Sources of funding: Grants (MAS. UKTI), FF&F, Banks, Angels and VC’s

1. Funding for Entrepreneurs and How to Raise It John Griffiths, Director, Connect Midlands WBS Entrepreneurship Mentoring Programme 28 July 2011

2. Objectives Options for funding your business What funds are best for you at the time Understand mindset of funder or investor. How to create a winning plan and pitch Understand how to raise money !

3. Agenda Connect and our track record Types of finance: grants, debt, angels, VC What do investors look for? Are you investment ready? Connect model Strategic & Business cases Interacting with investors Summary

4. Leading technology and growth network providing access to finance, innovation, professionals, successful entrepreneurs. Helps build route to market, management capability, and commercialise innovation

5. PRIME PARTNERS BUSINESS PARTNERS CORPORATE MEMBERS

6. Investment Readiness £200m to date! Connect Midlands is recognised as market leader in helping innovative,technology & high growth businesses become investment ready ....then showcasing them to the investment community to raise money they need to grow Growth ….and assisting them to grow shareholder value, create jobs, become world-beaters .

7. From idea to market – the rocky road of realisation The Goal. Growth & Profit market need funding management Potential for growth Ideas + concepts  Growth Time  †† Graveyard for start-ups & businesses ††

8. Types of Finance Main Stock Market AIM Plus Availability of Funds Venture Capital Grants Debt Business Angels 3 Fs Size of Company 8

9. What do investors look for ? Experienced & ambitious management team Sound business case & plan High growth prospects High market share potential IPR Sustainable competitive edge & USPs Sales already or close to market ? Shares & enough to be attractive Exit route – money out in 3-7yrs ?

10. Management ? investors back the jockey - not the horse

11. The basics – Your Turn a). 5 minutes discussion in pairs on: What is the vision of your business? How much £ do you require? What do you need it for ? What type of funding & when? Grants; Debt and Banks; Equity, Angels, VCs Who might you sell to ? b). 2 minutes feedback each

12. Grants Upsides: Free Money Don’t have to pay it back Great way to kick start business Some validation for matched / follow on funds Downsides: Beaurocratic Don’t chase unless fits your growth plan Targets and outputs and outcomes

13. Grants TSB – Grants for R&D Proof of Market: is there a market ? 60% grant to £25K Proof of Concept : NP & PD, 60% grant to £100K Development :to pre-production,35%-45% grant to £250K MASWM–Manufacturing & NPD Reviews / Projects Short tem improvement or strategic change Reviews, free Projects, 50% grant to £10K by no money left until 2012 ? UKTI – Advice and help with exporting Advice, strategic reviews, info from Trade Advisers Market research and visits, 33% to 60% grants

14. Debt Many types eg: Loans & Overdrafts Factoring / Invoice Discounting Asset Finance EFG – up to £1m, 75% Govt guarantee Alternatives to banks egs: CDFI, to £50K (ART/ BCRS/CWRT..) Thin cats, £50K - £3m Funding Circle, £5K - £50K

15. Banks and Debt No share of ownership Always repayable Carrier interest payments Availability depends on Viability Serviceability Security Balance sheet & trading history

16. What Banks look for Strong management team Sustainable competitive advantage Decent scale IPR and or USPs Growth sectors often favoured Business growth PLUS : Regular interest/capital repayments Trading business Security- debentures, personal guarantees Interest cover

18. Reduces risk for other providers of finance

19. Often accompanied by investors skills / knowledge

20. Typically invest in range £20K to £1m+

21. Often in networks and syndicates but can be alone

23. What Business Angels look for Strong management team (which they can strengthen) Proposal with sustainable competitive advantage Decent scale IPR (sometimes) Growth sectors (sometimes) Capital growth & exit More from Tim later PLUS: Fun, stimulation, involvement Sector they know & understand Non Executive Director

24. Venture Capital Money at risk Mostly shares – sell a percentage ownership for a cash investment Money does not need to be repaid Investor objective - capital gain An exit has to be planned £100K to £5m+ for early stage, (5-10x) West Midlands: Midven, Mercia Technology National: many more

25. What Venture Capitalists look for Strong management team Proposal with sustainable competitive advantage Decent scale (essential) IPR and or USPs Growth sectors Significant capital growth, (5-10) An exit PLUS Shareholder Board position or appoint Director Take a business from platform A to B Exit agreed as part of investment

26. Differences between grants, debt, equity What are they ?

27. Be Prepared – Get Yourself Ready to Raise Finance and Investment! Strong Proposition + Proof Points Compelling Business Plan Focussed Pitch £ + + =

28. Key areas for business development and “investability”

29. Strategic & Business Case Strategic Case: Exec Summary (2 pages) 10 slide presentation Does the investor like you & your proposal? Business Case: The business plan (BVCA guidelines) Further due diligence Can you defend your assumptions? Does the investment case make sense?

31. (Pitching to investors)

32. Preparation

33. Education

34. Awareness26

35. FUNDING STAGE Pre-Start Existence Survival Success Take-off Maturity LIFE CYCLE STAGE LIFE CYCLE STAGE Springboard SMEs seeking up to £500k pitch to an audience of investors and support intermediaries Investment Conference SMEs seeking up to £5m to pitch to an audience of investors and intermediaries Roundtable SMEs seeking early stage finance to present to target investors over an exclusive lunch or dinner InvoRed Supports SMEs to help them shape propositions and become investment-ready

36. Timetable for Equity Draw up plan/pitch: 1 month Approach VC and get a meeting: 1-3 months Further meetings: 1-3 months Due diligence: 2-4 months Final negotiations/legal's: 1-3 months Conclusion: min 6 months,can take 12 months Connect Investment Conferences: great way of meeting many investors at once – 22 Nov London

37. Interacting with Investors Be Realistic getting it wrong loses credibility about valuation Be Honest trust is a big part of the financial industry; it is a deal breaker Be Prepared you might only get one shot at fundraising you will be challenged!

38. Some Successes ! £2.8m since 2005 Monica Healthcare £1.04m since 2004 £88K since 2004 FDAS £4.72m since 2003 Prime Principle Haemostatix £5m +

39. Review Session Objectives Options for funding your business ? What funds are best for you at the time ? Understand mindset of funder or investor ? How to create a winning plan and pitch ? Understand how to raise money ? Have we done these ?

40. Summary and ConclusionsConnect Midlands and Connect InvoRed Understand finance options and best for you Strong Proposition, Proof points, Plan, Pitch Think like an investor ! Connect worked with 2,000 SMEs, Assisted >1,000 on investment readiness (IR) Over 300 entrepreneurs raised £200m Used by BIS to set national IR framework