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Raising Finance. NVI Wales Mentor Session - Impact innovation
The document outlines various methods of raising finance for businesses, including borrowing, equity investment, and grants. It details the characteristics, risks, and sources of each funding type, emphasizing the importance of cash flow and the security required for borrowing. Additionally, it highlights the need for compelling pitches and thorough project evaluations when seeking investment.
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Raising Finance. NVI Wales Mentor Session - Impact innovation
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- 2. Jargon Some examples: •Gearing •ROI •Preference Shares •Debenture •Invoicediscounting •Mezzanine Finance •Cash burn
- 3. Sources of Finance • Whatare they?
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- 5. Borrowing Characteristics • Ithas to be repaid with interest over agreed period. • Therefore 2 key questions: – Can the business generate sufficient cash to pay the interest and capital? – What security do we have if it all goes “horribly wrong”?
- 6. Borrowing Types Working CapitalAsset Backed Other Overdraft Leasing/HP EFGS Invoice Discounting Property Mortgage Friends and Family Credit from Suppliers Term loan with business security Crowd Funding Up front payments from Customers Term loan with personal security – Beware the PG! Vendor Finance
- 7. Borrowing Sources UK • Mainhigh street banks – but there are 395 others – see www.bba.org.uk • Many specialist factoring companies • Asset finance companies - see www.abfa.org.uk • Crowd Funding • Green Investment Bank • Department for Business Innovation & Skills - BIS Wales • Finance Wales • UK Steel Enterprise • Local Authorities • Credit Unions • Pembrokeshire Lottery • Business Wales www.business.wales.gov.uk
- 8. Crowd Funding • TheFunding Circle • Kickstarter • Crowdcube • SEEDRS • Platform Black • Many others............... • Varying business models
- 9. Equity Characteristics • Investingin shares in a private limited company is risky. • This means 3 key questions: – How big is this opportunity? – Are the management capable of exploiting it? – Where is the exit route?
- 10. Risk Capital Sources andSpectrum Flotation - IPO VC/PE Corporate Venturing Business Angels Crowd Funding & SEIS Funds Own Money, Friends & Family
- 11. Pitching and FollowUp • “Valuing start ups is a crap shoot” • Find the right investor for your proposal • Blindingly good pitch - 15 minutes – Don’t underestimate the value of a simple story well told – Really compelling value proposition • Validation, validation, validation • Traction in the market - Sales • Establish and be ready to handle objections and doubts • Seek to control time line for a decision
- 12. Risk Capital Sources •Finance Wales • SEIS and EIS Funds – Dragon SEIS Fund, ICE Angels • UK Steel Enterprise • Wesley Clover • Westbridge Capital • Xenos business angel network • EADS Foundation • Hafren Ventures • BVCA – www.bvca.co.uk
- 13. Grant Characteristics Grant Fundingis characterised by: – Need to achieve non financial outputs. – Tend to be paid retrospectively. – Clawback if grant not used correctly. This means grant givers are interested primarily in: – Is the project eligible? – Balance of funding? – “Additionality” test? – Will it achieve the non financial outputs? – Will it generate positive (or negative!) publicity? – Do we have budget available?
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- 15. Grant Sources UK • NESTA •Technology Strategy Board • WRAP • Carbon Trust • National Lottery • Social Investment Business • Private foundations
- 16. Grant Sources Wales • WelshGovernment • WG Smart Cymru • KTP and Go Wales • Jobs Growth Wales • Local Authorities including: – Local Investment Fund (LIF) – Rural Development Plans – ICT grants
- 17. The right fundingfor the right purpose Borrowing Equity Grants Working capital Yes Maybe No Assets Yes Yes Yes Losses No Yes Yes
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- 19. Using someone else’smoney is a privilege not a right – treat it with respect