CF14
Often the initial IP assets identified by management
miss a few which we have to add later outlined in pink
as management recognise our approach.© Metis Partners 2014
What an IP
Audit
reveals!

IP underpins competitive advantage
Brand &
Reputation
Know-how &
Key people
Low Value – Recognition of critical
know-how in business
Medium Value – protection of key
know-how / trade secrets -
competitive advantage
High Value – JVs / collaboration,
sharing know-how e.g manufacturing
case study
Low Value – unregistered TM/logo
use
Medium Value – TM’s ® & awards
and broadened reputation
High Value – expanding online or
into new markets / channels e.g.
musical instrument case study

Put another way!
What information / data
would you be worried about
a member of staff putting on
an USB stick and walking
into a competitor with?

IP Valuations we’ve done…. basic
Transfer of IP interCo / IPCo / offshore SPV
To settle IP disputes
To bridge a valuation/asset gap
To agree “relief from royalty” rates
To support licensing deals
To facilitate pension-led funding
PPA of intangibles

Transaction valuation of IP assets
Cash-flow valuation of IP assets
Strategic valuation of IP assets
Technical assessment / value of IP assets
IP asset valuation improvements - annually
A few examples to follow…
IP Valuations we’ve done…. specialist

Why Does IP Work as a Leveragable
Asset - Funders TRUST ?
Underpins competitive advantage
Not “black box” hypothetical valuation
Linked to current turnover / revenues of business
Relies on a “expert rating” of IP assets
Incorporates distressed / insolvency sale value £xxx’s
Reasonable royalty rate based on IP asset rating – “range”
IP can be “controlled” or “secured”

Banks recognise - IP has increasing value even
in Insolvency?

Metis Partners’ database of IP recovery £values –
hundreds of IP sales
IP asset class “Sweet spot”
Software £25k - £150k > +
Brands/TMs plus £20k - £125k > +
- Websites & domains £10k - £250k > +
Patents £25k - £250k > +
Databases £15k - £25k > +
Trade Secrets £15k - £75k > +

IP BACKED FINANCE
Metis Partners’ has been involved in deals raising over
$100m
As specialists in IP-backed finance, we use intangible assets to increase financial liquidity. Working with banks and their credit teams, we
highlight which IP assets are critical and underline competitive advantage and create sustainable growth.
HERE ARE SOME OF THE DEALS WE WORKED ON

CASE STUDIES

#1: “START UP WITH POTENTIALLY BIG DEALS BUT NO CASH”
Agrotech idea - IP not yet proven
Technology at “medium readiness level” but no cash
“Lots of interest & big deals” on table
Opportunity to monetise IP in new structures
Metis vCIPO - created value & £100k cash from cornerstone IP
Metis assisted in getting £750k funding based on early IP value

#4: “VALUE OF BARRIERS TO ENTRY”
£12m TO software business handling big data
Fast moving & highly competitive environment
Great software needed moat (patents) around it & speed bump IP to slow
down competitors
IP at heart of business growth strategy
Metis Exit Improvement – buyer recognised 12-18 month IP advantage
Metis prevented soft IP assets “walking away” from exit valuation

#7: “IP SEEN AS INFLEXIBLE ASSET”
Oil & Gas products business
• IP asset mapping – what’s the important stuff?
• New venture & investment in Middle East
• Moving IP into new territories creates new risks
• Alternative strategy to ring-fence IP assets & fundraise
• Maximise Metis IP asset valuation

#8: “IP USED TO BRIDGE VALUATION GAP”
Software MBO team losing patience
Management wanted to invest & grow faster
Founder & VC weren’t aligned on exit plan
Metis IP Audit recognised software modules were most valuable assets
Bank didn’t need security over all software
Metis IP valuation & IPCo structure created “bridge” to solve BIG
PROBLEM

#10: “BRANDS NOT CONSIDERED VALUABLE”
CG business on brink of administration
Well known “niche” brand >25 years old
Business model undervalued brand
Weak Balance Sheet & brand value at £250k
Metis IPCo structure unlocked new finance opportunities
Private investor valued heritage and £600k c/flow valuation

#16: “VALUABLE IP SEEN AS SUNK COST ”
Oil & Gas infrastructure business
Insolvency Practitioner selling ALL assets (incl. IP) for £35k
Metis Corporate Recovery secure offers circa £200k for
“forgotten” IP – US tech specs
Metis highlighted value in European accreditations / specs
Company missed out on Metis IP Commercialisation value –
could have saved business earlier

An Intelligent Approach to IP
+44 (0)141 353 3011
www.metispartners.com
TANGIBLE ASSETS ARE
THE TIP OF THE ICEBERG
Talk to the EXPERTS!

Wednesday 2nd March 2016
R&D Tax Relief Explained
6 Atholl Crescent
Edinburgh,
EH3 8HA
SANDY FINDLAY
Partner Manager
M: +44 (0) 7721 314900
T: +44 (0) 131 240 2900
E: sandy.findlay@jumpstartuk.co.uk
W: www.jumpstartuk.co.uk

R&D Eligibility – The Complexity

Complex and challenging
activities with uncertain
outcomes.

Which industries claim
the most?
£335M £635M £415M

Best People + Best Processes
= Best Results.
UK R&D TAX ADVISORY FIRM OF THE YEAR 2014 AND 2015
INTERNET OF
THINGS
Developing global
services for machine
to machine
operations in digital
signage
BENEFIT RECEIVED
£114,779
LIFE SCIENCES
Developing robust
models to test
efficiency & safety of
drugs and vaccines
BENEFIT RECEIVED
£106,091
Over 5 years
MEDICAL DEVICES
development of
sterile swabs and
transport media for
in-filled sample
collections
BENEFIT RECEIVED
£87,658
Over 2 years

4 Common objections
WE DON’T DO R&D.
R&D isn’t just about men in white
lab coats, most companies are
involved in some form of R&D.
ISN’T THIS A FORM OF TAX
AVOIDANCE?
NO! this is a legitimate scheme,
promoted by the UK government.
WE ALREADY CLAIM THROUGH
OUR ACCOUNTANTS.
GREAT! But are you claiming all the
benefit you are entitled to?
IT WOULD TAKE UP TOO MUCH
OF OUR TIME.
WRONG! Jumpstart do all the work
so you can focus on running your
business.

The Technical Consultation Approach

Our Client Services
and Support

The value of
a technical consultation.

Summary & Wrap-Up
www.citrus-mind.com

68
Online / Digital Cluster Activity
“Marketing” /
Dissemination
302
Views
+21%
[Aug]
244
Newsletter
239
Members
DH&C Online…

Thank you
www.citrus-mind.com
• Scottish Digital Health & Care Innovation – http://bit.ly/dhcinnovate
• Newsletter subscribe; http://eepurl.com/bJr8RL
• Facebook - http://on.fb.me/1T5UxFd
• E: Bill Grant; bill@citrus-mind.com
• E: Ian Sibbald; ian@citrus-mind.com
Citrus Mind Ltd,
Fleming House, Kirkton Campus,
Livingston EH54 7BN; T: 01506 238373

Funding for Innovation - Citrus Mind, Jumpstart, Metis Partners, Lending Crowd

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to Funding for Innovation - Citrus Mind, Jumpstart, Metis Partners, Lending Crowd

Similar to Funding for Innovation - Citrus Mind, Jumpstart, Metis Partners, Lending Crowd (20)

Recently uploaded

Recently uploaded (20)

Funding for Innovation - Citrus Mind, Jumpstart, Metis Partners, Lending Crowd