rory earley bacf 11.45 am 1 july 2011

Capital for Enterprise Limited 1

Business Angel Co-investment Fund

Rory EarleyCFEL

2Capital for Enterprise Limited

Business Angel Co-investment Fund

Rationale

• SMEs contribute strongly to employment growth and innovation

• Business Angels have taken over from Venture Capital as the main source of risk finance for early stage businesses

• Business Angels have limited capacity• There is an opportunity to increase both the quantity of

business angel investing and the number of good active syndicates


Business Angel Co-Investment Fund

Objectives

• To improve the quantity and quality of business angel investing in England and so to:

– Create or safeguard between 5,000 and 9,000 long-term high-quality jobs

– Encourage new business angels through more attractive network propositions

– Invest in and support high growth companies – Attract a target of at least £2 of private money for every £1 of public

money invested.– To recycle public funding to create a lasting legacy



Methodology

• Acting as a private investor within ‘partner’ networks and syndicates. Access to all deal flow on the same basis as other investors.

• Making rapid decisions in the way a business angel would be able to, but

• Only investing where appropriate due diligence has been carried out and the deal is properly structured



Methodology 2

• Able to invest up to c.£1m in any one company in any 12 month period or up to 50% of the total investment in a round

• Modest fee paid to syndicate manager on completion of a deal. Manager then responsible for information flows

• Standard paragraphs for legal documents to cover any HMG needs otherwise syndicates lead the deals



Investment Decisions

• An investment committee to reflect that this is not a VC fund and that it is administered but not ‘Fund Managed' by CfEL

• CfEL will:– Screen for eligibility – Pre-screen for complete proposal– Ensure management information received

• Investment committee will consider:– Is the proposal complete (CfEL pre-screen)– Any glaring omissions in DD e.g. customer referencing– Is there a reasonable chance of this investment making a positive

return



Network/Syndicate Role

• Fund would be open to all networks or syndicates (Partners) that meet its standards. Guidance will be developed on this but essentially need to produce an investment paper that demonstrates DD and structure and be able to sign up to legal agreements

• Partners expected to commit to bringing all deals that fit within fund criteria to the fund; and that the fund will have access to all deals on the same terms as their most favoured members

• Fund will pay a fee on investment but will not pay membership, joining or any other ongoing fees



CfEL Role

• Capital for Enterprise Ltd will administer the fund, carry out the initial checks on proposals from Partners and provide the secretariat for the Investment Committee and any Governing Board activities.

• CfEL will also provide aggregate reporting (e.g. on numbers of investments and jobs created) to the Regional Growth Fund (Government)



Initial Bid Partners

• The initial bid partners represent a cross section of the angel investment community. They have helped to put this bid together and are potential partners of the fund.

• The initial partners will be consulted before any changes to the administration or operation of the fund. They might be considered as a kind of governing board.

rory earley bacf 11.45 am 1 july 2011

Economy & Finance