Rural firms’ Finance for growth needs - Tim Powell, Senior Business Executive, University of Warwick’s Science Park

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UWSP Access to Finance

Tim Powell

[email protected]


Warwickshire Rural Growth Network Project

• Pilot Project The Rural Economy Grant – Micro Enterprise Support is part of the Warwickshire Rural Growth Network (RGN).

• Rural high growth/ high value micro-enterprises in the LEP priority sectors: manufacturing/ advanced engineering, digital media, and low carbon technologies.

• Overview of Interactions with 100 businesses


100 Interactions - Business Type


Type of Funding Sourced


Sources of Funding Used


Sources of Finance

Concept/ Seed /Micro Existing

Start-ups/Existing Early Stage/Growing Later Stage/Mature

£0k

£50k

£100k

£500k

£1m

£2m

£5m

£10m

£100m

Publically Backed Venture CapitalPrivate Venture CapitalNovel Debt (CDFIs)Banks

Business Angels, Alternative Crowd Funding Gov’t & Public backed Venture Capital/ LEP Initiatives/ERDF schemes & TSB & other grants CDFIs Bank

Public Equity MarketsPrivate

Venture CapitalBanks

4FTSB/ other Grants.Alternative Crowd Funding Angels

The SME Funding Escalator

Sources of Capital

HIGH RISK

LOW RISK

Idea Generation Product Development Commercialisation Expansion


Four ‘Fs’

• Founders, Friends, Family and Fools;• Relatively ‘cheap’ money (soft loans, gifts,

cheap and unstructured equity sales);• Usually quite limited (how big is your

credit card limit?);• Often uncritical – reinforces your own

ideas without challenging them;• To raise it, you often just need an idea

and an outline business plan.• Usually done without any agreement on

what happens in the future and that can be a problem later


Grants

• Grants usually provided by government, EU and public bodies;• Range from £500>£5m+;• Often require a contribution and or match funding;• Funding is often used to drive specific policy agenda (e.g. defence

technologies, nuclear technologies, young entrepreneurs);• Clear limits on what you can spend money on;• Often require fairly detailed applications and a business plan;• Grant schemes tend to be very competitive (in UK 10%>20% success rate

is typical);• Sources: Technology Strategy Board, local council, Local Enterprise

Partnerships, Universities • There are many different grant schemes – and they change regularly


Debt

• The lending of money, often secured against an asset, with a fixed repayment schedule;

• Usually only available to firms with a strong track record and/or valuable assets (very rarely IP);

• Often requires personal guarantees from directors (e.g. charges over their homes);

• CDFIs ( CWRT), asset finance, factoring; Crowd Funding (THIN Cats )

• Can have inflexible payment schedules with fixed interest but no equity ownership dilution issues

• Banks – have a number of different options and all debt can be quite quick to obtain

• Local Councils –administer a lot of schemes for their area


Equity

• Stranger or External Equity is suitable to very few businesses • Three main types of investor; Business Angels (private individuals- Networks and

Crowd Funding) ; Venture Capital Funds (investment firms); and Corporate Venturers and some public backed funds.

• All invest in high-risk businesses but usually BAs at the risky start-up stage, VCs once the tech/model is proven and CVs once the market is proven;

• Investments of £25k>£10m+;• Very competitive market (fewer than 20% of firms who approach Minerva get in

front of investors, fewer than 10% raise money);• Requires very detailed business plan and probably many meetings/presentations;• Equity investors want a capital

exit and need to be convinced that a business can deliver them high multiple of their initial investment;

• Sources: UKBAA/BVCA/

Education

Rural firms’ Finance for growth needs - Tim Powell, Senior Business Executive, University of Warwick’s Science Park