Show Me The Money London 2014 - Presentation by John Spindler Ceo of Capital Enterprise


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John Spindler is the CEO of Capital Enterprise. John has had over 15 years’experience as an entrepreneur and business advisor/consultant and as well as being responsible for the day to day management of Capital Enterprise is also a director and co-owner of audio designer and manufacturer Ferguson Hill.

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Show Me The Money London 2014 - Presentation by John Spindler Ceo of Capital Enterprise

  1. 1. Financing Entrepreneurs - Raising your first round of seed investment in London . . John Spindler CEO of Capital Enterprise
  2. 2. Why start because….?
  3. 3. …the world is changing…
  4. 4. ..So now is the time to..
  5. 5. …to start you need.. • But to move fast, learn quickly, maximise customer value and capture the market opportunity you may need investment to…
  6. 6. “There is an opportunity gap when the scope for growing income at a very fast rate is limited for those who have too little to invest , but expands dramatically for those who can invest a bit more.”- i.e. to win requires scale Banjaree &Duflo- Poor Economics ….SCALE
  7. 7. Scale focused start-ups are…different • Ambitious: want to be worth at least £20M+ in 3 years. • Solve a big problem for target customer . • Build on or leverage new technology/ business model innovations • Acquire and exploit as many “Unfair Advantages as possible”- team, key partners, resources etc • Move very FAST • Are Rare (less than 2% of all start-ups even try)
  8. 8. To create them there is a Process! Advance in Stages… ..using the Lean Start-up Method
  9. 9. ..So a Start-up in want of investment needs.. • Team, Tech & resources that is FIT for the task of creating an awesome company • Product that is the best solution FIT for the target customers problems. • Business Model that is FIT to be scaled. • Smart Ass Team • with a Kick Ass Product • With a Business model that can “capture” a Big Ass Market ( Jeff Clavier 3 Ass-es rule) + Capital Efficient to Scale.
  10. 10. Smart Ass Team is… Balanced • Hipster (Designer) • Hacker (Developer) • Hustler (Distributor)
  11. 11. Kiss Ass Product… has evidence that it solves a customers problem
  12. 12. A Big Ass market … is fine but you need to find an initial Beachhead.
  13. 13. …which means you need “Business Model” innovation
  14. 14. Business Model Innovation Examples • Subscription – Salesforce – cost of customer acquisition, lifetime value and churn • Market Place – Alibaba – average transaction, commission on transaction • Lead Generation – AllStarDirectories – traffic, form data, price per lead • Productizing a Service – MOZ – adding scale to a service business. This includes building tools and business process automation over time into a scalable model. • Transaction Fees – Flattr, KickStarter – average transaction fee, commission • Commerce – AmazonSupply – Physical Goods – wholesale, cost of goods, retail, average margin, physical good • Combinations – Multisided markets – hardware sensors, software services with data analytics. These are usually manifested in more mature startups vs. startups at launch. • Non-profit – UP Global – generate the majority of our revenue from corporate and foundation sponsors.
  15. 15. ..why you and why now?
  16. 16. …because you have some Killer “unfair advantages” such as.. • Team – That is “Fit for Purpose”! • Technology that is relevant and hard to replicate.. • Knowing your first 5 customers personally.. • Completed Customer Development- Knowing your target customers and understanding what they want. • A “personal brand”/ credibility that means something to your early adopting customers.. • Access to a Uncontested Channel to market.. • Access to “Hard to get” resources or an ability to “steal” them… • A funded runway… “ Time to Learn” • A roadmap so you undersatand key tasks, milestones and metrics to achieve..
  17. 17. Sources of Start-up Help for Tech Entrepreneurs Information: • Capital Enterprise; • Meet-up - • Mobile Academy- • Makers Academy- • GoGowo- • Skills Matter- • Start- up Britain - • British Library- • Google Campus- • General Assembly- • Innovation Warehouse- • IC Tomorrow - • UCL Decide- • Start-up Weekend- London- • Launch 48- • Start-ups on Air at Google Campus- https:// • Hubventurelabs - • 3 Beards- • Tech Hub- • Dreamstake- • Capital List Get Together-
  18. 18. Idea to Tech Business- Three Chasms.
  19. 19. Market BusinessTechnical Start-up challenges… raising money to “prove”… Do the Target Customers care..? Does the product work…? Can team deliver and business make money…?
  20. 20. Proof of Concept? Does it work? Does anyone care?
  21. 21. Funding Product Development & BETA Testing Grants & Awards General • Technology Strategy Board ( R&D Funding) - - • Knowledge Transfer Networks- • IC Tomorrow- • NESTA- • London European Enterprise Network- • E Funding for SME R&D - • EU Funding for R&D collaborations: • Knowledge Transfer Partnerships funding support- • J4B- Portal for grant finding Translation/ Follow on research funds. • • • • • •
  22. 22. Crowdfunding ( Reward) Crowd funding Platforms- Reward based Crowdfunding platforms- will help you to raise funding to build a proto-type and market test a great idea or product.- Great for pre-selling cool tech hardware. • • (USA) • • • • • • • • •
  23. 23. Funding the Runway…? • How much/ little money is needed to build and test MVP/ demonstrate viability. ? • Usually required to fund co- founder “Ramen” salary • Going to need a Budget, Cashflow forecast and “burn rate”
  24. 24. Need Less than £10K to Launch a business No Funds Grant- Unemployed? New Enterprise Allowance Scheme Self Fund Borrow Write a simple Business Plan & 12 month cashflow Community Development Finance Institution Start-Up Loan Bank Need less than £20K to get to Build and test MVP? - Sources of Grants- - Competition funding £1000 issued to 10+ businesses per month- - Princes Trust - £1000- £20,000 Enterprise Loans for Under 25’s- or - New Enterprise Allowance Scheme – Check who delivers the scheme in London by e-mailing Capital Enterprise. - Community Development Finance Associations- - Also check out North London Community Finance - ELSBC Access to Finance – Business Plan support for those looking to raise up to £10K • Soft loans for Creative Businesses-
  25. 25. Proving the Key Assumptions and hitting milestones • Human Resources - Hiring key people that will make a huge impact on your organization (not just employees for workload purposes, but like a shit-hot marketing person, for example). • Product – MVP- Beta- First Pivot-Full Launch- On-going Iterations • Market – Market validation. As in, first customers, or first paying customers, etc • Funding – Maybe some money being committed to a round that the investor in question can lead or participate in. Other examples of milestones include*: • Proof that you can work together as a team, usually historical evidence • Proof that you can build something, i.e. working prototype • Proof that it’s useful to someone – first users and clients • Proof that you can talk to investors – every financing round, even small ones • Proof that you can talk to audiences – 10000 followers or 1000 users… • Proof that the initial team is able to attract talent • Proof that ecosystem agrees with your ideas – bringing respected industry advisors partners on board • Proof that there is market – £1M annually/ Proof that the market is big! – £25M annually and beyond • Proof that you can manage your finances – cash-flow positive operation • Proof that you can scale – Bessemer’s 5C’s
  26. 26. Idea to Tech Business- Three Chasms.
  27. 27. Accelerators help by .. Offering early Stage Entrepreneurs… • Fellow Community of entrepreneurs & supporters • Runway support & funding (£15-£100K at standardised investment terms. ) ( 3-6 months on average) • Physical Space & Facilities • Mentors ( 1st Industry- 2nd Investors) • Help to Rapid Field Trail with users & customers. • Demo days- Introductions to Investors/ customers …so that they can test.. • Product- Assess Functional use/ improve design & UX • Market Reaction- interest/ usage/revenue - AARRR • Revenue/ profit Potential- pricing, market timing, LTV/CCA • Business Model- “To Pivot or Not To Pivot” • Investor reaction- interest and valuations • Team- ability to work together and deliver.
  28. 28. Accelerators In London
  29. 29. Investment Readiness Test
  30. 30. Are you Investment Ready?
  31. 31. Part 4 The Funding Process
  32. 32. Idea Problem/ Space Exploration Design/ Prototype Beta Test Adapt/ PivotX2 Launch Bootstrap- FFF Innovation Awards Start-up Loans Crowdfunding i.e. Kickstarter Seedrs/ Crowdcube SEIS Super Angels/ Angel Groups Early Stage VC’s Start- Up Funding road –map. MVP Factories Hackathons/ Hatcheries/ Meet-ups. Accelerators Accelerators
  33. 33. 1 Idea Stage 2 Commitment Stage- Secure Co-Founders 3 FFF funding round –Build & Beta Test Minimum Viable Product 4 Seed Investment Round (Angels + Early VC’s) - Prove Business model & acquire metrics to prove scalability 5 Series A Round (Angels, VC’s & Strategic Investors) – Go for scale, build out team, technology- EXECUTE 6 Exit (Average 7 years and after many rounds) – Trade Sale or IPO ££££££££££££££ How Start-Up Funding Works ?- Why 100% of Nothing is worth Less than 10% of something big
  34. 34. Investment Essentials Round Amount Purpose London Pre-Money Valuation Guideline Source of Investment What investors like to see Pre Seed £25K-£150K (SEIS eligible) Assemble Team/ Build & Test MVP/ Proof of Concept R&D Zero- £500K Own Money/ FFF/ Crowdfunding/ SEIS Funds/ TSB Unfair Advantages Seed £150-£350K BETA Test/ Launch into Beachhead/ Proof of Product Solution Fit £500K-£1.5m Business Angels/ Crowdfunders/Seed VC's/ Co-Investment Funds SMART Team- Early Evidence of Product/ Solution Fit- Validating customers/ users Super Seed (Bridging round) £500K- £1m Working Business Model/Proof of Product/ Market Fit/ Demonstration of Growth £1.5M-£4m Super Angels/ Seed VC's Product Solution FIT Proved- Early Indications of Product- Market Fit ( i.e. revenues) Series A £2m-£15M+ Scale £8m- £50m VC's/ Family offices and Corporate Ventures Revenues & METRICS proving scalability.
  35. 35. Importance of Tax breaks • EIS • SEIS • ECF’s • Co-Investment Programmes
  36. 36. Seed Enterprise Investment Scheme-SEIS is a tax break launched in April 2012 for UK tax payers to encourage them to buy shares in start-up companies registered in the UK The Facts: • SEIS investors can input £100,000 in a single tax year rising to a maximum £150,000 over two or more tax years in to a single company • Investors cannot control the company receiving their capital • Investors pick up 50% tax relief in the tax year the investment is made, regardless of their marginal rate. • In the 2013-14 tax year, tax payers can roll 50% of a chargeable gain in the tax year in to a SEIS with a full capital gains tax exemption (another 14%) • The business must be a start-up company -registered in the UK within 2 years of claim. • The company must not employ more than 25 workers. • The company must have assets of less than £200,000. • The company has to trade in an approved sector – generally not in finance or investment, for example, a property company raise capital as a SEIS. SEIS is…… “a game changer”?
  37. 37. Thinking like an Angel! Why Do Angels Invest? Where to find them?
  38. 38. Key to being s Successful Business Angel? • Good Reputation – “Track Record” • Great Source – “Having good introducers” • Good Selection – “ Sticking to what you know” • Adding Value- “ Offering more than money to increase the chance of success” • Ability to Follow on Successes/ Walk Away from Failures. • Getting Value – “ Getting a Good deal at all stages”
  39. 39. Investors Dilemma • Even the best performing investors find over 60% of investments return to zero. • Average time for investments to mature is 7-10 years • Most investors want exits in 3-5 years • Most can only invest for 1-2 rounds • If investing someone else's money (e.g. VC’s)then they make their money from arrangement fee, management fee and % of the capital gains ( e.g. 2 and 20 % rule).
  40. 40. Valuations & Dilution rates Dilutions – (N.B. Never take a down round and always avoid ratchet clauses) • Bootstrap – Accelerators 5-10% • Seed – Round 20-25% (+ 10% option pool) • Series A – Round 20-25% Crunchbase Valuations
  41. 41. Capital List – The Minimum Viable Introducer “ Showcasing and connecting Entrepreneurs to champions and investors”
  42. 42. Send a slide deck and get introduced Ten slides. Ten is the optimal number of slides in a PowerPoint presentation because a normal human being cannot comprehend more than ten concepts in a meeting—and business angels are very normal. If you must use more than ten slides to explain your business, you probably don’t have a business. The ten topics that an investors cares about are: 1. Summary and call to action/ what do you want? 2. Problem 3. Your solution 4. Business model 5. Underlying magic/technology 6. Marketing and sales 7. Competition 8. Team 9. Projections and milestones 10. Status and timeline Send to :
  43. 43. Airbnb pitch deck 1
  44. 44. 7 Types of Early Stage Investors in London Market 1. Crowdfunders/ Platforms 2. Tax Relieve Seeking SEIS/EIS Funds 3. Government Backed ECF’s 4. Traditional Angel Syndicates 5. Super Angels 6. VC’s 7. Strategic Investors ( Corporate Venture)
  45. 45. Seed/ Early stage Investment Platforms Crowdfunders. Angel Platforms - -
  46. 46. “Pay to Play” Funds. Top SEIS Funding Syndicates 1. Jenson Solutions- 2. Ingenious Media- 3. Ascension Ventures- 4. Start-up Funding Club- 5. Ascot SEIS – Top Traditional Angel Syndicates 1. London Business Angels: 2. E100 (LBS) 3. Oxford Angels: http:// 4. Cambridge: http:// 5. Envestors- 6. Angels Den-
  47. 47. Super Seed Investors • Playfair Capital- • Angel Lab- • Kima Ventures- • Boundary Capital - • Venerex ( Fashion Tech- see Capital List) • Jam Jar Investments- • No 1 Seed - • Warner Yard Associates - • Angel List Syndicates –
  48. 48. Active Seed VC’s in London. Big 5 • Accel Partners: Stage agnostic, see their portfolio here. • Balderton- Stage Agnostic- See there portfolio here • Index Ventures: Stage agnostic, see their portfolio here. • Wellington Partners: Stage Agnostic, see there portfolio here • Octopus Ventures: Early to mid-stage, see their portfolio here. ECF’s/ Public funded. • Notion Capital – SAAS and Cloud specialist- See portfolio here • Passion Capital: Early Stage, see their portfolio here. • Sussex Place Ventures- Early stage - • Episode1: Early Stage Software Companies • Longwall – Oxford Based – Science backed Start-ups focus Cool Cats • Profounders: Early and mid-stage, see their portfolio here. • Amadeus Capital: Early and mid-stage- just launched new fund. • Piton Capital: Early and mid-stage specialize in market places. • DN Capital : Early and mid-stage, see their portfolio here • DFJ Esprit: Early to mid-stage, see their portfolio here. • Spark Ventures : Stage Agnostic- See there portfolio here • White Star Capital- Early stage – See portfolio here • Arts Alliance: Minimum investment £500K in Media related tech- see portfolio here • EC1 Capital: Early stage, see their portfolio here • Connect Ventures- Early stage and very cool. • Hoxton Ventures – New and focus on seed with next move to USA.
  49. 49. Specialist Funds Social/ Tech for Good - NESTA - - Unltd – - Big Society Capital- - Sources of Social Finance- - Bridges Venture Fund - Big Issue Investment- - Social Finance- - Social Investment Fund- Women - Stargate Capital- Trapezia- - FSE- Incito- - Aspire Fund - Green - Bridges Sustainable Fund- - Ingenious Media- Cleantech Fund - Carbon Trust- - Low Carbon Accelerator- - CT Investment Partners- - Wellington Partners-
  50. 50. Corporate Players
  51. 51. Investment State of Play 2013 Deals Under £0.5M • SEIS Deals £6-7m per month - 82 Deals p.m - £72K Average • EIS & SEIS - £600M in New Companies in 2012-13. - Estimated 1,116 New Companies received EIS/SEIS investments in 2013. Deals Over £0.5m
  52. 52. Thank You Contact: