NVI SwanseaRaising Funding

David Notley

Jargon

Some examples:

•Gearing•ROI•Preference Shares•Debenture•Invoice discounting•Mezzanine Finance•Cash burn

Sources of Finance

• What are they?

Borrowing

GrantEquity

Forms of Finance

Borrowing Characteristics

• It has to be repaid with interest over agreed period.• Therefore 2 key questions:

– Can the business generate sufficient cash to pay the interest and capital?

– What security do we have if it all goes “horribly wrong”?

Borrowing TypesWorking Capital Asset Backed Other

Overdraft Leasing/HP EFGS

Invoice Discounting Property Mortgage Friends and Family

Credit from Suppliers Term loan with business security

Crowd Funding

Up front payments from Customers

Term loan with personal security – Beware the PG!

Vendor Finance

Borrowing Sources

UK• Main high street banks –

but there are 395 others – see www.bba.org.uk

• Many specialist factoring companies

• Asset finance companies - see www.abfa.org.uk

• Crowd Funding• Green Investment Bank• Department for Business

Innovation & Skills - BIS

Wales

• Finance Wales• UK Steel Enterprise• Local Authorities• Credit Unions• Pembrokeshire Lottery• Business Wales

www.business.wales.gov.uk

Crowd Funding

• The Funding Circle• Kickstarter• Crowdcube• SEEDRS• Platform Black• Many others...............• Varying business models

Equity Characteristics

• Investing in shares in a private limited company is risky.

• This means 3 key questions:– How big is this opportunity?– Are the management capable of exploiting

it?– Where is the exit route?

Risk Capital Sources and Spectrum

Flotation - IPO

VC/PE

Corporate Venturing

Business Angels

Crowd Funding & SEIS Funds

Own Money, Friends & Family

Pitching and Follow Up

• “Valuing start ups is a crap shoot”• Find the right investor for your proposal• Blindingly good pitch - 15 minutes

– Don’t underestimate the value of a simple story well told– Really compelling value proposition

• Validation, validation, validation• Traction in the market - Sales• Establish and be ready to handle objections and doubts• Seek to control time line for a decision

Risk Capital Sources

• Finance Wales• SEIS and EIS Funds – Dragon SEIS Fund, ICE Angels• UK Steel Enterprise• Wesley Clover• Westbridge Capital• Xenos business angel network• EADS Foundation• Hafren Ventures• BVCA – www.bvca.co.uk

Grant CharacteristicsGrant Funding is characterised by:

– Need to achieve non financial outputs.– Tend to be paid retrospectively.– Clawback if grant not used correctly.

This means grant givers are interested primarily in:– Is the project eligible?– Balance of funding?– “Additionality” test?– Will it achieve the non financial outputs?– Will it generate positive (or negative!) publicity?– Do we have budget available?

Grant Types

Grant Sources

UK• NESTA

• Technology Strategy Board

• WRAP

• Carbon Trust

• National Lottery

• Social Investment Business

• Private foundations

Grant Sources

Wales• Welsh Government

• WG Smart Cymru

• KTP and Go Wales

• Jobs Growth Wales

• Local Authorities including:– Local Investment Fund (LIF)– Rural Development Plans– ICT grants

The right funding for the right purpose

Borrowing Equity Grants

Working capital Yes Maybe No

Assets Yes Yes Yes

Losses No Yes Yes

Q&A?

Using someone else’s money is a privilege not a right – treat it

with respect