Financing potentially high growth Businesses- Essentials

John Spindler CEO of Capital Enterprise

Welcome

Agenda

Sources of fundingGoing for growth- funding gaps

Equity FinanceUseful Links

Sources of Start-up/ Growth Finance

• Personal resources (time and money = sweat equity)• Friends, Family & Fools ( Your Supporters)• Customers and Suppliers• Government Grants & Loans• Corporate Sponsorship• Debt Providers

– Banks– Specialist lenders

• Equity Providers– Private Investors-Angels

Matching the right mix of sources to the right stage and type of finance is the key to successful fundraising

Hockey Stick Growth Curve

What do you need money for?

Type Amount Purpose Provider

Set-Up-Pre-seed- before trading

VariesUp to £100k

Get the business set-up- and trading. Equipment, website, accommodation, marketing, salaries.

Founders ‘bootstrap’, - Sweat Capital, Family & Friends, Personal Loans & Credit Cards. Over 95% of new businesses start-up on less than £10,000

Research & Development Capital ( If doing something new and innovative)

VariesUp to £0.5m.

Proving of the Concept- i.e. it works.Market testing Intellectual Property Registration.Time

Bootstrap- Finance whilst working elsewhere or as consultant on commissions Government Grants/ Tax Incentives e.g. TSBOpen Innovation Collaborations with industry/ HEIDefinitely not banks

Working Capital Varies To fund cashflow cycle (once you have orders)

Customers & SuppliersBanks/ Factorers/ Invoice Discounters/ credit cards

Scaling up/ GrowthSeries A Investment

200K- 2m Commercialisation of “proven” technology.Roll out of growth plans

Private investors alone or in groups/ dedicated seed funds, specialist VC’s alone or in syndicates. Government Backed funds.VC’s only if more than £1m- below more likely angels.

Scaling a Business

• Commissioned Model IP Business Model• Service Product• B2B vs B2C ? • Grow a Commissioned based business need: portfolio-

brand recognition-sales funnel- high margins- unique talent- credit lines.

• IP Business model more scalable but need: Upfront Investment- Legal Protection- Large Market- Distribution Chanel- Great Value Proposition- Partners

• Business Model Growth Engine: Viral- Sticky- Channel Explosion – (Life Time Value must significantly exceed Cost of Customer Acquisition)

Do I have a growth Business Model?

Financing Growth

• Sales Spurt Extend Overdraft/ Factoring• Expanding sales channels/funnel Loan • Expanding capacity Loan• Increasing efficiency/ margins. Loans/ Leasing• Upfront/ Pre-Revenue Investment FFF/

Crowdfunding?• Diversification/ “Pivot” business model Equity

Investment

Do you have a predictable business model?

Reasons Why Investors Invest. The main reason why Angels invest in something is because they believe in the entrepreneur. The following are the main factors they consider when making an investment:• Trustworthiness of the entrepreneur• Expertise of the entrepreneur• Enthusiasm of the entrepreneur• Track record of the entrepreneur• Independent Investors liked entrepreneur upon meeting• Perceived rewards for the investors- 10X initial investment in 2-3 years• Sales potential of the market- Must be large.• Growth potential of the market• Predictability of the Growth Engine. • Quality of product• Overall competitive protection of the product• Potential exit routes (liquidity)N.B. All Investors oscillate between fear & greed.

I still want Investment…..?

• Create a Growth Business Model• Prove that it can work• Write a business plan/ investor pitch• Hire advisors/lawyers- Prepare Term Sheet. • Meet Investors• Prove it can work a bit more• Pitch to investors• Negotiate Terms & Condition• YESSSSSSSSSSS- You now have an investor – your hard

work begins

What can we do to help?

• New Business Bootcamp (Tech/Lean/Fashion)• Sign up to a bootcamp extra events • Check out the 100 offers/ funding links• Introduce you to an Angel Network• Offer you a mentor• Offer help developing a business plan• Offer a professional business coach.

Looking for Funding

Information:

• Capital Enterprise What’s On in London- www.capitalenterprise.org/whats-on • Business Link - www.businesslink.gov.uk • Start- up Britain - http://www.startupbritain.org • British Library- www.bl.uk/bipc • HMRC Small Company Enterprise Centre- Source of advice and help

http://www.hmrc.gov.uk/manuals/vcmmanual/VCM10050.htm• HMRC R& D Tax Credits www.ucl.ac.uk/advances/advances-news/hmrc• HMRC Guide & Support- http://capitalenterprise.org/guide-to-rd-tax-credits • British Business Angel Association: www.bbaa.org.uk • British Venture Capital Association: www.bvca.co.uk/• London Funding Conference: http://www.londonfundingconference.com/about-funding • Guide to Early Stage Investment:

http://www.paloalto.co.uk/about_us/Early_Stage_Investment_by_Alan_Gleeson.pdf • Design Council- http://

www.designcouncil.org.uk/resources-and-events/Designers/Continued-professional-development/Guides

And if you have not checked them out please look at the latest schedule of advice and training events at :www.thebusinessbootcamp.org.

• Any area• SME only• Proof of market

• £25k @60%

• Proof of concept• £100k @60%

• Prototype development

• £250k @35-45%

Looking for funding?Grants & Awards General• J4B- Portal for grant finding http://www.j4b.co.uk• Technology Strategy Board ( R&D Funding) - http://www.innovateuk.org -

http://www.innovateuk.org/content/competition/grant-for-rd-single-business.ashx• London European Enterprise Network- http://www.een-london.co.uk • E Funding for SME R&D - http://www.eurostars-eureka.eu/what.do• EU Funding for R&D collaborations: http://ec.europa.eu/research/participants/portal/page/calls • Knowledge Transfer Partnerships funding support-

http://www.ktponline.org.uk/ktp-what-will-it-cost-my-business

Translation/ Follow on research funds. • www.rdfunding.org.uk/bulletin/queries/Search.asp?TheCloseMonth=July&TheYear=2011.• http://www.rcuk.ac.uk/kei/ktportal/Pages/Followon.aspx• https://ktn.innovateuk.org/web/145175/overview• http://www.ahrc.ac.uk/FundingOpportunities/Pages/BrowseOpportunitiesOld.aspx • http://www.ahrc.ac.uk/Pages/default.aspx • http://www.theculturecapitalexchange.co.uk/

Looking for Funding?Grants & Awards - Creative

• Arts Council- http://www.artscouncil.org.uk/funding/grants-arts • London Councils- http://www.londoncouncils.gov.uk/services/grants/ • Fundraising Resources & News - http://www.fundraising.co.uk/news • Foyles Foundation- http://www.foylefoundation.org.uk/main-grants-scheme-arts • Welcome Trust- http://www.wellcome.ac.uk/Funding/Public-engagement/Funding-schemes/Arts-Awards/index.htm • British Fashion Council- http://www.britishfashioncouncil.com • Centre for Fashion Enterprise- http://www.fashion-enterprise.com/the-agency • Shell Livewire -£1000 award for new entrepreneurs 16-30 - http://www.shell-livewire.org/news/awards2011 • UK Film Council- http://www.ukfilmcouncil.org.uk/whatwefund • NESTA- http://www.nesta.org.uk/areas_of_work/creative_economy/digital_rnd • British Council- http://www.britishcouncil.org/arts-performing-arts-funding.htm

Corporate Sponsorship• http://artsandbusiness.org.uk/Media%20library/Files/Individual%20giving/09jul_taxguide.pdf • http://www.companygiving.org.uk• http://www.uksponsorship.com/arts1.htm • http://resources.mediatrust.org/marketing-support/tactics/sponsorship/?gclid=CPjHwre-t6kCFcod4Qodo3-o-A

Looking for funding?

Equity Finance• NESTA - www.nesta.org.uk/investments • British Business Angel Association- www.bbaa.org.uk • Capital 4 Enterprise- http://www.capitalforenterprise.gov.uk/portfolio • London Business Angels: http://www.lbangels.co.uk • London Seed Capital - http://www.londonseedcapital.com/ • Oxford Early Investments- http://www.oxei.co.uk/about.php• Envestors- www.envestors.co.uk• Fashion Angels- http://www.fashion-angel.co.uk • Theatre Angels- http://www.solt.co.uk/angels.html • Paste & Wait Investment (USA only) www.kickstarter.com • Paste & Wait Investment. www.indiegogo.com• Paste & Wait: www.peoplefund.it • Paste & Wait: http://www.pleasefund.us/help/about-us • Paste & Wait: http://www.wefund.com • Crowd funding: http://www.pozible.com • Crowd Funding : http://www.crowdfunder.co.uk • Crowdfunding: http://www.crowdcube.com

Early Stage VC • Amadeus- http://www.amadeuscapital.com/about-seed.php• Balderton- http://www.balderton.com• CAIN- http://www.cainuk.com • DfJ Esprit - http://www.dfjesprit.com • Doughty Hanson- http://www.doughtyhanson.com/technology-ventures.aspx • Early Bird Ventures- http://www.earlybird.com • Index Ventures- http://www.indexventures.com • Octopus- www.octopusventures.com • Anthemis ( Finance & Technology): http://www.anthemis.com • London Technology Fund: www.londontechnologyfund.com

Looking for funding?

Debt Funding Initiatives• Enterprise Finance Guarantee ( Government underwriting UK banks business loans-

http://www.rbs.co.uk/business/borrowing/g1/firms.ashx • CDFA ( Soft Loans from Community Banks- http://www.cdfa.org.uk • Manufacturing Funding- http://www.rbs.co.uk/business/borrowing/g1/manufacturingfund.ashx • Examples of New types of funding: • http://www.marketinvoice.com• http://www.fundingcircle.com • http://www.thincats.com• http://www.firstfunding.org

Incubators ( Discounted accommodation & support)• Camden Collective ( Creative) - http://camdencollective.co.uk• Hatton Garden Jewellery Centre- http://www.centa.co.uk/hattonjc.html • Fashion - http://www.fashion.arts.ac.uk/business • CEME ( Science & Engineering) - http://www.ceme.co.uk • Innovation Warehouse- http://www.theiw.org • Design/Media- Ravensbourne- http://www.rave.ac.uk/pdf/ravensbourne_wearethefuture.pdf • Dreamstake- http://www.dreamstake.net

Contact us for more information or to arrange a follow up meeting

john@capitalenterprise.org

020 7 679 459807968 470901