Post on 14-Sep-2014
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Welcome
From Idea to Investment Workshop .
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Want investment….?
Only 2% of those who submit business plans/applications to Business Angels get funded.
• 60% are rejected after a 30 minute review
• 25% are rejected after a 3 hour appraisal
• 10% are rejected after a full day evaluation
• 3% are rejected following failed negotiations
• 2% succeed in raising funds
Source- Envestors.
Still want investment….?
Business Plans/ applications to business angels are rejected because…
• Lack of skills/ credibility in the management team- No unfair advantages
• No Market opportunity- “reinvented the wheel”
• No proof of concept.• Business Model Not scalable• Forecasts based on unproven
assumptions• Business Model too complex to
execute• Inadequate financial returns ( 10X
within 3 years?)• Lack of trust• No clear exit route• Too Early…. But with work… ??
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..then ask for advice
Only 8% of all SME’s ever seek strategic advice and support
Source- Dept of BIS 2011 report on growth companies
But… This 8% of small businesses account for 43% of all High Growth businesses Potentially those who seek strategic advice have a 18 times greater chance of producing a scalable business.
Investors want ….?
Investors want to find..
1. Skilled and credible management team
2. BIG Market Opportunity- a big problem for a potential large set of customers that you can solve?
3. The Idea/ Prototype to be proven and market validated.
4. No Technical Risk5. Evidence that the Business Model is
both repeatable and scalable.6. Business Model ready to execute7. Road Map & Forecasts based on
proven assumptions8. Adequate financial returns ( 10X
within 3 years?)9. People they can trust/ work with10. A clear exit route- How will they claim
there reward??
What is a Scalable Start-Up?
“a start-up is an organization formed to search for a repeatable and scalable business model”- Steve Blank- “4 Steps to an Epiphany”
“an organization dedicated to creating something new under conditions of extreme uncertainty”- Eric Reis- “Lean Start-up”
0 2 4 6 8 10 12 14 16
-20
-10
0
10
20
30
40
50Start-up Growth Pathway
Investment
Inco
me
“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.”
Banjaree &Duflo- Poor Economics
Investors do not want…
http://youtu.be/QoAOzMTLP5s?hd=1
Investors want…
http://lockerz.com/d/10264659
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A Good business is often based on …
Unfair Advantages
See Steve Blank, Four Steps to the Epiphany
Attempts to Premature Scale is the No 1 reason that ambitious business start-ups fail.- Source Start-up Genome.
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Importance of FIT
Problem Solution
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Idea to Prototype.
http://www.businessmodelgeneration.com/downloads/value_proposition_designer_draft.pdf
Importance of Business Model
“A business model describes how your company creates, delivers and captures value”
Or in English:
“A business model describes how your company will make money”
Need a “proven” business model determine Market Risk.
http://www.businessmodelgeneration.com/
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http://www.boardofinnovation.com/business-revenue-model-examples/
http://www.slideshare.net/AnnaPietka/e-commerce-new-business-models-14291829
Examples of the top 10 Business Models in 2011- 2012
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Go Lean!!
“Lean Start-up is about reducing market risk by working out how to fail
fast”
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The competition- your customers perspective?
• Incredible Ignorance• Dr Do nothing• Mr Do it myself• Superman ( What’s their
kryptonite) • Boy in costume
Who are you competing against for your customers attention?
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Customer Relations- Where there is Love there is growth?
Love = Growth• Viral (Co-efficient of 1)-
Customers love you so they get at least one other person to use/ buy i.e. Facebook, Spotify
• Customer Acquisition- You pay £££ to market your product and the profit from the customers you gain is greater than the marketing costs??? (N.B. Margins often need to be high)
• Stickiness- Customers “love” you so they keeping coming back for more e.g. Apple- MacDonalds.
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Business- Customer Flow MetricsAwareness
Acquisition
Activation
Referral/ Repeat
Revenue
Motivation/ Want( Click-throughs)
No of Enquiries/Visits
No of Registrations/ Beta Downloads
Use Analytics ( Share rates)
Buy ( share rates)
Achieve (Customer Satisfaction)
Search/ Find
Evaluate/ ValidateDistribute/ Deliver
Distribute/ Deliver
Evaluate/ Validate
Measure Conversion Rates
A Market Validated Business Model is one which is proven to be repeatable and potentially scalable.
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ll
How are you going to make money?- The revenue model. - Traditional- (user = paying customer)- Advertising Model- “The customer is the product”- Split Revenue model- supplier and you split customer fees.- Two Sided model- Customers and suppliers fund ( directly or
through advertising) - Multi- facetted model- Many income stream options. - Freemium Model- Free to use up-to a point- Network Model – (Achieve scale & let someone else
monetise).
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Market Validation Pathway
Alpha•Closed set of customers- usually friends
•Agile design•Falsify the KPI’s
BETA•Open set of customers•Validate the business models
•“Smoke Test”•A/ B Test•Pivot
Full Launch•Full PR & Marketing•Maximising revenue•Building Brand•Building Capacity
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Proving the Business Model Key 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 – 100k users or 1M users or 10M 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 – £10M annually
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Runway Length?• How much/ little money is
needed to set-up the business, get a MVP product to market, cashflow the runway and resource the company until break-even.
• Going to need a Budget, Cashflow/P&L forecast, (Valuation Model & Term Sheet)
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Not Too early for investment if …..• You have proven the concept- Product/
Problem fit. • You have proven your business model-
Product+ Model? Market fit.• You have a team/ partners in place that could
help you scale?
www.ngfc.org.uk
• Bootstrapping through Personal resources (time and money = sweat equity you are investing)• FFF- Family Friends & Fools – People who will give you funds with little questions asked including
reward based crowd funders such as Peoplefundit. • Government Grants• Customers and Suppliers- “Build slowly at low risk by obtain credit from suppliers and growing
business through profits from paying customers”• Loan providers- “Increase business growth ambitions by increasing investment by taking out debt”
– Banks ( Overdraft-unsecured and secured loans)– Community Finance Institutions ( Soft/ unsecured loans for riskier ventures)– Leasing Companies.– Invoice lenders (Factoring, invoice discounting)– New loan markets such as Market Invoice and Funding Circle.
• Investors-– Private Investors- Business Angels such as Angel Capital– Venture Capitalist– Crowdcube– Government Backed Investment FundsMatching the right mix of sources to the right stage and type of finance is the key to successful
fundraising
www.ngfc.org.uk
Information:
• Capital Enterprise What’s On in London- www.capitalenterprise.org/whats-on • Business Link - www.businesslink.gov.uk • Start- up Britain - http://www.startupbritain.org • British Library- www.bl.uk/bipc • Bootlaw- http://bootlaw.com/ • HMRC Small Company Enterprise Centre- Source of advice and help
http://www.hmrc.gov.uk/manuals/vcmmanual/VCM10050.htm• HMRC R& D Tax Credits www.ucl.ac.uk/advances/advances-news/hmrc• HMRC Guide & Support- http://capitalenterprise.org/guide-to-rd-tax-credits • British Business Angel Association: www.bbaa.org.uk • Guide to Early Stage Investment: http://
www.paloalto.co.uk/about_us/Early_Stage_Investment_by_Alan_Gleeson.pdf• Start-ups on Air at Google Campus- https://
docs.google.com/spreadsheet/viewform?formkey=dEpuYlRFRFJ6SUVDdHVLRms3YmdBcmc6MQ• Hubventurelabs - http://hubwestminster.net/hubventurelabs
• Guide to 100 offers for start-ups – www.capitalenterprise.org
And if you have not checked them out please look at the latest schedule of advice and training events at :www.ngfc.org.uk .
www.ngfc.org.uk
Need less than £10K to start?
- Sources of Grants- www.j4b.co.uk - Competition funding £1000 issued to 10+ businesses per month- http://www.shell-livewire.org - Princes Trust http://www.princes-trust.org.uk/need_help/enterprise_programme.aspx - £1000- £10,000 Enterprise Loans for Under 25’s- www.startuploanslondon.co.uk or www.startuploans.com - New Enterprise Allowance Scheme – Check who delivers the scheme in London by e-mailing Capital Enterprise.- Community Development Finance Associations- http://www.cdfa.org.uk - 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- http://www.creativeindustryfinance.org.uk/
Need Less than £10K to Launch a
business
No Funds
Grant- www.j4b.co.uk
Unemployed? New Enterprise Allowance Scheme
Self Fund
BorrowWrite a simple
Business Plan & 12 month cashflow
Community Development
Finance Institution
Bank
Funding Product Development
Grants & Awards General• J4B- Portal for grant finding http://www.j4b.co.uk• Technology Strategy Board ( R&D Funding) - http://www.innovateuk.org -
http://www.innovateuk.org/content/competition/grant-for-rd-single-business.ashx• Knowledge Transfer Networks- www.innovateuk.org • London European Enterprise Network- http://www.een-london.co.uk • E Funding for SME R&D - http://www.eurostars-eureka.eu/what.do• EU Funding for R&D collaborations: http://ec.europa.eu/research/participants/portal/page/calls • Knowledge Transfer Partnerships funding support-
http://www.ktponline.org.uk/ktp-what-will-it-cost-my-business
Translation/ Follow on research funds. • www.rdfunding.org.uk/bulletin/queries/Search.asp?TheCloseMonth=July&TheYear=2011.• http://www.rcuk.ac.uk/kei/ktportal/Pages/Followon.aspx• https://ktn.innovateuk.org/web/145175/overview• http://www.ahrc.ac.uk/FundingOpportunities/Pages/BrowseOpportunitiesOld.aspx • http://www.ahrc.ac.uk/Pages/default.aspx • http://www.theculturecapitalexchange.co.uk/
www.ngfc.org.uk
Funding the RunwayAccelerators : Training & Mentoring programmes that provide fast-track to seed funding forScalable new businesses• Lean Start-up : - http://be.foundercentric.com/ • Start-Up Weekend: http://london.startupweekend.org • Launch 48: http://launch48.com• Tech Hub : http://www.techhub.com – Google Campus- http://www.campuslondon.com/ • FIG- http://www.findinvestgrow.com/ • Y-combinator- http://ycombinator.com/ • Tech Stars- http://www.techstars.com/ • Seed Camp: http://www.seedcamp.com ( Applications open)• Hackfwd: http://hackfwd.com • Emerge Venture Labs- http://www.theemergelab.org • Ignite 100- http://ignite100.com • BBC Worldwide Labs- http://www.bbcworldwide.com/digital/labs.aspx • Springboard- http://springboard.com/ - http://www.f6s.com/profile/1961#programs/ajax-application • Student Start-ups- http://studentupstarts.com • Accelerator Academy- http://acceleratoracademy.com • Fintech Innovation Labs- https://www.fintechinnovationlablondon.co.uk/about.html#4 • Wayra- http://wayra.org/en/wayra • Euclid Opportunities- ( Fin Tech Only) http://euclidopportunities.com/ • Nreduce- Virtual Y-Combinator- http://nreduce.com/ • Innovation Warehouse- http://www.theiw.org • Healthbox- http://www.healthboxaccelerator.com/ • Collider12- http://collider12.com/
CrowdfundersCrowd 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.- • www.kickstarter.com (USA)• www.indiegogo.com (USA)• www.peoplefund.it• www.sponsume.com • www.pleasefund.us • www.wefund.com • www.pozible.com • www.crowdfunder.co.uk
Equity/ investment Crowd funding platforms:
- www.crowdcube.com - www.seedrs.com
Also check out the Crowdfunding Accelerator- http://www.eventbrite.com/edit?eid=4402024574
Business AngelsAngel Investment - £100-500K Seed Investment
• NESTA - www.nesta.org.uk/investments • British Business Angel Association- www.bbaa.org.uk • Capital 4 Enterprise- http://www.capitalforenterprise.gov.uk/portfolio • Angel Co-Fund- http://www.angelcofund.co.uk/
Capital Enterprise top 10 Angel Network in London1. London Business Angels: http://www.lbangels.co.uk 2. Oxford Early Investments- http://www.oxei.co.uk/about.php3. Envestors- www.envestors.co.uk4. Finance South East- www.thefsegroup.com5. Angels Den- www.angelsden.com6. Venture Director- www.venturedirector.com- www.boundarycapital.com 7. Start-up Funding Club- http://www.startupfundingclub.com/ 8. E100- London Business School - http://
www.london.edu/facultyandresearch/subjectareas/strategyandentrepreneurship/enterprise100.html 9. #1 seed- www.number1seed.co.uk 10. Ascension Ventures- http://www.ascensionmedia.com/ascension-ventures.php
For an alternative list check out- http://www.designcity.co.uk/angelnews/edition_94.htm#article1
Specialist FundsWomen
- Stargate Capital- Trapezia- http://www.stargatecapital.co.uk/trapezia_1.aspx- FSE- Incito- http://thefsegroup.com/investors/business-angels/incito-ventures/- Aspire Fund - http://www.capitalforenterprise.gov.uk/files/Aspire%20Information%20Leaflet%20(v%202)%20Flyer%20brochure.pdf
Green- Bridges Sustainable Fund- http://www.bridgesventures.com/sustainable-growth-funds - Ingenious Media- Cleantech Fund http://
www.ingeniousmedia.co.uk/investments/investment-opportunities/clean-energy - Carbon Trust- http://www.carbontrust.com/about-us/our-investments - Low Carbon Accelerator- http://www.lowcarbonaccelerator.com - CT Investment Partners- http://www.ctip.co.uk - Wellington Partners- http://www.wellington-partners.com/wp/index.html
Social- Big Society Capital- http://www.bigsocietycapital.com - Sources of Social Finance- http://www.bigsocietycapital.com/finding-the-right-investment - Bridges Venture Fund http://www.bridgesventures.com/social-entrepreneurs-fund - Big Issue Investment- http://www.bigissueinvest.com - Social Finance- http://www.socialfinance.org.uk - Social Investment Fund- http://www.thesocialinvestmentbusiness.org
www.ngfc.org.uk
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 2012-13 tax year, tax payers can roll any chargeable gain in the tax year in to a SEIS with a
full capital gains tax exemption (another 28%)• 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- Tax breaks to encourage investment in start-ups
Early Stage VC’s & Supper AngelsAccel Partners: Stage agnostic, see their portfolio here.
Anthemis Investment- Stage Agnostic, see portfolio here
Balderton- Stage Agnostic- See there portfolio here
Eden Ventures- Early- mid stage – see there portfolio here
Index Ventures: Stage agnostic, see their portfolio here.
Passion Capital: Early Stage, see their portfolio here.
Delta Partners: Early to mid-stage, see their portfolio here.
Atomico: Stage agnostic, see their portfolio here.
Profounders: Early and mid-stage, see their portfolio here.
AIB Seed Capital Fund: Managed by two funds which invest under-€250k and over-€250k, see their portfolio here.
• ACT: Early to mid-stage, see their portfolio here.
• Bloom Equity: Early to mid-stage angel syndicate, see their portfolio here.
• DFJ Esprit: Early to mid-stage, see their portfolio here.
• Charlotte St: Early to Mid Stage, see there portfolio here
• Dawn Capital: Early to mid-stage, see their portfolio here.
• Notion Capital – • Doughty Hanson- Stage Agnostic, see portfolio here
• Seraphim Capital – Early-mid stage see there portfolio here.
• Kernel Capital: Early stage, see their portfolio here.
• Octopus Ventures: Early to mid-stage, see their portfolio here.
• Hoxton Ventures ; Early stage with disruptive tech.
• EC1 Capital: Early stage, see their portfolio here
• Connect Ventures- Early stage and very New.
• Pen Tech Ventures- Early Stage to mid- See portfolio Here
Alternatively you can check out Crunch Base / Angel List http://www.crunchbase.com/financial-organizations
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Active London Angels…
• http://bamlondon.blogspot.co.uk/p/angels_16.html
• https://angel.co/
www.ngfc.org.uk
• The quality and “connections” of the management team• The size of the business opportunity/ funding need• The scope for building a sustainable competitive advantage• The level of risk/ security. • And the timeliness of the proposal
Will determine the attractiveness of your business to investors, lenders and funders
• The ability of the entrepreneur to negotiate well and of the team to execute the business plan convincingly-
Will determine the type, price and quality of the deal that can be achieved
Step 5: So remember –What’s important when seeking finance
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What Next
• Back to the drawing boardor• Get Capital Enterprise support.. • http://foundercentric.com • Intros to mentors and advisors.• Advice on Slidedecks..• Intros to investors…?
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Recommended Slide-deckhttp://www.slideshare.net/slidesthatrock/how-to-pitch-a-vc-redesigned
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