Raising Finance. NVI Wales Mentor Session - Impact innovation
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Transcript of Raising Finance. NVI Wales Mentor Session - Impact innovation
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NVI SwanseaRaising Funding
David Notley
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Jargon
Some examples:
•Gearing•ROI•Preference Shares•Debenture•Invoice discounting•Mezzanine Finance•Cash burn
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Sources of Finance
• What are they?
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Borrowing
GrantEquity
Forms of Finance
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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”?
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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
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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
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Crowd Funding
• The Funding Circle• Kickstarter• Crowdcube• SEEDRS• Platform Black• Many others...............• Varying business models
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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?
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Risk Capital Sources and Spectrum
Flotation - IPO
VC/PE
Corporate Venturing
Business Angels
Crowd Funding & SEIS Funds
Own Money, Friends & Family
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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
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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
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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?
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Grant Types
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Grant Sources
UK• NESTA
• Technology Strategy Board
• WRAP
• Carbon Trust
• National Lottery
• Social Investment Business
• Private foundations
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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
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The right funding for the right purpose
Borrowing Equity Grants
Working capital Yes Maybe No
Assets Yes Yes Yes
Losses No Yes Yes
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Q&A?
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Using someone else’s money is a privilege not a right – treat it
with respect