business start up show: raising funding & business metrics

Raising finance and the importance of business metrics

John CheneyJohn.cheney@workbooks.com

What’s the process?

What’s the stor

y

•Think through your story

•Define in as much detail as you can what you are looking to achieve and why.

Building

your

plan

•Build a business plan

• Document your strategy so it can be easily communicated to potential investors.

Selling you

r plan

•Sell your vision

•Identify your potential sources of funding and sell your plan.

Closing the deal

•Close the deal

•Agree the terms and get good advice.

What’s the story

Vision

Opportunity

LandscapePeople

Execution

?

Importance of execution

Prospects to Cash

Targeting Marketing Selling Deliverin

g Invoicing

Targeting

Who is my target customer?– Type of organisation– Type of individual– Motivation for purchasing

How many potential prospects?– Market size

What do I know about them already?– Using a competitor– Interests

Targeting

Marketing

Which are my most effective channels for marketing?– Online?– Direct?

What is the cost of a lead?

How many leads convert into a sale?

Marketing

Selling

Sales Effectiveness – How many deals can a sales person close in a

period?– Who are my best sales people?– What’s my cost of sale?

Competition– Who are my competitors?– Why are we winning/losing?

Selling

Delivery

Cost of Delivery– Gross margin & profitability?

Time of delivery– How long from Order to Invoice?– Can it be quicker?

Delivering

Have an execution plan

Targeting Marketing Selling Deliverin

g Invoicing

Prospects to Cash

Understand the Metrics!

Build your plan

Detailed business plan– Vision, Opportunity, Market Landscape, People,

Execution– Investment opportunity & ROI– Exit Strategy & Valuations (Comparisons)

Financial Model– P&L, Balance Sheet, Cash flow, Key Metrics

Executive Summary– 3 pages!

Angel Investors

High Net Worth Individuals

Often experienced & successful business people

Typically invest between £10k – £500k per investment

EIS qualification is often very important

Enterprise Investment Scheme

A Government scheme to encourage people to investment in small businesses

Key benefits– Investors can get 20% income tax relief– Investors can get 40% capital gains roll-over relief– Qualifying gains can effectively be tax free

There are rules– You need to be a qualifying business– You can only raise £2m at a time– There are more rules...

http://www.hmrc.gov.uk/eis/

Find Angels

Where can I find them?– Angel Networks (www.bbaa.org.uk)– Your Networks

Lawyers, AccountantsFriends & Family

What do Angels want?– Equity stake – normally ordinary shares– To see a return on their investment– To back great teams

Passion, enthusiasm, drive, expertise– Involvement

Board seat or Advisory role

Venture Capitalists

Professional Investment firms– Money from Pensions, VCTs, other institutions– Funds have sizes and a life cycle

Typically have investment criteria– Stage: Seed, Early Stage, Growth Stage– Sector: Cleantech, IT, Life Sciences, etc– Geography

Investment sizes reflect stage– Seed £500k - £1m– Early Stage £1m - £3m– Growth: £5m+

Finding VCs

Where can I find them?– European Venture Capital Association -

www.evca.eu– British Venture Capital Association -

www.bvca.co.uk

What do VCs Want?– Equity Stake, maybe debt

Focus on Internal Rate of Return (IRR)– Preference shares (different rights)– Board Seat – with a fee– Often syndication

Third Party Advisors

Benefits– Network of contacts– Can organise road show and manage process– Sounding board to validate plan– Negotiate terms

Downsides– Cost (% of funds raised + retainer)

Look for track recent track record and references

Closing the deal

Get good legal advise!

Benefits & Issues

Benefits

Investment capital

Dispassionate advise

Your increased professionalism

Credibility

Issues

Managing shareholders

Risk of different views

Change is shareholders status or strategy

What’s the process?

What’s the story• Think through your story• Define in as much detail as you can what you are looking

to achieve and why.

Building your plan• Build a business plan• Document your strategy so it can be easily

communicated to potential investors.

Selling your plan • Sell your vision• Identify your potential sources of funding and sell your plan.

Closing the deal • Close the deal• Agree the terms and get good advice.

Any Questions?