Crowdfunding / Crowdcube Breakfast - Taunton

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Slides from the Crowdfunding / Crowdcube Breakfast event held on 20th October 2014 at Francis Clark offices, Taunton. Joint event with Francis Clark, Ashfords and Crowdcube.

Transcript of Crowdfunding / Crowdcube Breakfast - Taunton


2. Chairmans LockPartner 3. AdministrationHousekeepingTimetable - Questions at the end and CompulsorySlides See pack 4. Speakers Richard Wadman, Corporate Finance Director, Francis Clark Todd Wilson, Investment Analyst, Crowdcube Melissa Rose, Corporate and Commercial Solicitor, 5. Francis Clark who are we? 7 regional offices: Taunton, Exeter, Torquay, Plymouth, Tavistock,Salisbury and Truro UK Top 25 Firm (Accountancy Age 2014) 49 Partners and over 390 staff Identified in December 2013 by the London Stock Exchange as one ofthe 1000 Companies to Inspire Britain Largest range of specialists located in the South West Awarded Best VAT consultancy at the Taxation Awards 2014 Awarded Tax Award of the Year (non global firm) in the BritishAccountancy Awards 2012 Awarded Best Tax Practice in a Regional Firm at the Taxation Awards2012 Awarded Auditor of the Year Mid Tier at the national FinancialDirectors Excellence Awards 6. CrowdsourcingequityRichard Wadman CorporateFinance Director 7. Grants, Debt and Equity The FundsRoutes to Equity Friends, Families and FoolsInclude related businesses? Networks e.g., SWAIN, OXIN Conduits e.g., UEC Enterprises, GAIN? Virtual Networks e.g., Crowdcube Venture capitalists and Private Equity e.g., PiperPrivate Equity, Altitude Partners LLP or LongwallVenture Partners 8. Grants, Debt and Equity The FundsCrowdcube not just equity..Eden Project crowdfunding raises 1.5m in 20hours - The charity sold 500 bonds in 20 hours inreturn for 6% interest a 9. Crowdsourcing Equity e.g., Crowdcube - BrewDog - Debt e.g., Thin Cats - Funding Circle or Peer to Peer e.g., Rewards e.g., Kickstarter - orCrowdfunder 10. The problem Q1 2013 showed the lowest ever level of use ofexternal finance by SMEs SME Finance Monitor, Aug 13 Access to finance is a major barrier to growth formore than one in five small companies FT, Mar 12 Less than one in five SMEs have attempted toraise finance in the last year with 40 per cent ofapplications rejected RealBusiness, Sept 13 11. The solution Crowdcube is the worlds first and leading equity crowdfunding platformgiving entrepreneurs a new way to raise investment Fully authorised and regulated by the Financial Conduct Authority 12. The solution 13. The equity solution 14. The mini-bond solution More than just financialconsiderations 4-5 years trading Capacity to engage with tens ofthousands of customers 5 million + turnover At least EBITDA profitable Investment used for tangible growthi.e. assets rather than restructuring 15. Creating a buzz 16. Success so far37 millionfunded so far220,000average deal1.9 millionbiggest deal250,000largest single investment+90,000members145+2,600average investmentSuccessfullyfunded dealsStage of GrowthBy Category 17. Case studies 18. Case studies 19. Growth2012 2013 Growthinvestment 2.2m 12.2 + 562%deals 22 54 + 145%UKs Most Active Seed Investor in 2013Beauhurst report stated Crowdcube has dominated theUK equity crowdfunding marketing since launch and wasresponsible for 70% of crowdfunded deals in 2013.Source: Beauhurst, UK Equity Investment Review 2013, February 2013averageinvestment1,800 2,800 + 56% 20. Why do investors love us?Crowdcube isa breath offresh air; its aconvenient,easy-to-useand makesinvesting farmoreaccessible.Rupa GantraCrowdcube Investor 21. Why do our entrepreneurs love us? 22. Summary Leading the transformation of UK investmentfinance No. 1 Seed Investor in the UK Crowdcube Venture Fund managed byBraveheart Investment plc Enabling business growth on the worlds leadinginvestment crowdfunding platform 23. Todd WilsonInvestment 24. CROWDFUNDINGMelissa RoseAshfords LLP20 October 2014 25. Key ContactsDavid 526004Melissa 526045Dominic 526030Crowdfunding | 20 October 2014 26 26. 1. Crowdcube & Ashfords Ashfords integral in pre-authorisation model and obtaining FCAauthorisation on 1 February 2013; Legal advisor to Crowdcube corporate and regulatory; Recommended legal advisors for investee companies thatsuccessfully pitch through Crowdcube; Advised over 100 companies; Advise on start ups, growth companies and later stage funding.Crowdfunding | 20 October 2014 27 27. 2. Legal Steps Pre Pitch& Documentation Content of pitch must be fair, clear and not misleading and give details ofshare rights and constitutional documents; Prior to pitching: Check existing constitutional documents; Check consents required. Waive pre-emption on issue from all existing shareholders; Board resolution to issue the shares; Shareholder resolution to adopt new Articles of Association, sub-divide thenominal value of the shares and grant directors with authority to allot newshares.Crowdfunding | 20 October 2014 28 28. 3. Legal Steps Articles Articles of Association: Crowdcube has template Articles of Association; Drafted by Ashfords; Specifically designed for crowdfunding; Include two classes of shares (A: voting, and B: non-voting) A sharesfor significant investors; Pre-emption on issue and pre emption on transfer but only for AShareholders; Drag along, tag along, board representation and electroniccommunication provisions. Where investee company has its own Articles must work forcrowdfunding i.e. equal dividend rights, no restrictive covenants, nosubordinated rights, equal rights on an exit, drag along etc.Crowdfunding | 20 October 2014 29 29. 4. Legal Steps Shareholders Agreement Shareholders Agreements: Normal for VC/Private Equity investment but not recommended forcrowdfunding due to practical implications of obtaining signatures, andissue of unanimity for amendments with significant number ofshareholders; Existing shareholders agreements usually need amending or varying likely with unanimous consent pre-pitch consideration; Can be drafted to bind certain groups of shareholders only e.g.founders if want to retain in place due to investor concerns or keepmatters private; Be careful of provisions restricting issues/transfers to persons signinga deed of adherence.Crowdfunding | 20 October 2014 30 30. 5. Other Issues Share numbers - 10 investments, valuations, rounding/share price. EIS/SEIS get tax advice!!! Employment Related Securities Share Option Schemes fully diluted basis calculations Ongoing compliance accounts and filings Corporate SecretarialCrowdfunding | 20 October 2014 31 31. Any questions?Crowdfunding | 20 October 2014 32 32. Investmentready forequityRichard Wadman CorporateFinance Director 33. Investment 34. The Readiness Process When, why and what funding is needed Communicating the business proposition -Business plan and projections Viable plan and credible management Building the 35. The Business Plan A Guide Executive summary The Business history and present: Where you are now, includinghistoric financials, ownership, awards, accreditations etc. The market and the opportunity Future strategy/ plans/ risks Operations (changes + practicalities) Financial summary of projections Finance required The team Environment, Equal Opp and Local Economy etc - Depending on thetype of finance sought may have to consider these opportunity and howyou will exploit it. Why youwill succeed.Financial implicationsand finance required. 36. Projections How to Excel and/ or Sage Winforecast (other programmes) Approach Annual P&L to Monthly P&L Cash flow assumptions Capital expenditure (profile) Other non-P&L items e.g., loans Opening 37. Investment ready general housekeeping Compliance and Legal- Licences / contracts/ legal title?- IPR ownership in the company?- Statutory Accounts/management accounts- VAT, PAYE/NI, Books and records in order? 38. Requirements: Equity Exit route and returns to the investor Investors expertise vs. loss ofindependence? Be prepared to discuss valuation Emotional! Be aware of FSMA regulations SEIS/ 39. Why are SEIS and EIS important?Important to the Investor De-risks an investment Improves ROIImportant to you As raised 1,017million through EIS in theyear to 31 March 2012, upfrom 545 million raised in2010-11More than 2,000companies have raisedaround 2 billion inequity cash frominvestors, according toHM Revenue &Customs (HMRC),which monitors SEIS. 40. Enterprise Investment Scheme Rate of income tax relief 30% up to maximum per investor of1m per year Capital Gains tax relief Hold Over relief. Exemption for gainson EIS investment if income tax claimed Mandatory investment period 3 years Qualifying investment Cash for Ordinary shares in unlisted company < 250 employees Net Assets < 15 million Carrying out permitted activity Not controlled by another 41. Seed Enterprise Investment Scheme Rate of income tax relief 50% up to maximum per investor of100k per year Capital Gains tax relief 50% relief on capital gains realised onasset disposals used to make