WBS Entrepreneurship Mentoring Workshop -28 July 2011 - John Griffiths

www.connectmidlands.org

Funding for Entrepreneurs and

How to Raise It

John Griffiths, Director, Connect Midlands

WBS Entrepreneurship Mentoring Programme 28 July 2011

http://www.connectmidlands.org/


Objectives

• Options for funding your business

• What funds are best for you at the time

• Understand mindset of funder or investor.

• How to create a winning plan and pitch

• Understand how to raise money !



Agenda• Connect and our track record• Types of finance: grants, debt, angels, VC• What do investors look for? • Are you investment ready?• Connect model • Strategic & Business cases• Interacting with investors• Summary



Leading technology and growth network providing access tofinance, innovation, professionals, successful entrepreneurs.

Helps build route to market, management capability,

and commercialise innovation



BUSINESS PARTNERS

CORPORATE MEMBERS

PRIME PARTNERS


http://www.go-wm.gov.uk/


£200m to date!

Connect Midlands is recognised as market leader in helping innovative,technology & high growth businesses become investment ready

InvestmentReadiness

....then showcasing them to the investment community to raise money they need to grow

….and assisting them to grow shareholder value, create jobs,become world-beaters .

Growth



From idea to market – the rocky road of realisation

Ideas + concepts

The Goal. Growth & Profit

† † Graveyard for start-ups & businesses † †

fundingmanagement

market need

Time Growth

Potential for growth


www.connectmidlands.org8

Types of Finance

Main Stock Market

AIM

Plus

VentureCapital

BusinessAngels

Size of Company

Ava

ilabi

lity

of F

unds

3 Fs

DebtGrants



What do investors look for ?

• Experienced & ambitious management team• Sound business case & plan

• High growth prospects

• High market share potential

• IPR

• Sustainable competitive edge & USPs

• Sales already or close to market ?

• Shares & enough to be attractive

• Exit route – money out in 3-7yrs ?



Management ?

investors back the jockey - not the horse



The basics – Your Turn

a). 5 minutes discussion in pairs on:

• What is the vision of your business?

• How much £ do you require?

• What do you need it for ?

• What type of funding & when?– Grants; Debt and Banks; Equity, Angels, VCs

• Who might you sell to ?

b). 2 minutes feedback each



GrantsUpsides:• Free Money• Don’t have to pay it back• Great way to kick start business• Some validation for matched / follow on funds

Downsides:• Beaurocratic• Don’t chase unless fits your growth plan• Targets and outputs and outcomes



Grants• TSB – Grants for R&D

– Proof of Market: is there a market ? 60% grant to £25K

– Proof of Concept : NP & PD, 60% grant to £100K

– Development :to pre-production,35%-45% grant to £250K

• MASWM–Manufacturing & NPD Reviews / Projects– Short tem improvement or strategic change– Reviews, free

– Projects, 50% grant to £10K by no money left until 2012 ?

• UKTI – Advice and help with exporting– Advice, strategic reviews, info from Trade Advisers– Market research and visits, 33% to 60% grants



Debt

Many types eg:• Loans & Overdrafts• Factoring / Invoice Discounting• Asset Finance• EFG – up to £1m, 75% Govt guarantee

Alternatives to banks egs:• CDFI, to £50K (ART/ BCRS/CWRT..)• Thin cats, £50K - £3m• Funding Circle, £5K - £50K



Banks and Debt

• No share of ownership• Always repayable• Carrier interest payments• Availability depends on

– Viability– Serviceability– Security

• Balance sheet & trading history



What Banks look for• Strong management team• Sustainable competitive advantage• Decent scale • IPR and or USPs• Growth sectors often favoured• Business growth

PLUS :• Regular interest/capital repayments• Trading business• Security- debentures, personal guarantees• Interest cover



Business Angel Finance

• Risk money (unsecured) invested by individuals

Exchanged for a share of the business

Reduces risk for other providers of finance

Often accompanied by investors skills / knowledge

Typically invest in range £20K to £1m+

Often in networks and syndicates but can be alone

Tim Powell – Minerva, later



Angels in the West Midlands

• Networks:– Minerva– Beer & Partners– Central England Business Angels– Advantage Business Angels

• High-Net Worth Individuals

• BBAA www.bbaa.org.uk

• See www.westmidlandsfinance.com

http://www.bbaa.org.uk/



What Business Angels look for

• Strong management team (which they can strengthen)• Proposal with sustainable competitive advantage• Decent scale• IPR (sometimes)• Growth sectors (sometimes)• Capital growth & exit

• More from Tim later

PLUS:• Fun, stimulation, involvement• Sector they know & understand• Non Executive Director



Venture Capital

• Money at risk• Mostly shares – sell a percentage ownership

for a cash investment• Money does not need to be repaid• Investor objective - capital gain• An exit has to be planned

• £100K to £5m+ for early stage, (5-10x)• West Midlands: Midven, Mercia Technology• National: many more



What Venture Capitalists look for• Strong management team • Proposal with sustainable competitive advantage• Decent scale (essential)• IPR and or USPs• Growth sectors • Significant capital growth, (5-10)• An exit

• PLUS• Shareholder• Board position or appoint Director• Take a business from platform A to B• Exit agreed as part of investment



Differences between grants, debt, equity

• What are they ?



Be Prepared – Get Yourself Ready to Raise Finance and Investment!

Proof Points CompellingBusiness Plan

FocussedPitch+ + = £

Strong Proposition

+



Key areas for business development and “investability”

Route to Market

Access to Finance

Management

VISION

Emerging High Growth Businesses



Strategic & Business Case

Strategic Case:• Exec Summary (2 pages)• 10 slide presentation• Does the investor like you & your proposal?

Business Case:• The business plan (BVCA guidelines)• Further due diligence• Can you defend your assumptions?• Does the investment case make sense?


www.connectmidlands.org26

Connect Midlands’ investment readiness programme, InvoRed

CMICSpringboardRoundtable

Green

Coaching Pathfinder Workshops

Corporate Finance Support

Amber

Amber 2 day workshops Assessment Panels

Networking

Right Funds for You, Events, Presentations

> Showcasing> (Pitching to investors)

> Preparation

> Education

> Awareness



Pre-Start Existence Survival Success Take-off Maturity

Sustained Growth

Early Growth

Start-up

Seed

FU

ND

ING

STA

GE

LIFE CYCLE STAGE

Springboard

SMEs seeking up to £500k pitch to an audience of investors and support intermediaries

Investment Conference

SMEs seeking up to £5m to pitch to an audience of investors and intermediaries

Roundtable

SMEs seeking early stage finance to present to target investors over an exclusive lunch or dinner

InvoRed

Supports SMEs to help them shape propositions and become investment-ready

LIFE CYCLE STAGE



Timetable for Equity• Draw up plan/pitch: 1 month

• Approach VC and get a meeting: 1-3 months

• Further meetings: 1-3 months

• Due diligence: 2-4 months

• Final negotiations/legal's: 1-3 months

• Conclusion: min 6 months,can take 12 months

• Connect Investment Conferences: great way of

meeting many investors at once – 22 Nov

London



Interacting with Investors• Be Realistic

– getting it wrong loses credibility – about valuation

• Be Honest– trust is a big part of the financial industry; it

is a deal breaker

• Be Prepared– you might only get one shot at fundraising– you will be challenged!



£2.8m since 2005

£4.72m since 2003

£88K since 2004£1.04m since 2004

Monica Healthcare

Prime Principle

Haemostatix

FDAS

£5m +

Some Successes !



Review Session Objectives

• Options for funding your business ?

• What funds are best for you at the time ?

• Understand mindset of funder or investor ?

• How to create a winning plan and pitch ?

• Understand how to raise money ?

• Have we done these ?



Summary and ConclusionsConnect Midlands and Connect InvoRed

• Understand finance options and best for you• Strong Proposition, Proof points, Plan, Pitch• Think like an investor !

• Connect worked with 2,000 SMEs,

• Assisted >1,000 on investment readiness (IR)

• Over 300 entrepreneurs raised £200m

• Used by BIS to set national IR framework


WBS Entrepreneurship Mentoring Workshop -28 July 2011 - John Griffiths

Economy & Finance

Transcript of WBS Entrepreneurship Mentoring Workshop -28 July 2011 - John Griffiths