Finance in the South West 2014

Finance in the

South West 2014

As business confidence

returns…

Lewis Banfield - Partner

www.francisclark.co.uk

Administration

Admin

Timetable

Slides – available on request (feedback forms)

Questions – Please keep questions until coffee/lunch

Presenters…

http://www.google.co.uk/imgres?imgurl=http://thattechchick.com/wp-content/uploads/2011/12/ban-cell-phones.jpg&imgrefurl=http://thattechchick.com/ntsb-wants-to-ban-cell-phone-use-while-driving/&h=1200&w=1200&sz=108&tbnid=AxmdXAoGdQTgRM:&tbnh=90&tbnw=90&prev=/search?q=mobile+phone+banned&tbm=isch&tbo=u&zoom=1&q=mobile+phone+banned&usg=__UGk0n_OXmNlCjY9NvEknkw6_0D8=&docid=E2Xx0IJdiqvrQM&hl=en&sa=X&ei=O60cUYnPCMOFhQeMnoFY&ved=0CDIQ9QEwAQ&dur=331


Presenters and other participants

…and many more

http://www.google.co.uk/url?sa=i&rct=j&q=crowdcube&source=images&cd=&cad=rja&docid=HHkVS7aS2dRndM&tbnid=vhU9DxAELfW_6M:&ved=0CAUQjRw&url=http://thegrowthacademy.com/&ei=owMZUbT0BI3FtAaEpoAY&bvm=bv.42080656,d.Yms&psig=AFQjCNEioHuI1SUp--HnPUMy_FtenwWRCA&ust=1360680123489165


Structure of morning

• Background and Grants (8.30am to 9.35am)

• Key note speaker

• SME, LEP and the ‘funding gap’

• Grant schemes

• SME experience, rewards, debt and equity (9.55am to 11.10am)

• Investment ready, business support and closing address (11.30am to 12.35pm)

• Q&A one to one / Networking (12.35pm to 2pm)


Twitter

Follow us on twitter @francisclarkllp

Tweet about this event using

#FCFinanceSW


Key note speaker

Michael Portillo

• Former Cabinet Minister

• Broadcaster

• The recovery, the Euro, Scotland

and future elections


Michael Portillo

Finance in the South West

2014

Tim Jones

Heart of the South West Local Enterprise Partnership

Priorities

Regional Growth Fund

Plymouth City Deal

EUSIF

Growth Deal (Local Growth Fund)

Vision

Evidence Strategic Economic Plan

Golden Thread from

Vision through to

Deals

Business People Place

Implementation

Strategy

Our BIG opportunities

Marine / City Deal Hinkley legacy Exeter Smart Jobs Aerospace

Rail, Road and Digital Connectivity Skills Infrastructure

Dependent on

EUSIF - background

• Proposals for investment of:

– ERDF (place blind)

– ESF (place blind)

– EAFRD (rural only)

• Split by Transition (Plymouth, Torbay and Devon) and More developed (Somerset)

• Submitted 31st Jan

Transition

More Developed

Total

ERDF £43.47m

£14.41m

£57.88m

ESF £28.9m

£14.41m

£43.31m

EAFRD

Not split £15.54m

SEP Priorities

Creating the Conditions for Growth Maximising Productivity and Employment

Opportunities

Building on our Distinctiveness

Pla

ce

The Enabling Landscape

Transport and Accessibility

Sustainable solutions to flood and water

catchment management

Unlocking delivery of stalled housing sites

Energy Infrastructure

The infrastructure and facilities to create more

and better employment

Enterprise infrastructure

Investing in strategic employment sites in

our main cities and towns

Digital infrastructure

The infrastructure and facilities needed to

support transformational change

Opening up specialist sites for marine sector

development

Investing in science park and innovation

infrastructure for nuclear, marine,

environmental sciences and aerospace

Maximising our environmental assets

Bu

sin

ess

Creating a favourable business environment –

the GAIN Growth Hub

Simpler, more coherent business support

o Improved access to finance platform

o Tailoring national policies to local

potential

Achieving more sustainable and broadly based

business growth – the Global Market Growth

package

Reaching new markets – including public

sector, web-fuelled and supply chain

Globalisation (exports and inward

investment)

Support related to key opportunities –

transformational investment package

Golden opportunities – Catapult-lites and

networks

Horizontal Innovation – Capacity building,

grand challenges and Innovation for all

Pe

op

le

Creating the environment where businesses and

individuals can reach their potential:

Skills infrastructure and facilities

Accessibility to education/employment

Digital Literacy for inclusion, progression

and business growth

Investing in skills and development to increase

job opportunities and move people into the job

market:

Moving people into employment - focusing

on youth, long term unemployed and

economically inactive

Careers advice and progression

Improving workforce skills

Creating a world class workforce building on our

distinctiveness and growth sectors:

Entrepreneurship and business skills

Technical and higher level skills

development and retention

Maximising the skills and employment

opportunities from our Golden

Opportunities

Growth Deal

• Single Pot – promised £70bn

• Impact of austerity diluted the amount

• Current deal might total £2bn across 39 LEPs

• Money has been top-sliced from transport and education budgets

• Timing issues and accountability still to be resolved

More jobs, better jobs, greater prosperity

heartofswlep.co.uk

http://www.heartofswlep.co.uk

Grants -

Overview

David Armstrong –

Corporate Finance Director


All change!

• European Programme 2014 - 2020 – c£110m

• Starting to see grant schemes arising out of the LEPs

• State Aid

• Assisted Area Map changing – winners rather than losers

• City Deal

• c750 grant schemes

• BUT - SME funding gap remains!


Our successes

• £12m of grant unlocked £36m of other funding

• Create 840 and safeguard 640 jobs

• What makes a good grant application?

http://www.plesseysemiconductors.com/index.php


So, what is available?

• Assisted Area status + Size Eligibility and Level of grant

National

Regional

Local


Regional Growth Fund

• Programmes – Assisted Asset Scheme, PWGF2 etc

• Projects – direct applications for >£1m

• RGF5 & 6

• RGF6 opens Summer 2016

• Competitive process

• Create sustainable private sector jobs

• Roadshows

• Yesterday’s news


City Deal

Headlines

• £300m (£34m public sector)

• Unlock commercial opportunities in marine sciences, renewable

technologies and to boost exports

• Plymouth and South West Peninsula

• Conversion of South Yard at Devonport Naval Base

• Young People

Business support and grants, including

• GAIN grants

• Innovation Vouchers, MAS and UKTI


Torbay Growth Fund: 2nd round

• Grants or loan up to £150k

• Minimum grant is £15k

• Up to £12k per job

• Capital or revenue projects

• Job creation

• Business investing in Torbay

Regional Growth Fund/Assisted Asset Purchase

Bruce Pedrick

Relationship Director


Overview

Benefits for Business

Key Features

Eligibility

Exclusions

Examples

Summary and next steps

23


£2.6 Billion fund operating across England

Scheme runs from 2011 - 2016

Non repayable grants – subject to eligibility criteria and agreed job

targets

Create long term growth and sustainable employment

Encourage private sector investment

Lloyds Bank allocated £25 Million (June 13 to April 15)

24

Overview


Benefits To Business

• Enables asset purchase (where businesses currently lack deposit)

• Grants from £5,000 up to £500,000

• Up to 20% of the asset cost for small enterprises (up to 50 FTE and

less than 10M Euro T/O)

• Up to 10% of the asset cost for medium enterprises (up to 250 FTE

and less than 50M Euro T/O)

• Non repayable

• Amount of grant will be minimum amount required to enable us to lend

on normal lending terms

• Remaining funding via HP / Loan (Min £100,000) facility


Key Features

• Create / protect 1 job for every £15,000 grant received

• Independent accountant to verify within 30 months after drawdown or 6

months after job target achieved

• Grant is taxable income and classed as state aid

• Unable to link in any other forms of state aid.

• Meet normal viability criteria

• Asset must be located in England (in an area outside London)


Eligibility

• You need finance but lack the sufficient deposit

• Able to commit to creating / protecting jobs for a min 12month period

• An SME (as defined earlier)

• No other state aid supporting purchase

• Business not in financial difficulty.


Exclusions

• Property investment / development – property purchases are eligible if property is for

own use and held on Co Bal Sheet

• Air transport equipment

• Road freight transport for hire or reward – eligible if eg vehicle for a wholesaler who does their own deliveries

• Fishery & Aquaculture

• Primary production of Agriculture products

• Coal

• Export Related Activities – case by case


Retailer – £195K RGF and £600K loan towards purchase of additional retail premises

for expansion – KIV property must be for own use and held on Co Bal Sheet

Building Contractors - £145K RGF grant and £600K loan towards purchase of new

offices

Tourism - £95K RGF grant and £380K loan towards assets to be used in refurb of

bar/restaurant/catering area and a small renewable energy scheme

Restaurant - £150K RGF grant and £450K loan to purchase their freehold premises

Manufacturing - £110K RGF grant plus loan of £385k to acquire a new R&D factory/

warehouse towards purchase price of £590K

29

Recent Examples


Summary and next steps

• Support SMEs with asset purchases that may have been discounted

• Bring forward growth plans and create/protect jobs

• Speak to your Relationship Manager/Director or Francis Clark

GRANTS - RGF

JOHN HUTCHINGS

PROGRAMME MANAGER RGF GRANT FUNDS

PLYMOUTH UNIVERSITY

PWGF 1 and 2 Management Information

RGF Round 1 – PWGF1 RGF Round 3 – PWGF2

PLYMOUTH UNIVERSITY AND WESTERN MORNING NEWS GROWTH FUND 1 AND 2

….results so far

PWGF1 • Awards made 20 • Average grant £46,000 • Total £920,000 • Jobs forecast to be created 85+ • Cost per job £10,824

PWGF2 (….fully allocated…) • Awards made 41 • Average grant £90,300 • Total £3,705,000 • Jobs forecast to be created 449+ • Cost per job £8,250

……and has unlocked over £9.5M of private sector investment

Geographic Spread of Applications

6%

42%

26%

15%

11%

Submitted Applications

Cornwall

Devon

Plymouth

Somerset

Torbay

13%

43% 22%

17%

6%

EOIs Submitted

Cornwall

Devon

Plymouth

Somerset

Torbay

6%

43%

34%

17%

Companies Awarded Funding

Cornwall

Devon

Plymouth

Somerset

• PWGF2 fully allocated in 9 months • Demand still evident • Several strong applications not

funded • Enquiries still being received

• What next?

…now open!!!!!

RGF4 – Plymouth and South West Peninsula

City Deal

Aims of the Fund • Rebalancing the local economy – more private sector employment • Creating new, and sustainable jobs • Helping local businesses to grow • Access to additional funding to enable project completion • Looking for good value for money • Co-investment from the private sector • Spend by 31st March 2015 – No pressure then!

• Projects need to be “spade ready”

RGF4 – Plymouth and South West Peninsula City Deal

• A further £3 M to be “granted” • Smaller Grants - £25k - £150k – limited to a fund of £1.168M • Larger Grants - £250k - £1M max per applicant

• Industry Sector focus Marine and supply chain Advanced Manufacturing Digital Environmental Technologies (……….but other industries may apply)

• de minimis or General Block Exemption

• Across the Heart of the South West LEP and Cornwall & Isles of Scilly LEP areas • All Local Authorities are partners, Chambers (lead by Plymouth), GAIN, PCC lead

body, Plymouth University programme managers

?

Speak with the Grant Team at the end of the presentations

Thank You for listening

SMART and

other grants

David Bullen – Corporate

Finance Senior Associate


SMART

Previously known as “Grant for R&D”

Science, Engineering and Technology: New Products and Services

Grant support for SMEs:

• Proof of market (9 months, £25k, 60%)

• Proof on concept (18 months, £100k, 60%)

• Development of prototype (2 years, £250k, 35% / 45%)

Competitive / Batch Applications

Smart v R&D Tax Credits - cannot have both for same project

http://www.robothespian.com/blog/news-blog.html


Innovation Vouchers

£6m for UK SMEs - Grants of up to £5k

Criteria

• challenge for your business/ specialist help

• first time that you have worked with the knowledge supplier

• In one of priority themes

Innovation and themes:

• “new or improved products, new or improved processes, new or improved

services, investigating new markets or managing your intellectual property”

• Agrifood; Built Environment; Energy Waste & Water; Open Data Innovators

and Inventors; Cyber Security

TSB funds generally - www.innovateuk.org/funding-

support;jsessionid=B70572D282A5EFA40F8B31DC80CEB806.3

http://www.innovateuk.org/funding-support;jsessionid=B70572D282A5EFA40F8B31DC80CEB806.3




Innovation 4 Growth

SMEs and Large Companies based in the South West

Part fund R&D Projects: eligible costs incl staff salaries, materials,

equipment etc

Grants £25k to £150k (At up to 35% intervention)

Development of new or improved products, technologies, processes or

services

Job creation and/ or safeguarding

All funding to be issued by 30/4/15

Application deadline 10th March. Start with Registration Form

www.innovation4growth.co.uk

http://www.innovation4growth.co.uk/


Other grant schemes

• European Fisheries Fund

FLAG – Fishing businesses & Fishing communities

Axis 2 – Fish Processing

• Energy Entrepreneurs’ Fund

• Opened for final £10m in January 2014

• Grants of < £2m

• Innovative low carbon energy ideas

• Applications judged “on their ability to cut costs of existing technologies

and the potential for future carbon savings and commercial viability”

• FITs, RHI etc.

• FC Blog for updates - www.francisclark.co.uk/news-

views/blog/

http://www.francisclark.co.uk/news-views/blog/




Debt..

Energy Efficiency Financing Scheme

• Siemens Financial Services and Carbon Trust

• Business trading > 36 months

• Investment in energy efficient equipment (and renewable energy

generation?)

• Loan e.g., Interest rate c 9% for a 7 year term loan repayable in monthly

instalments.

• ReEnergise SmartEnergy Finance

• Investment in renewable energy and energy efficient projects

• £5m fund


Break

Session 2 start time

9.55am

Finance in the

South West 2014

Rewards, Debt and

Equity, but first…







• Grant schemes




STRICTLY CONFIDENTIAL

49

SOME IMPORTANT THINGS ON FUNDING

Rory Kindlon - CFO

February 2014

POWER TO LEARN

[Title]

50 STRICTLY CONFIDENTIAL

The Who, What, Why and How

THE HOW - KPIs & DRIVERS

Online advertising is now bought in

real time

Few companies in the world are able

to apply machine learning

We have built a platform to do this

Makes the best digital media

decisions in real time

SCALE + SPEED + SMARTS

WHO WHERE WE ARE GOING - THE PLAN

0.2 5.0

38.4

127.9

275.8

Mar-14E Mar-15E Mar-16E Mar-17E Mar-18E

UK Germany New York San Fran. Hong Kong

Online advertising has failed to learn

$42bn Market

99.8% ads not clicked

>30% ads not viewed

61% traffic generated by bots

For Plymouth

THE WHY

[Title]


My background

Co-Founder and CFO of IO Technologies Group Ltd

20 Years in Finance with experience in Tech Startups, Investment

Banking, PE, Accountancy

In a former life:

Director of Corporate Finance at Skyscape Cloud Services

Partner at Akira Partners, London-based TMT M&A boutique

Qualified chartered accountant with Andersen’s

Key strengths:

Funding & private equity

Corporate strategy

Industry knowledge

Value creation

[Title]


Funding requirements, history and strategy

Date Source Amount Valuation Runway Uses

Pre-

May 13

Founders £350k n/a May 13 • Recruit Management Team

• Develop Plan

May 13 Round 1

F&F

£100k +100%

Sep 13 • Grow team to 8

• Build MVP / Secure first customer

Aug 13 Round 2

HNI

£410k +100%

Dec 13 • Grow team to 19

• Customers on platform to 4

Dec 13 PWGF 1 £100k n/a Jan 14 • Match Funding

• Contribution towards 12 new jobs

Jan 14 Round 3

HNI

£550k +300% May 14 • Grow team to 34

• Customers on platform to 12

£1.4m raised to date

R&D Tax Credits £200k

Grants £100k+

Round 4 Further £2.5m

Round 5 Further £5m+

[Title]


5 important things

MANAGEMENT

MARKET

PRODUCT

OPERATIONS

FUNDER RETURNS

PASSION, DRIVE & AMBITION

DYNAMICS & TRENDS

COMPELLING VALUE PROPOSITION

ADVANTAGES OVER ALTERNATIVES

AUTOMATION

QUALITY AT SCALE

JOB CREATION / ECONOMIC BENEFITS

RISK ADJUSTED RETURNS

[Title]


PREPARE PLATFORM FOR

PERFORMANCE

Jul-14 Dec-14 Jul-15

HIGH VOLUME TRAFFIC

AND LEARNINGS

1

2

Reach critical

performance

GAME ON

TOE TO TOE WITH

COMPETITION 3

Stay focussed on key milestones

Dec-13

Clients

Headcount

ARR (£m)

17

43

£1.4m

56

67

£6.7m

176

85

£24.8m

San Francisco New York London

[Title]


Important Values

FAITH

COURAGE UNITY

[Title]


THANK YOU

Supported by

Phil Geraghty – Managing Director

Funding and validating

local projects

Crowdfunder is the UK’s largest crowdfunding

Network.

Helping businesses, community groups and

Charities to raise funds and bring people together.

We have worked with 1000’s of projects all over

the UK and raised over £1.2m.

We are backed by Nesta’s Innovation in Giving

Fund and here in the South West by Plymouth

University.

There are three different types of crowdfunding

• Sell a % of your established business for money

• Dragons den

• Borrow money online from lots of people rather than the bank

What is Crowdfunding?

The Market

Lending Reward

s

Equity

• Only type that builds communities

• People give money

in return for rewards

• We do rewards

based crowdfunding

Crowdfunding is best

explained by example

Phil from Leeds Bread wanted to setup

a co-operative organic bakery in Leeds.

The bank said he was mad, but that did

not stop him, and he setup a crowdfunder

Campaign.

He raised over £8000 from 114 people

He knew the first 30 people, but the rest were

friends of friends and other local people who

loved his idea. Great ideas spread.

The deal was simple, you put £100 into the project

and you get a loaf of bread every week for a year.

He offered the reward and people got involved.

What have we achieved so far

History

Working with Partners

Partners

“Our scalable, cost effective way of reaching audience”

Crowdfundi

ng Charities Crowdfunding

Cornwall &

The University

Crowdfunding

Food Crowdfunding

Communities

Speak to us if…

Come talk

1. You have a project to fund

2. Your clients/customers have project to fund

3. You are a potential partner wanting to make a difference

4. You would like to be part of our growth

SWIG Finance

South West Investment Group

Call: 01872 223883 [email protected] www.swigfinance.co.uk

Who Are SWIG?

CDFI

CDFIs lend money to businesses, social enterprises and

individuals who struggle to get finance from high street

banks…They offer loans and support at an affordable rate

to people who cannot access credit elsewhere…

A key plank of Governments’ Access to Finance Strategy

‘

Call: 01872 223883 [email protected] www.swigfinance.co.uk

’

Operating across the

South West for 25 years

Over £25 million to over 1,500 local businesses

HOW CAN WE HELP?

We provide FINANCE to

Start up and Growth

businesses

Business Support We are linked into a wide variety of business

support agencies and other sources of finance

Your Business Business support Business Growth

+ =

Get in touch

www.swigfinance.co.uk [email protected]

01872 223883

SWIG Services Ltd

Lowena House, Glenthorne Court, Truro Business Park

Threemilestone, Truro, Cornwall, TR4 9NY

B Y D A V I D B R O W N

• Alternative Funding

• A Market Place to bring lenders & borrowers together

• Varied concepts across increasing number of Companies and Platforms

• Business loans now available

PEER TO PEER/CROWDSOURCING DEBT

• Began in 2005 with Zopa

• 121% sector growth in 2013

• Q4 2013- £843M lent

• To be Regulated by FCA April 2014

• UK has most advanced website platforms

• Folk2Folk 6th largest in UK

PEER-TO-PEER LENDING SECTOR

http://www.zopa.com/

https://www.fundingcircle.com/

http://www.ratesetter.com/

• P2P Companies match creditworthy borrowers with investors looking for competitive returns

• Loans posted onto website and auction the right to participate in Loans

• Subscribed by multiple lenders, loan executed once sum raised

• Website based platforms with varied models used in assessing Loans

HOW IT WORKS

• Secured Lending only

• Speed of decision making

• Auction letters of credit

• Local knowledge

• Face2Face in addition to online proposition

FOLK2FOLK IN THE SOUTH WEST

• Set up by the owners of Parnalls Solicitors in Launceston

• Financial and Legal sector professionals

• Local expertise

• Quick decisions

• Personal touch

BACKGROUND

• Alternative option for their savings

• Attractive returns

• Secured loans

• Spreading risk

• Investing in the South West economy

LENDERS BENEFITS

• Fast Local decision

• Any purpose

• Interest Only

• Flexible

BORROWERS BENEFITS

SECTORS

43%

8%

20%

15%

8%

6%

Property Build/Purchases

Renewables

Commercial Development

Agriculture

Leisure

Other

SANTANDER GROWTH CAPITAL

PETER ABEL, DIRECTOR

SOUTH WEST

GROWTH CAPITAL FILLS THE FUNDING GAP as identified in the Rowland

Report

OUR BROAD CRITERIA – WHAT ARE WE LOOKING FOR?

Annual turnover

£0.5m – £25m

Demonstrable Growth

in a combination of

sales and / or profits

Track record of

operating profitability

and cash generation

Proven management

teams with ambition

Privately owned

businesses rather than

Private Equity backed

Not start-ups.

At least 3 years of

financial history

AREAS WHERE GROWTH CAPITAL SUITABLE

Capex investment to

support growth plans

Investment in New

Product Development

Investment in sales &

marketing overhead

for new products /

areas

Acquisition funding

support

Funding of proven roll-

out concept

Expansion projects to

drive rapid growth

OUR GROWTH CAPITAL PROVIDES KEY BENEFITS TO SMEs

Debt offering - No

warrants and no

dilution of equity

Preserves cash -

Interest only. Cash

interest is L+5%.

Rolled interest of 5%

Enhanced debt

capacity - Cash flow

lend not limited to

tangible security

No prepayment

penalty fees -

Provides flexibility on

term

Full banking and

security - No

automatic requirement

for PGs

Access to

Breakthrough

programme -

Additional support

BREAKTHROUGH PROGRAMME – NOT JUST FUNDING

The Breakthrough programme will invest £200 million in fast-growth SMEs, supporting local enterprise and community

initiatives, creating jobs, inspiring entrepreneurs of the future and turbo-boosting a private sector led economy

This initiative will help SMEs participating in

the Breakthrough programme to reach new

overseas markets if their growth plans and

ambitions are beyond the UK. It includes

subsidised trade missions, educational

roadshows and support accessing

information on exporting.

Santander is running a unique experience

programme for fast-growth SMEs that takes

them behind the doors of the world’s most

iconic and best fast-growth businesses, to

learn first hand how they did it – real

experience to help their own growth journey.

In keeping with our focus on responsible

business, Santander has launched a

number of initiatives to encourage more

responsible and inclusive business practice

and to invest in Social Enterprise

development.

Santander is running regional Breakthrough

Live conferences for fast-growth SMEs.

Working with Santander Universities the

Breakthrough Live conferences bring

together leading entrepreneurs to share

experiences.

Santander has launched an online portal for

SMEs participating in the Breakthrough

investment programme to access the best

student and graduate talent across our

partner University network – including

Universities in Scotland.

Santander has up to £200 million to invest

in fast-growth SMEs turning over between

£500k – £25m across the UK. The

investment programme will run over the

next 3 – 5 years and invest in up to 200

SMEs.

1. Breakthrough Growth Capital

4. Breakthrough Talent

2. Breakthrough Live

5. Breakthrough Responsibly

3. Breakthrough Masterclasses

6. Breakthrough International

www.santanderbreakthrough.co.uk

Communications Technology

Completed July 2012

£1m Growth capital loan

10 new jobs

Vet Practices

Completed July 2012

£1.25m Growth capital loan

120 new jobs

Engineering

Completed September 2012


20 new jobs

Legal Services

Completed January 2013

£1.1m Growth capital

20 new jobs

Software

Completed January 2013


6 new jobs

Healthy Fast Food chain

Completed March 2013


150 new jobs

Telecommunications


£1m Growth capital loan

50 new jobs

Software



14 new jobs

Software as a service (SaaS)

Completed April 2013


14 new jobs

Thai restaurant chain



90 new jobs

Healthy Fast Food chain

Completed May 2013


50 new jobs

Media services provider

Completed April 2013


15 new jobs

Cleaning products



5 new jobs

Women’s clothing e-tailer


£0.7m Growth Capital loan

30 new jobs

SOME OF OUR GROWTH CAPITAL INVESTMENTS

http://www.yourvets.co.uk/

http://www.ridgwayeng.com/index.php

http://www.ilikemusic.com/

THANKYOU

PETER ABEL, DIRECTOR

SANTANDER GROWTH CAPITAL, SOUTH WEST

Tel: 07809 493791

Email: [email protected]

Website: www.santanderbreakthrough.co.uk

……a bank for your ideas!

mailto:[email protected]

Equity – why

even Boris is

talking about

it..

Nick Woodmansey –

Corporate Finance

Senior Associate


Equity

Who is talking about it?

• Francis Clark

• CBI – “Slice of the Pie – tackling the

under-utilisation of equity finance”

• Boris Johnson - “The real opportunity for

Britain is to move away from just bank financing

towards equity financing of all kinds, to try to get

private investors to put money into startups - so

that you're not relying on the banks who've not

traditionally been brilliant.”


Background to equity

• Why equity?

• In banking terminology – an equity proposition!

• Ambitious growth

• Lack of security

• Lack of track record

• More than just the initial money

• Drive growth

• Mentoring & discipline

• Introductions

• Further capital


Structuring equity investments

• Cash investment made into:

• Shares

• Loans

• Required return

• 20 to 40% IRR (annual yield)

• 3 – 5 x cash multiple

• Majority of the equity return is on exit

• Portfolio return is lower


Enterprise Investment Scheme (‘EIS’)

• Investor income and capital gains tax relief

• Unquoted

• Unconnected

• Minority stake

• But there are exclusions!

• Watch compliance!

• Two formats

• EIS

• Seed EIS


Enterprise Investment Scheme

EIS SEIS

Investment limit

£1,000,000 £100,000

Investment timeframe

3 years 3 years

Income tax relief

30% 50%

Capital gains tax on sale

No tax charge No tax charge

Reinvestment of

previous gains

Defer tax Exempt gain

Loss relief

Against personal tax liability


Sources of, and/ or, routes to equity?

• Friends, Families and Fools

• Virtual Networks - e.g. Crowdcube

• Angel Networks - e.g. SWAIN

• Venture capitalists and Private Equity

• Active in SW include

“Q1 2013 showed the lowest ever level of use of

external finance by SME’s” – SME Finance Monitor, Aug ‘13

“Access to finance is a “major barrier” to growth for

more than one in five small companies” – FT, Mar ’12

“Less than one in five SME’s have attempted to

raise finance in the last year – with 40 per cent of

applications rejected” – RealBusiness, Sept ‘13

The problem

Crowdcube is the world’s first and leading equity crowdfunding platform

giving entrepreneurs a new way to raise investment

Fully authorised and regulated by the Financial Conduct Authority

The solution

The solution

Success so far

£19 million funded so far…

£250,000 largest single investment

>60,000 members

95+

£1.9 million biggest deal

£2,800 average investment

Successfully

funded deals

£180,000 average deal

Stage of Growth

By Category

Case studies

What are the benefits?

New way to raise finance

UK wide investor reach

Easier to promote

Cost effective

Marketing effect

Crowd feedback

Financial return

‘Armchair Dragon’

Support friends and family

Participation

Lower/spread risk

Simple to invest

Michael Wilkinson

Investment Manager

[email protected]

@MW_Crowdcube

www.crowdcube.com


February 2014

Angel Investment

Philip Tellwright

Chief Executive

SWAIN

Business Angel networks

Copyright SWAIN 2013


Area of operations


Statistics

11%

5%

17%

8%

17%

24%

18%

Deals done by sector

Cleantech

Food/drink

IT

Manufacturing

Media/comms

Medical devices

Service


Stats


10 years 103 companies financed 144 rounds of funding £75m raised in total Failure rate 29% Ytd to March 2014 15 deals £1.1m 4 more completions anticipated

Original ethos


Key features business angel activity


• Personal – preferably regional • Confidentiality • Understand more complicated

businesses • Add value • Provide support • Will follow their money because

of the relationship which has been established

Keeping pace with fashions


Where value is generated

John - 30 investments

• Currently @ 3.5x money

50% 30% 20%

Value Added Selection End Sale


http://www.google.co.uk/url?sa=i&rct=j&q=john+caines&source=images&cd=&cad=rja&docid=UAMK1fSEErq96M&tbnid=JdpgPTq-tQjLUM:&ved=0CAUQjRw&url=http://www.angels4angels.co.uk/who-we-are-john&ei=PTQmUaPGB8bM0AXWhoDgCg&bvm=bv.42661473,d.d2k&psig=AFQjCNEW33kdh2Cd_BT3uO1YQw-x0kXWfA&ust=1361544630418917

banc

Why do investors invest?

1. To make a return

2. To participate and

contribute

3. Because returns are

poor elsewhere

4. Because they get tax

relief

Right product; right

people

Add value

Typical Investor Requirements

5x – 10x cash

3-5 years

Exit

Seat on the Board

Some influence and control


Nesta Research 2009 (1)


Nesta Research 2009 (2)


Investors “ought to…”


Changing face of funding sources

Copyright SWAIN 2013 Source Platform Black

Crowd plus lead investor


The road ahead



February 2014

Angel Investment

Philip Tellwright

Chief Executive

SWAIN

PRIVATE EQUITY AN INTRODUCTION

George Adams

Piper Private Equity LLP

1

Private Equity

It’s Position In The Milky Way Of Company Funding

2

Private Equity

Let’s Look A Bit Closer

3

What Are Private Equity People

Like?

4

We’re quite normal – but there is a big variety

We’re focused on growing value

We can bring expertise, further cash, opportunities and contacts

We have some rules, but can be extremely flexible

Not every company is suitable

The Reality

5

o Expertise: Varies by type of PE House eg sector specific eg issue specific o Rules: Information & Data Behavioural Ultimately relationship is key o Flexibility: Cash In/Out Minority / Majority Management In / Out / New Higher Risk / Steadier Returns

A Few Aspects

6

Piper

Passionate about brands

We Invest in consumer brands

Retail, Leisure, Consumer Products & Services

£3m to £15m

7

Passionate about brands

We have an excellent track record and have developed deep sector knowledge in each of

these markets

Delivered diet company Family clothing catalogues Latin American restaurant chain Luxury handmade rugs

Casual clothing brand Sports nutrition products

Food Service brand

Womenswear catalogue for over 45’s

Travel clothing retailer

Bar chain Burger restaurant chain

Upholstered furniture retailer

Exam revision specialist

Cocktail bar chain

Café / bar / restaurant chain

Adult soft drinks

Luxury footwear

Our Track Record

8

Beach and resort clothing for men

Chain of Caribbean restaurants

We look at:

The Consumer Proposition

Team

Growth

Exit

What Piper Looks At

9

The End

Thank You

10

Growth Capital Investors

Introduction to BGF

Edwin Davies, Investment Associate 26.02.14


About us BGF

Long-term growth capital for UK companies

£2.5bn of capital from five of the largest UK banks

Long-term business builder through expertise as well as capital

Independent, quick and autonomous decision making

90+ staff, 7 regional offices, local deal origination, execution and support


Investment Criteria Long-term growth capital for UK companies

Established UK companies with sales of c. £5 – 100m

Businesses with past and potential future growth

Capable management team

£2-10 million equity requirement (per funding round)

Minority equity stakes

Growth capital funds can be used for:

Acquisitions, working capital, R&D, capital investment, overseas expansion

Some “cash out” to shareholders but this must be less than 50% of the BGF investment

Generalist sector focus but excluding:

Property investment and development; Some regulated financial services businesses; Some on ethical grounds


http://www.morphsuits.co.uk/

http://www.businessgrowthfund.co.uk/grow/investments/celaton

http://www.businessgrowthfund.co.uk/grow/investments/magma

http://www.google.co.uk/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=A7ud9M5ShLrVpM&tbnid=l2qQDdL20NIEQM:&ved=0CAUQjRw&url=http://www.charlestownsquare.com.au/Dining-Entertainment&ei=GIksUdSYGIrL0AWUnoDADg&bvm=bv.42965579,d.d2k&psig=AFQjCNF4V-ce-3k1YBJ42E2eKl0du_mTZA&ust=1361959567527904

http://www.google.co.uk/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=wTSSKg9drJbx1M&tbnid=vuHWHzaX2O-HhM:&ved=0CAUQjRw&url=http://www.namtec.co.uk/supplier-directory/vtl-group&ei=V5dJUviQMMeihge8pIDoCQ&bvm=bv.53217764,d.ZG4&psig=AFQjCNGsO-8B1kaoQmn1mBRio94NcgBPnA&ust=1380640981441792

http://www.google.co.uk/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=ySP21WcAL1l2rM&tbnid=vr1-8PDauY-IGM:&ved=0CAUQjRw&url=http://www.wireless-mag.com/News/25928/Sub10_Systems_signs_distribution_deal_with_Horsebridge_Networks_Systems.aspx&ei=XDrqUsjNJqLP0QWNk4GgDg&bvm=bv.60444564,d.d2k&psig=AFQjCNF-YByO4YkaOleJ3RqzxBjBAFJQiA&ust=1391168473703046


Why are we different BGF

Focus on growth capital for SMEs

Flexible, long-term view on exit

Flexibility on investment structures

Minority investor and partnership approach

Regional office network

Huge network of experienced business leaders to support growth at board level

Focused diligence process and sensible investment timelines


Break

Session 3 start time

11.30am

Finance in the

South West 2014

Investment ready,

Business support and

closing address…







• Grant schemes


• Investment ready, business support and

closing address (11.30am to 12.35pm)


Investment

ready…

Matthew Willmott – Corporate

Finance Associate


Matching requirements

Understand your

requirements

Understand funding

options and funders

requirements


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 relationship


Investment ready – 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?


Requirements: Grants

• “Project” eligibility – sector, size, location…

• Timescale – prescriptive, process and panels, not

retrospective

• Match funding

• ‘Need for grant’ versus viable proposition

• Other factors - Environment, Equality, on going

requirements


Requirements: Debt

• Serviceability & Headroom

• Security / Personal Guarantees

• Conduits for government initiatives

• Covenants – achievable / appropriate?


Requirements: Equity

• Exit route and returns to the investor

• Investors expertise vs. loss of

independence?

• Be prepared to discuss valuation

• Be aware of FSMA regulations


Investor Ready - Conclusions

• Appropriate funding / understand the funder

• Business Case

• Plan B?

• Know the ‘deal breakers’ – due diligence

• Build in extra time

Business Plans

and Financial

Projections

Nick Tippett – Corporate

Finance Associate


“Business Plan”

• Business case

• Tailor to audience

• Informing v giving away IP


Structure of a business plan

• Front cover

• Contents

• Executive summary

• Background to the business

• Products and services

• Customers and markets

• Business operation

• Management

• Financial history

• Financial projections

• Appendices


Projections: the perfect scenario

• Monthly integrated profit and loss, cashflow and balance

sheet covering a period of three years

• Documented assumptions

• Ability to sensitize the model


Projections: the real world!

• Choose an approach that works for the business

• Focus on the KPIs of the business

• Make basic assumptions

• Compare to actual results


Common issues

• Inconsistencies between Business Plan (narrative) and

Projections (figures)

• Profit ≠ cash

• Do not forget about tax (VAT and tax on profits)

• Match funding to cash requirements, business model &

exit strategy

• Read through documents ‘cold’

Access to Finance Masterclass 3

July 2013

GrowthAccelerator overview

www.growthaccelerator.co

m

Presented by Bruce Colley

26th February 2014

www.growthaccelerator.co

m

1-2-1 Coaching

Workshops

Master Classes

Connectivity

Growth Mapper

Growth Manager

Access to

finance Business

development

Help to Innovate

Leadership & Management

Funding

1

5

9

“My bank want me

to factor – is it the

best option?”

"I haven't had to

raise finance before

- what are my

options?”

"I want an investor

who will bring in

expertise and

contacts”

"My bank won't

support me with my

funding

requirements“

“I want to grow my company, but.......”


July 2013

• SMEs only - less than 250 employees, £40m turnover

• Ambition to double in turnover, profits or employees in 3 years

• Registered in England

• Independently owned

• Any sector

Eligibility?

18th December 2013, Tortworth Court, Bristol


July 2013

1. This is a Selective Service, only for those with the ambition

to double in the next three years

2. It is Personalised to Address Your Business Challenges

3. It is the UK Government Investing in High Growth

Businesses, delivered by a consortium of private sector

partners

4. It use commercial, experienced coaches (800 across the

country – 200 specialist Access to Finance)

5. The service is focused on Results

What makes this service unique?



July 2013

1. Worked with over 11,000 high growth businesses across

England

2. Raised finance for a wide range of companies in the South-

West – ranging from: traditional debt, invoice finance, asset

backed RDF, matched funded TSB, angel (traditional and

crowd), funding circle and VC

Progress to date?



July 2013

Scope of the service Current position Post funding

Core support Review of your

business.

Business diagnostic.

Establish eligibility

and suitability.

Review coaching and

package of support.

Access to finance

require a reasonable

business plan to be in

place

Funding

requirements

Debt or equity (angels,

crowdfunding,

networks, syndicates,

banks, specialist

financiers, VCs…)

Review suitability of

business plan

Agree finance action

plan

Investment readiness

Fine tuning of business plan

Developing thoughts in line

with appropriate

masterclasses

Agreeing the opportunity note

and the pitch proposition

Identifying gaps in the due

diligence

Reviewing on-going

professional support

Introduction

Agreeing priorities and

schedule for introductions

Introductions to up to

three sources of finance

Liaising with Investment

relations team

Hand over to corporate

finance advisor / lawyer as

appropriate

Connectivity

On going

leadership and

management

training

Masterclasses

Leadership &

Management

Investment

relation team

Fast track

workshops

Access to finance support

MC1: Understanding finance - To understand advantages/disadvantages of

alternative sources of external finance

MC2: Preparing for finance - To craft a strong ‘pitch’ to increase your success of

accessing external finance

MC3: Closing the deal – Legal and Valuation - To maximise your ability to complete

a financing deal

The fast track w/s programme is an intensive series of workshops backed up by

one-to-one coaching that gets you ready for finance and helps to put you in front

of investors and other sources of finance (micros and start-ups)

£2000 matched funding towards leadership and management training per senior manager.

Can be effective in developing the management teams ability to further develop the investment

proposition (i.e. marketing plan, financial planning etc.)

Also available post investment to help develop management capacity

Provides additional information on relevant VCs, banks, angel syndicate and

networks. Also providing feedback on your opportunity note


July 2013

Contact me:

Bruce Colley [email protected] 07436 108297

What do I do next?


mailto:[email protected]

The Growth Acceleration and Investment Network

The Peninsula’s Growth Hub

www.gaininbusiness.com

GAIN…

• Is a network of business service providers dedicated to raising awareness and increasing take-up of the support available

• Adds value to, and does not duplicate, existing networks and business support


Helping business find the right support…

• GAIN Business Engagement Service – A phone / e-mail based light touch diagnostic,

signposting and brokerage service for any business

• The GAIN Digital Exchange – gaininbusiness.com

Both to be launched in April 2014

For more information - 0800 052 5600


Flexing provision and filling gaps

MAS for marine

Innovation Vouchers

Start Up Support

Export Support Programme / Web fuelled

Enhanced FDI

Finance Partnership


Business

support - other

David Bullen – Corporate

Finance Senior Associate


Business support (and funds?)

• MAS

• UKTI

• Business Growth Vouchers

• There are others…


MAS


UKTI

Support to........ • Develop an export strategy – Passport to Export (£3,000), Gateway to

Global Growth (£3000)

• Undertake market research (including identifying potential partners) –

EMRS (50% match), OMIS (subsidised)

• Visit & develop new export markets – MVS (£200-£850)

• Improve international communications: website, email, languages &

culture – ECR (subsidised), ECR EV (£3000)

• Exhibit overseas – TAP & TAP SOLO (£1,000 to £2,500)

• Carry other marketing and sales development activities - European

funding (ERDF) (£1,000 to £30,000)


Business Growth Vouchers

• Up to £2,000 support (50% match funded)

• 5 categories of support: - Managing cashflow, late payments and negotiating finance

- Developing skills and taking on staff

- Improving Leadership and Management

- Marketing, attracting and keeping customers

- Making the most of digital technology

• FC registered for the first point above

• http://enterprisenation.com/marketplace

• https://www.gov.uk/apply-growth-vouchers

http://enterprisenation.com/marketplace

https://www.gov.uk/apply-growth-vouchers






Michael Portillo


2014

Finance in the

South West 2014

Thank you

and please network







• Grant schemes





Summary

• SMEs – the country needs you

• SW a great place to do business

• Some great businesses in the SW

• Confidence?

• Funding and support – options

• Thank you


Network: there are here to speak to you

…and many more

http://www.google.co.uk/url?sa=i&rct=j&q=crowdcube&source=images&cd=&cad=rja&docid=HHkVS7aS2dRndM&tbnid=vhU9DxAELfW_6M:&ved=0CAUQjRw&url=http://thegrowthacademy.com/&ei=owMZUbT0BI3FtAaEpoAY&bvm=bv.42080656,d.Yms&psig=AFQjCNEioHuI1SUp--HnPUMy_FtenwWRCA&ust=1360680123489165


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Economy & Finance

Finance in the South West 2014