HPSU presentation 14 march 2011
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Enterprise IrelandHigh Potential Start Ups (HPSU)
PRESENTATION TO INDONESIAN DELEGATION
John ConverySenior Development AdvisorHPSU
Monday 14th March 2011
AGENDAEnterprise Ireland Mission
Our Client Base
High Potential Start Ups Background
High Potential Start Ups How we operate
High Potential Start Ups Assistance
Measurement of Progress
Start Ups Common Mistakes and lessons learned
Enterprise Ireland Mission To accelerate the development of world-class Irish companies to achieve strong positions in global markets, resulting in increased national and regional prosperity.
ENTERPRISE IRELAND CLIENT BASE
E.I. Client Base Segmented by Stage of DevelopmentHigh PotentialStart-Ups
Entrepreneursstarting companieswith the ability tocompete in world markets
Ambitious companieswith the ability togrow to scale andachieve significant global successTotal E.I. Client base ~ 3,500 companies 148,000 employees
HIGH POTENTIAL START Ups
What is a HPSU ?A company must be :
Recently established (between 0-4 years from first employee)
Innovative (operating in a growth sector).
Capable of generating at least :
10 full time jobs (in Ireland) - by end of year 3
Annual revenues of 1.M - by end of year 3
Irish Owned and located in Ireland.
Who we work with .Typically
Key functional managers within existing businesses with new business ideas.Experienced Managers looking at MBOs.Irish ex-Pats, returning to Ireland with new business ideas.Individuals involved in 3rd level research, with an interest in commercialisation.Serial or repeat entrepreneurs.Promoters who identify an opportunity and want to start an export business.
- The majority of original promoters of start up companies EI supports have strong technical background / qualifications.
E.I. HPSU Activity1,200 start-up enquiries received p.a. Of those ~ 400 can be classified as eligible as E.I. clients
E.I. approves equity funding packages for ~70 HPSUs p.a.
Where do entrepreneurs come from?Sourcing people with new ideas.
High Potential Start Ups
- How we operate
How we operateOne division responsible for all start ups.Organised along sectoral lines.Each new prospective client is assigned a Development Advisor or account executive.The full range of EI resources for an individual / company is accessed through that advisor.All clients are handled both on a one to one basis AND are involved in relevant sectoral initiatives.
E.I. approach to start-upsWhat Does the HPSU Dept. Provide?
- A Dedicated Start-up Team.- Technology- Finance- HRD- Sales - Marketing
Start-Up Business Consultancy for New High Potential Client, followed by
Assessment of and Investment in New High Potential Business
High Potential Start Ups
Some detail on assistance from EI1. Advice and mentoring
Funding from EI
Identifying customers and securing export sales
4. Infrastructure Incubation space - Business Innovation Centres
1. Advice and mentoring Getting startedEnterprise Start Programmes (over 6 weeks) and Enterprise Platform Programmes (over 12 months with part salary support).
Initial idea / project evaluation Feasibility study grant (50%).
Advice and help in development of a business plan;
Assistance with product / market validation;
Challenging of assumptions, projections etc help fill the gaps.
Advice and help in building a balanced, management team;
1. Advice and mentoring Getting startedMentor panels
Fit for market seminars
Investor readiness seminars
Information on potential investors
Networking receptions (clients, advisers, investors)
Introductions (investors, business partners, consultants)
How E.I. Funds High Potential Start Ups1. Funding the Concept (Category One Funding)
2. Funding the Business Plan (Innovative Funding)
1. Funding the Concept (Category One)
Mentor, Bus. Accelerator
Recruiting Key PersonMax E.I. Funding is 110K (over 2 years)Based on 50% grantInnovation Vouchers (max. 5,000)Overall Objective : Move the project toward a full Business Plan
2. Funding the Business Plan Innovative FundingEvaluation of the Business Plan (which includes Cash Flows)
E.I. will invest by way of Equity(usually Cum, Conv Pref. Shares
E.I. will invest based on identified cash need per the Business Plan
Typical first investment is - 300,000 with additional sums based on achieving agreed milestones.
E.I. will always look for co-investors (BES, VCs, Promoters)
How is E.I.s Investment Structured?100 % equity package
Other Common Funding Sources: BES/Seed Capital SchemeBESMax investment in any one company is 2M (or 1.5M in any 12 month period).
Relief of 150,000 per investor per annum at marginal rate of tax.
Scheme expires December 2013.
Commutation Rules could reduce other State Aids by 20%.Seed Capital SchemeProvides refund (under certain conditions) for PAYE paid over previous 6 years.
Relief of 100,000 per investor.
Refund is limited to PAYE paid subject to a max income of 100K pa
Investment must be in shares in the company and is claimed as a refund of that investment
3. Identifying Customers and securing export salesAccess to an international network of overseas officesOverseas incubation spaceAssistance in identification and securing overseas key reference customersFinancial assistance towards costs associated with attending international trade fairs, fact finding missions etcAccess to overseas market intelligence and researchIntroductions to overseas industry experts
Measurement of Progress
Volume and Impact EI assisted HPSUs since 1999
HPSU review 1989 - 2008:Status of EI client companies in 2008
Trading Performance Trading PerformanceE.I. assisted HPSUs since 1998.
For these firms trading in 2008:Total annual sales : 1.3 billionTotal employment : 10,500
START UPs- Common mistakes and lessons learned
Start Up - Lessons LearnedSome of the more common start up mistakes we typically see..
Some common start up mistakes Value proposition is not clearly defined. Technically brilliant product but does it deliver VALUE to the customer?
Inability to identify and qualify the customer.
Our product has no competitors !
Unbelievable numbers (revenue projections and costs).
Unrealistic expectations on raising cash (time needed and valuations). It will take 3-6 months. Plan conservatively.
Inability to manage cash high burn rate.
Some common start up mistakes (contd)Inability to identify clear and achievable milestones.
Unbalanced Management team dominant CEO with little commercial experience. Recruiting a good CEO costs money - and equity.
Weak (non commercial) Board. Securing a hard-nosed, no nonsense, commercial Chairman is invaluable.
Inability to plan for contingencies (they will happen !!).
No exit strategy (an absolute must for VC funding).