Practical Fund Raising (for a hi-tech startup) David Moore QUBIS Ltd 028 9097 1521 [email protected]...
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Transcript of Practical Fund Raising (for a hi-tech startup) David Moore QUBIS Ltd 028 9097 1521 [email protected]...
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Practical FundRaising
(for a hi-tech startup)
David MooreQUBIS Ltd 028 9097 [email protected]
QUBIS Ltd - ‘Turning Research into Wealth’
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Overview
Why raise external funds? Investment opportunity
(viewed from the other side of the table).
Typical sources (levels of risk and return).
Realistic amounts and timescales.
QUBIS Ltd - ‘Turning Research into Wealth’
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Why do you need funding? Product Development,
primarily salaries Equipment Working Capital
However - Early stage Fund Raising is difficult and time consuming!
QUBIS Ltd - ‘Turning Research into Wealth’
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Investment Opportunity Very high risk! Trust an unproven
management team to develop (and then sell) a conceptual product to a theoretical market at a profit!!
Wait 5-25 years for a return!!!
QUBIS Ltd - ‘Turning Research into Wealth’
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Business Plan Bugbears! ‘Hockey stick’ revenue growth. ‘We only need 0.1% of £5bn
market to achieve £5m sales’. ‘Top down’ rather than ‘bottom
up’ approach. This product will ‘sell itself’
QUBIS Ltd - ‘Turning Research into Wealth’
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‘Hockey Stick’ Sales
QUBIS Ltd - ‘Turning Research into Wealth’
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Business Plan Bugbears! ‘Hockey stick’ revenue growth. ‘We only need 0.1% of £5bn
market to achieve £5m sales’. ‘Top down’ rather than ‘bottom
up’ approach. This product will ‘sell itself’
QUBIS Ltd - ‘Turning Research into Wealth’
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0.1% of £5bn Market
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Business Plan Bugbears! ‘Hockey stick’ revenue growth. ‘We only need 0.1% of £5bn
market to achieve £5m sales’. ‘Top down’ rather than ‘bottom
up’ approach. This product will ‘sell itself’
QUBIS Ltd - ‘Turning Research into Wealth’
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Investment Decision Man - team, experience, skills,
contacts etc Market - growth potential,
competition, channels, knowledge etc
Money - funding requirement, sources of funds, break even etc
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Sources of Funds Self, personal savings ‘Sweat Equity’ ‘3 Fs’ - Friends/Family/Fools Free equity to obtain staff Customers InvestNI - PoC, GAP, Grant for R&D Private Investors, ‘Business Angels’ Seed funding, e.g. QUBIS Ltd, QUBIF Venture Capital
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‘Bootstrapping’
Possibly the ideal funding mechanism for start-ups in today’s investment climate.
Using your ingenuity to raise funds from whatever sources are available.
Investors are normally not interested in getting involved before a revenue stream is established.
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Sources of Funds Self, personal savings ‘Sweat Equity’ ‘3 Fs’ - Friends/Family/Fools Free equity to obtain staff Customers InvestNI - PoC, GAP, Grant for R&D Private Investors, ‘Business Angels’ Seed funding, e.g. QUBIS Ltd, QUBIF Venture Capital
QUBIS Ltd - ‘Turning Research into Wealth’
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Sources of Funds Self, personal savings ‘Sweat Equity’ ‘3 Fs’ - Friends/Family/Fools Free equity to obtain staff Customers InvestNI - PoC, GAP, Grant for R&D Private Investors, ‘Business Angels’ Seed funding, e.g. QUBIS Ltd, QUBIF Venture Capital
QUBIS Ltd - ‘Turning Research into Wealth’
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Types of Capital
Loan Government Risk
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Bank
Banks provide Loan Capital. Overdraft, short term, payable
on demand. Business Loan, fixed term. EFG, reduces risk to bank Key issues: Security, interest
& capital repayment i.e. not suitable for hi-tech start-up ventures, little security and no early cashflow.
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Government Agencies InvestNI, InterTrade Ireland
provides Grant and/or Repayable support.
Business Development PoC, R&D , GAP Key issues: Additionality,
Admissibility, percentage contribution, export focus.
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Business Angels
Business Angels provide Risk Capital seeking a return over 5-10 years.
High net worth individuals Probably have successfully
‘exited’ from previous venture Bring skills, expertise and
cash. Key issues: <£50k, ‘hands-on’
role, capital growth. QUBIS Ltd - ‘Turning Research into Wealth’
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Venture Capital (VC)
Investment fund of Risk Capital, which will seek a return in circa 5 years.
May bring sectoral expertise, contacts and experience of similar ventures.
Relatively high investment threshold, high fixed costs.
Key issue: >£250k, capital growth, Board seat, focus.
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QUBIS Ltd
Wholly owned by QUB Aim, create wealth through the
commercialisation of university research.
Invest cash and IPR in return for an equity stake, Seed Capital.
Typical investment size £5k-£50k.
www.qubis.co.uk for more infoQUBIS Ltd - ‘Turning Research into Wealth’
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QUBIF
Overall fund size £1m Commercialisation of research from
QUB Typical investment £15k-£50k Willing to take a staged approach to
a max of £200k
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Return on Investment Investors, whether business
angels, venture capitalists, banks will all be looking for a return on their investment.
The size of that return and the cost of their money is governed by the risk of the project.
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Typical Returns
Business Angels, Seed Capital & Venture Capital all seek capital growth. Returns sought circa 20%-50% per annum.
Banks seek a 1%-3% (over base rate) return on their money, they do not want to lose any of their capital.
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Funding Round 1
InvestNI PoC £60,000
Total £60,000
Prove technology in lab, pre company.
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Funding Round 2
Founders (4x£1k) £4,000 QUBIS Ltd £10,000 +
IP QUBIF £50,000 Total £64,000
Develop ‘pre-production’ prototype within NewCo Ltd
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Funding Round 3
QUBIS Ltd/QUBIF £25,000 Private Investors £25,000 Internal Funds £20,000 InvestNI (Bus Dev) £50,000 Total £120,000
Launch product, build initial sales revenues.
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Funding Round 4
Internal Funds £50,000 InvestNI (Bus Dev) £45,000 Bank (EFG) £100,000
Total £195,000
Continue to grow sales revenues, strengthen team.
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Funding Round 5
Internal Funds £50,000 INI Grant for R&D £100,000 Bank (EFG) £150,000
Total £300,000
Major new product development, substantial sales and marketing.
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Funding Round 6 Internal Funds £100,000 InvestNI (Bus Dev) £100,000 Qubis £50,000 VC Investment £400,000
Total £650,000
Major growth phase, management team, new product development, substantial sales and marketing
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Funding Summary Round 1 £60,000 Round 2 £64,000 Round 3 £120,000 Round 4 £195,000 Round 5 £300,000 Round 6 £650,000 Total £1,389,000
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Funding Summary
Round £cash Time Sales Round 1 £60k 6 mths Round 2 £64k 2 yrs Round 3 £120k 2.5 yrs £0 Round 4 £195k 4.5 yrs £250k Round 5 £300k 6.5 yrs £500k Round 6 £650k 8.5 yrs £1m
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Funding Summary
Round £cash Time Sales Round 1 £60k 6 mths Round 2 £64k 2 yrs Round 3 £120k 2.5 yrs £0 Round 4 £195k 4.5 yrs £250k Round 5 £300k 6.5 yrs £500k Round 6 £650k 8.5 yrs £1m Difficult, Possible, Support.
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