15/11/2013	
  

Access	
  to	
  Finance	
  update	
  
Jerry	
  Davison,	
  The	
  Mill	
  Consultancy	
  and	
  SouthWestf...
15/11/2013	
  

Agenda	
  
Ê  Risk	
  and	
  reward	
  equation	
  	
  
Ê  The	
  current	
  funding	
  landscape	
  
Ê...
15/11/2013	
  

The	
  current	
  funding	
  landscape	
  

What	
  are	
  we	
  seeing?	
  
Ê  Bank	
  finance	
  very	
 ...
15/11/2013	
  

For	
  earlier	
  stage	
  companies	
  

	
  	
  

Ê  equity	
  
Ê  grants	
  and	
  quasi-­‐grants	
  ...
15/11/2013	
  

Finding	
  Equity	
  
Ê  Sources	
  
Ê  Friends,	
  family,	
  employees	
  
Ê  Business	
  angels	
  
...
15/11/2013	
  

Crowdcube | Transforming Equity Finance

§  Crowdcube	
  is	
  the	
  world’s	
  first	
  and	
  leading	
...
15/11/2013	
  

Deals	
  successfully	
  funded	
  

Success so far…

£16	
  million
funded	
  so	
  far…	
  	
  

£2,500	...
15/11/2013	
  

Peer-­‐to-­‐Peer	
  lending 	
  	
  
Ê  e.g.	
  Funding	
  Circle	
  	
  
Ê  Requires	
  at	
  least	
  ...
15/11/2013	
  

Some	
  South	
  West	
  initiatives	
  
Ê  PWGF	
  -­‐	
  £3.9m	
  from	
  the	
  RGF	
  –	
  grants	
  ...
15/11/2013	
  

Funding	
  examples	
  
Ê  Forest	
  Fuels	
  –	
  biomass	
  wood	
  fuel	
  supplier	
  (2009-­‐2013)	
...
15/11/2013	
  

Some	
  other	
  sources	
  and	
  initiatives 	
  

	
  	
  

Ê  Pension	
  scheme	
  (e.g.	
  transfer	...
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Access to finance - the alternative to banks

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Banks may not be lending like they used to so we look at ways of financing your business, raising additional funds to facilitate growth.

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Access to finance - the alternative to banks

  1. 1. 15/11/2013   Access  to  Finance  update   Jerry  Davison,  The  Mill  Consultancy  and  SouthWestfd   1  
  2. 2. 15/11/2013   Agenda   Ê  Risk  and  reward  equation     Ê  The  current  funding  landscape   Ê  Equity   Ê  Debt   Ê  South  West  and  Government  initiatives   Ê  Some  funding  examples   The  risk  and  reward  equation   Bank finance - with security Capital need Growth Flotation VCs/private equity Business angels/small VCs/ crowdfunded equity and loans Friends, family, employees Seed Start up Early growth Risk Sustained growth Time > 2  
  3. 3. 15/11/2013   The  current  funding  landscape   What  are  we  seeing?   Ê  Bank  finance  very  difficult  and  more  expensive   Ê  Angel  equity  (funding  directly    by  individuals)  is   plentiful:  £800  million  p.a.   Ê  Advent  of  web-­‐based  ‘crowdfunding’  (lending  and   equity)   Ê  A  few  VCs  are  investing,  especially  in  cleantech,   biohealth,  web  (e.g.  SaaS),  mobile,  energy   Ê  Many  VCs  sitting  on  their  cash  or  propping  up  existing   investments   Ê  Lots  of  Government  initiatives  such  as  grants  and  tax   incentives   3  
  4. 4. 15/11/2013   For  earlier  stage  companies       Ê  equity   Ê  grants  and  quasi-­‐grants   Ê  Enterprise  Finance  Guarantee   Ê  crowdfunding  –  equity  only   Ê  mezzanine     Ê  tax  incentives  –  R&D  credits,  EIS  and  SEIS   For  later  stage  companies   Ê  bank  lending     Ê  invoice  discounting     Ê  leasing     Ê  unsecured  loans  e.g.  mezzanine   Ê  peer-­‐to-­‐peer  lending   Ê  equity  -­‐  including  crowdfunding     Ê  larger  grants   Ê  tax  incentives   4  
  5. 5. 15/11/2013   Finding  Equity   Ê  Sources   Ê  Friends,  family,  employees   Ê  Business  angels   Ê  Angel  funds,  syndicates  and  networks     Ê  VCTs,  Venture  Capital,  private  equity   Ê  Crowd  funding   Ê  How  do  you  find  them?   Ê  Google,  Advisors,  BVCA  and  UKBAA   Ê  Investors  like  tax  incentives  –  SEIS  and  EIS   Equity  -­‐  some  metrics   Ê  Only  6%  of  private  equity  is  invested  in  start-­‐up  or  early  stage   companies  –  the  rest  is  follow  on  funding,  MBOs,  expansion   Ê  For  the  best  entrepreneurs,  with  the  top  1%  of  propositions,  there   is  plenty  of  funding  out  there   Ê  The  next  5%  or  so  will  usually  find  funding,  it  justs  takes  longer   Ê  Fewer  than  5%  of  SMEs  demonstrate  the  >  20%  per  annum  growth   potential  which  makes  them  investment  attractive  to  equity   Ê  Typical  size  equity  deals:   Ê  £250k  to  £2m  for  early  stage   Ê  £500k  to  £50m+  for  established  companies  needing  expansion  or  MBO   capital   5  
  6. 6. 15/11/2013   Crowdcube | Transforming Equity Finance §  Crowdcube  is  the  world’s  first  and  leading  equity   crowdfunding  platform  letting  people  invest  in  UK  businesses   §  Crowdcube  is  authorised  and  regulated  by  the  FCA   Benefits 6  
  7. 7. 15/11/2013   Deals  successfully  funded   Success so far… £16  million funded  so  far…     £2,500   £250,000     81   >50,000   members   largest  single  investment   av.  investment   >5,000   £1.95  million   biggest  deal     Self-­‐Cert  HNW  or  SI   Debt  finance  sources     Ê  Banks  -­‐  maybe   Ê  Enterprise  Finance  Guarantee  –  only  £194m  lent  1  July  –  31  Dec   2012     Ê  Companies  with  little  or  no  security;  loans  up  to  £1m   Ê  Factoring  and  invoice  discounting  –  and  new  models  on  the  web   Ê  e.g.  Platform  Black,  Market  Invoice,  Tinderbox       Ê  Leasing,  other  asset  based  finance     Ê  ‘Mezzanine’  loans  –  unsecured  but  high  cost  e.g.  BMS  Finance   Ê  Peer  to  peer  lending     7  
  8. 8. 15/11/2013   Peer-­‐to-­‐Peer  lending     Ê  e.g.  Funding  Circle     Ê  Requires  at  least  two  years  of  filed  accounts   Ê  Funding  Circle  has  financed  £173m  of  loans  to  date   Ê  Online  auction  basis   Ê  Interest  rates  ~  9%   Ê  The  future  method  of  debt  funding  for  SMEs?   Ê  p2pmoney.co.uk/companies.htm   Government  initiatives       Ê  Grants  e.g.  GBI,  R&D  and  innovation  (Technology  Strategy   Board  -­‐  Smart),  Nesta;  note  matching  requirements  for  most   grants   Ê  Business  Growth  Fund:  equity  £2m-­‐£10m  in  larger  SMEs   Ê  Enterprise  Capital  Funds   Ê   Angel  Co-­‐Fund:  co-­‐investment  with  angel  syndicates   Ê  http://british-­‐business-­‐bank.co.uk/applying-­‐for-­‐finance/   Ê  https://www.gov.uk/business-­‐finance-­‐support-­‐finder   Ê  http://www.businessfinanceforyou.co.uk/   8  
  9. 9. 15/11/2013   Some  South  West  initiatives   Ê  PWGF  -­‐  £3.9m  from  the  RGF  –  grants  up  to  £150k   Ê  SWIG  -­‐  Start  up  loans;  Loans  Fund;  Cleantech  Fund  -­‐  £250k   Ê  Angels:  SWAIN,  Silicon  Beach,  Horatio,  Notion,  Devon   Business  Angels   Ê  Grant  funding  –  GBI,  BIG  and  R&D  –  particularly  strong  in   Cornwall   Ê  Fredericks  Foundation  –  up  to  £20k   Ê  http://www.gaininbusiness.com/funding   Funding  structures         Ê  Most  entrepreneurs  are  likely  to  use  a  whole  mix   of  finance   Ê Equity   Ê Debt   Ê Grants   Ê Tax  breaks   Ê Examples  –  Forest  Fuels,    Cornish  Sea  Salt,   Fizcast   9  
  10. 10. 15/11/2013   Funding  examples   Ê  Forest  Fuels  –  biomass  wood  fuel  supplier  (2009-­‐2013)   Ê  Equity,  Funding  Circle  loan,  invoice  discounting,  very  small   overdraft   Ê  Cornish  Sea  Salt  (from  2008  and  onwards)     Ê  Equity  (founder  and  two  regional  VCs),  GBI  grant,  Springboard,   mezzanine  loan  (regional  VC),  commercial  mortgage  facility   Ê  Headcastlab  –  digital  animation  apps  (in  late  2012  and  2013)   Ê  Equity  -­‐  £150k  under  SEIS  then  £170k  EIS   Ê  GBI  grant  £225k  and  BIG  grant  £11k   Strategy   Raising   finance   Share  option   schemes   Business   Development   Marketing   consultancy   Commercial   advisory   services   Business   planning  and   forecasting   Investment   readiness   Exit  readiness   10  
  11. 11. 15/11/2013   Some  other  sources  and  initiatives       Ê  Pension  scheme  (e.g.  transfer  of  property,  or  even  IP  to  a  SIPP  or   SSAS  fund)   Ê  Supply  chain  finance  –  large  co  approves  payment  –  100%  advance   Ê  Santander  –  ‘Breakthrough’     Ê  £200m  for  high  growth  co’s   Ê  >  3  years  trading   Ê   mezzanine  loans   Ê  flexible  repayments     Ê  Discount  for  early  payment?   11  

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