raising finance. nvi wales mentor session - impact innovation
DESCRIPTION
Raising Finance will deliver an overview of the main types and sources of business funding. It will explore what different finance providers are looking for and consider how businesses can devise a funding roadmap appropriate to their needs.TRANSCRIPT
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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