finance in the south west 2014
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Finance in the
South West 2014
As business confidence
returns…
Lewis Banfield - Partner
www.francisclark.co.uk
Administration
Admin
Timetable
Slides – available on request (feedback forms)
Questions – Please keep questions until coffee/lunch
Presenters…
www.francisclark.co.uk
Presenters and other participants
…and many more
www.francisclark.co.uk
Structure of morning
• Background and Grants (8.30am to 9.35am)
• Key note speaker
• SME, LEP and the ‘funding gap’
• Grant schemes
• SME experience, rewards, debt and equity (9.55am to 11.10am)
• Investment ready, business support and closing address (11.30am to 12.35pm)
• Q&A one to one / Networking (12.35pm to 2pm)
www.francisclark.co.uk
Follow us on twitter @francisclarkllp
Tweet about this event using
#FCFinanceSW
www.francisclark.co.uk
Key note speaker
Michael Portillo
• Former Cabinet Minister
• Broadcaster
• The recovery, the Euro, Scotland
and future elections
www.francisclark.co.uk
Michael Portillo
Finance in the South West
2014
Tim Jones
Heart of the South West Local Enterprise Partnership
Priorities
Regional Growth Fund
Plymouth City Deal
EUSIF
Growth Deal (Local Growth Fund)
Vision
Evidence Strategic Economic Plan
Golden Thread from
Vision through to
Deals
Business People Place
Implementation
Strategy
Our BIG opportunities
Marine / City Deal Hinkley legacy Exeter Smart Jobs Aerospace
Rail, Road and Digital Connectivity Skills Infrastructure
Dependent on
EUSIF - background
• Proposals for investment of:
– ERDF (place blind)
– ESF (place blind)
– EAFRD (rural only)
• Split by Transition (Plymouth, Torbay and Devon) and More developed (Somerset)
• Submitted 31st Jan
Transition
More Developed
Total
ERDF £43.47m
£14.41m
£57.88m
ESF £28.9m
£14.41m
£43.31m
EAFRD
Not split £15.54m
SEP Priorities
Creating the Conditions for Growth Maximising Productivity and Employment
Opportunities
Building on our Distinctiveness
Pla
ce
The Enabling Landscape
Transport and Accessibility
Sustainable solutions to flood and water
catchment management
Unlocking delivery of stalled housing sites
Energy Infrastructure
The infrastructure and facilities to create more
and better employment
Enterprise infrastructure
Investing in strategic employment sites in
our main cities and towns
Digital infrastructure
The infrastructure and facilities needed to
support transformational change
Opening up specialist sites for marine sector
development
Investing in science park and innovation
infrastructure for nuclear, marine,
environmental sciences and aerospace
Maximising our environmental assets
Bu
sin
ess
Creating a favourable business environment –
the GAIN Growth Hub
Simpler, more coherent business support
o Improved access to finance platform
o Tailoring national policies to local
potential
Achieving more sustainable and broadly based
business growth – the Global Market Growth
package
Reaching new markets – including public
sector, web-fuelled and supply chain
Globalisation (exports and inward
investment)
Support related to key opportunities –
transformational investment package
Golden opportunities – Catapult-lites and
networks
Horizontal Innovation – Capacity building,
grand challenges and Innovation for all
Pe
op
le
Creating the environment where businesses and
individuals can reach their potential:
Skills infrastructure and facilities
Accessibility to education/employment
Digital Literacy for inclusion, progression
and business growth
Investing in skills and development to increase
job opportunities and move people into the job
market:
Moving people into employment - focusing
on youth, long term unemployed and
economically inactive
Careers advice and progression
Improving workforce skills
Creating a world class workforce building on our
distinctiveness and growth sectors:
Entrepreneurship and business skills
Technical and higher level skills
development and retention
Maximising the skills and employment
opportunities from our Golden
Opportunities
Growth Deal
• Single Pot – promised £70bn
• Impact of austerity diluted the amount
• Current deal might total £2bn across 39 LEPs
• Money has been top-sliced from transport and education budgets
• Timing issues and accountability still to be resolved
Grants -
Overview
David Armstrong –
Corporate Finance Director
www.francisclark.co.uk
All change!
• European Programme 2014 - 2020 – c£110m
• Starting to see grant schemes arising out of the LEPs
• State Aid
• Assisted Area Map changing – winners rather than losers
• City Deal
• c750 grant schemes
• BUT - SME funding gap remains!
www.francisclark.co.uk
Our successes
• £12m of grant unlocked £36m of other funding
• Create 840 and safeguard 640 jobs
• What makes a good grant application?
www.francisclark.co.uk
So, what is available?
• Assisted Area status + Size Eligibility and Level of grant
National
Regional
Local
www.francisclark.co.uk
Regional Growth Fund
• Programmes – Assisted Asset Scheme, PWGF2 etc
• Projects – direct applications for >£1m
• RGF5 & 6
• RGF6 opens Summer 2016
• Competitive process
• Create sustainable private sector jobs
• Roadshows
• Yesterday’s news
www.francisclark.co.uk
City Deal
Headlines
• £300m (£34m public sector)
• Unlock commercial opportunities in marine sciences, renewable
technologies and to boost exports
• Plymouth and South West Peninsula
• Conversion of South Yard at Devonport Naval Base
• Young People
Business support and grants, including
• GAIN grants
• Innovation Vouchers, MAS and UKTI
www.francisclark.co.uk
Torbay Growth Fund: 2nd round
• Grants or loan up to £150k
• Minimum grant is £15k
• Up to £12k per job
• Capital or revenue projects
• Job creation
• Business investing in Torbay
Regional Growth Fund/Assisted Asset Purchase
Bruce Pedrick
Relationship Director
Regional Growth Fund/Assisted Asset Purchase
Overview
Benefits for Business
Key Features
Eligibility
Exclusions
Examples
Summary and next steps
23
Regional Growth Fund/Assisted Asset Purchase
£2.6 Billion fund operating across England
Scheme runs from 2011 - 2016
Non repayable grants – subject to eligibility criteria and agreed job
targets
Create long term growth and sustainable employment
Encourage private sector investment
Lloyds Bank allocated £25 Million (June 13 to April 15)
24
Overview
Regional Growth Fund/Assisted Asset Purchase
Benefits To Business
• Enables asset purchase (where businesses currently lack deposit)
• Grants from £5,000 up to £500,000
• Up to 20% of the asset cost for small enterprises (up to 50 FTE and
less than 10M Euro T/O)
• Up to 10% of the asset cost for medium enterprises (up to 250 FTE
and less than 50M Euro T/O)
• Non repayable
• Amount of grant will be minimum amount required to enable us to lend
on normal lending terms
• Remaining funding via HP / Loan (Min £100,000) facility
Regional Growth Fund/Assisted Asset Purchase
Key Features
• Create / protect 1 job for every £15,000 grant received
• Independent accountant to verify within 30 months after drawdown or 6
months after job target achieved
• Grant is taxable income and classed as state aid
• Unable to link in any other forms of state aid.
• Meet normal viability criteria
• Asset must be located in England (in an area outside London)
Regional Growth Fund/Assisted Asset Purchase
Eligibility
• You need finance but lack the sufficient deposit
• Able to commit to creating / protecting jobs for a min 12month period
• An SME (as defined earlier)
• No other state aid supporting purchase
• Business not in financial difficulty.
Regional Growth Fund/Assisted Asset Purchase
Exclusions
• Property investment / development – property purchases are eligible if property is for
own use and held on Co Bal Sheet
• Air transport equipment
• Road freight transport for hire or reward – eligible if eg vehicle for a wholesaler who does their own deliveries
• Fishery & Aquaculture
• Primary production of Agriculture products
• Coal
• Export Related Activities – case by case
Regional Growth Fund/Assisted Asset Purchase
Retailer – £195K RGF and £600K loan towards purchase of additional retail premises
for expansion – KIV property must be for own use and held on Co Bal Sheet
Building Contractors - £145K RGF grant and £600K loan towards purchase of new
offices
Tourism - £95K RGF grant and £380K loan towards assets to be used in refurb of
bar/restaurant/catering area and a small renewable energy scheme
Restaurant - £150K RGF grant and £450K loan to purchase their freehold premises
Manufacturing - £110K RGF grant plus loan of £385k to acquire a new R&D factory/
warehouse towards purchase price of £590K
29
Recent Examples
Regional Growth Fund/Assisted Asset Purchase
Summary and next steps
• Support SMEs with asset purchases that may have been discounted
• Bring forward growth plans and create/protect jobs
• Speak to your Relationship Manager/Director or Francis Clark
GRANTS - RGF
JOHN HUTCHINGS
PROGRAMME MANAGER RGF GRANT FUNDS
PLYMOUTH UNIVERSITY
PWGF 1 and 2 Management Information
RGF Round 1 – PWGF1 RGF Round 3 – PWGF2
PLYMOUTH UNIVERSITY AND WESTERN MORNING NEWS GROWTH FUND 1 AND 2
….results so far
PWGF1 • Awards made 20 • Average grant £46,000 • Total £920,000 • Jobs forecast to be created 85+ • Cost per job £10,824
PWGF2 (….fully allocated…) • Awards made 41 • Average grant £90,300 • Total £3,705,000 • Jobs forecast to be created 449+ • Cost per job £8,250
……and has unlocked over £9.5M of private sector investment
Geographic Spread of Applications
6%
42%
26%
15%
11%
Submitted Applications
Cornwall
Devon
Plymouth
Somerset
Torbay
13%
43% 22%
17%
6%
EOIs Submitted
Cornwall
Devon
Plymouth
Somerset
Torbay
6%
43%
34%
17%
Companies Awarded Funding
Cornwall
Devon
Plymouth
Somerset
• PWGF2 fully allocated in 9 months • Demand still evident • Several strong applications not
funded • Enquiries still being received
• What next?
…now open!!!!!
RGF4 – Plymouth and South West Peninsula
City Deal
Aims of the Fund • Rebalancing the local economy – more private sector employment • Creating new, and sustainable jobs • Helping local businesses to grow • Access to additional funding to enable project completion • Looking for good value for money • Co-investment from the private sector • Spend by 31st March 2015 – No pressure then!
• Projects need to be “spade ready”
RGF4 – Plymouth and South West Peninsula City Deal
• A further £3 M to be “granted” • Smaller Grants - £25k - £150k – limited to a fund of £1.168M • Larger Grants - £250k - £1M max per applicant
• Industry Sector focus Marine and supply chain Advanced Manufacturing Digital Environmental Technologies (……….but other industries may apply)
• de minimis or General Block Exemption
• Across the Heart of the South West LEP and Cornwall & Isles of Scilly LEP areas • All Local Authorities are partners, Chambers (lead by Plymouth), GAIN, PCC lead
body, Plymouth University programme managers
?
Speak with the Grant Team at the end of the presentations
Thank You for listening
SMART and
other grants
David Bullen – Corporate
Finance Senior Associate
www.francisclark.co.uk
SMART
Previously known as “Grant for R&D”
Science, Engineering and Technology: New Products and Services
Grant support for SMEs:
• Proof of market (9 months, £25k, 60%)
• Proof on concept (18 months, £100k, 60%)
• Development of prototype (2 years, £250k, 35% / 45%)
Competitive / Batch Applications
Smart v R&D Tax Credits - cannot have both for same project
www.francisclark.co.uk
Innovation Vouchers
£6m for UK SMEs - Grants of up to £5k
Criteria
• challenge for your business/ specialist help
• first time that you have worked with the knowledge supplier
• In one of priority themes
Innovation and themes:
• “new or improved products, new or improved processes, new or improved
services, investigating new markets or managing your intellectual property”
• Agrifood; Built Environment; Energy Waste & Water; Open Data Innovators
and Inventors; Cyber Security
TSB funds generally - www.innovateuk.org/funding-
support;jsessionid=B70572D282A5EFA40F8B31DC80CEB806.3
www.francisclark.co.uk
Innovation 4 Growth
SMEs and Large Companies based in the South West
Part fund R&D Projects: eligible costs incl staff salaries, materials,
equipment etc
Grants £25k to £150k (At up to 35% intervention)
Development of new or improved products, technologies, processes or
services
Job creation and/ or safeguarding
All funding to be issued by 30/4/15
Application deadline 10th March. Start with Registration Form
www.innovation4growth.co.uk
www.francisclark.co.uk
Other grant schemes
• European Fisheries Fund
FLAG – Fishing businesses & Fishing communities
Axis 2 – Fish Processing
• Energy Entrepreneurs’ Fund
• Opened for final £10m in January 2014
• Grants of < £2m
• Innovative low carbon energy ideas
• Applications judged “on their ability to cut costs of existing technologies
and the potential for future carbon savings and commercial viability”
• FITs, RHI etc.
• FC Blog for updates - www.francisclark.co.uk/news-
views/blog/
www.francisclark.co.uk
Debt..
Energy Efficiency Financing Scheme
• Siemens Financial Services and Carbon Trust
• Business trading > 36 months
• Investment in energy efficient equipment (and renewable energy
generation?)
• Loan e.g., Interest rate c 9% for a 7 year term loan repayable in monthly
instalments.
• ReEnergise SmartEnergy Finance
• Investment in renewable energy and energy efficient projects
• £5m fund
www.francisclark.co.uk
Break
Session 2 start time
9.55am
Finance in the
South West 2014
Rewards, Debt and
Equity, but first…
Lewis Banfield - Partner
www.francisclark.co.uk
Structure of morning
• Background and Grants (8.30am to 9.35am)
• Key note speaker
• SME, LEP and the ‘funding gap’
• Grant schemes
• SME experience, rewards, debt and equity (9.55am to 11.10am)
• Investment ready, business support and closing address (11.30am to 12.35pm)
• Q&A one to one / Networking (12.35pm to 2pm)
STRICTLY CONFIDENTIAL
49
SOME IMPORTANT THINGS ON FUNDING
Rory Kindlon - CFO
February 2014
POWER TO LEARN
[Title]
50 STRICTLY CONFIDENTIAL
The Who, What, Why and How
THE HOW - KPIs & DRIVERS
Online advertising is now bought in
real time
Few companies in the world are able
to apply machine learning
We have built a platform to do this
Makes the best digital media
decisions in real time
SCALE + SPEED + SMARTS
WHO WHERE WE ARE GOING - THE PLAN
0.2 5.0
38.4
127.9
275.8
Mar-14E Mar-15E Mar-16E Mar-17E Mar-18E
UK Germany New York San Fran. Hong Kong
Online advertising has failed to learn
$42bn Market
99.8% ads not clicked
>30% ads not viewed
61% traffic generated by bots
For Plymouth
THE WHY
[Title]
51 STRICTLY CONFIDENTIAL
My background
Co-Founder and CFO of IO Technologies Group Ltd
20 Years in Finance with experience in Tech Startups, Investment
Banking, PE, Accountancy
In a former life:
Director of Corporate Finance at Skyscape Cloud Services
Partner at Akira Partners, London-based TMT M&A boutique
Qualified chartered accountant with Andersen’s
Key strengths:
Funding & private equity
Corporate strategy
Industry knowledge
Value creation
[Title]
52 STRICTLY CONFIDENTIAL
Funding requirements, history and strategy
Date Source Amount Valuation Runway Uses
Pre-
May 13
Founders £350k n/a May 13 • Recruit Management Team
• Develop Plan
May 13 Round 1
F&F
£100k +100%
Sep 13 • Grow team to 8
• Build MVP / Secure first customer
Aug 13 Round 2
HNI
£410k +100%
Dec 13 • Grow team to 19
• Customers on platform to 4
Dec 13 PWGF 1 £100k n/a Jan 14 • Match Funding
• Contribution towards 12 new jobs
Jan 14 Round 3
HNI
£550k +300% May 14 • Grow team to 34
• Customers on platform to 12
£1.4m raised to date
R&D Tax Credits £200k
Grants £100k+
Round 4 Further £2.5m
Round 5 Further £5m+
[Title]
53 STRICTLY CONFIDENTIAL
5 important things
MANAGEMENT
MARKET
PRODUCT
OPERATIONS
FUNDER RETURNS
PASSION, DRIVE & AMBITION
DYNAMICS & TRENDS
COMPELLING VALUE PROPOSITION
ADVANTAGES OVER ALTERNATIVES
AUTOMATION
QUALITY AT SCALE
JOB CREATION / ECONOMIC BENEFITS
RISK ADJUSTED RETURNS
[Title]
54 STRICTLY CONFIDENTIAL
PREPARE PLATFORM FOR
PERFORMANCE
Jul-14 Dec-14 Jul-15
HIGH VOLUME TRAFFIC
AND LEARNINGS
1
2
Reach critical
performance
GAME ON
TOE TO TOE WITH
COMPETITION 3
Stay focussed on key milestones
Dec-13
Clients
Headcount
ARR (£m)
17
43
£1.4m
56
67
£6.7m
176
85
£24.8m
San Francisco New York London
[Title]
55 STRICTLY CONFIDENTIAL
Important Values
FAITH
COURAGE UNITY
[Title]
56 STRICTLY CONFIDENTIAL
THANK YOU
Supported by
Phil Geraghty – Managing Director
Funding and validating
local projects
Crowdfunder is the UK’s largest crowdfunding
Network.
Helping businesses, community groups and
Charities to raise funds and bring people together.
We have worked with 1000’s of projects all over
the UK and raised over £1.2m.
We are backed by Nesta’s Innovation in Giving
Fund and here in the South West by Plymouth
University.
There are three different types of crowdfunding
• Sell a % of your established business for money
• Dragons den
• Borrow money online from lots of people rather than the bank
What is Crowdfunding?
The Market
Lending Reward
s
Equity
• Only type that builds communities
• People give money
in return for rewards
• We do rewards
based crowdfunding
Crowdfunding is best
explained by example
Phil from Leeds Bread wanted to setup
a co-operative organic bakery in Leeds.
The bank said he was mad, but that did
not stop him, and he setup a crowdfunder
Campaign.
He raised over £8000 from 114 people
He knew the first 30 people, but the rest were
friends of friends and other local people who
loved his idea. Great ideas spread.
The deal was simple, you put £100 into the project
and you get a loaf of bread every week for a year.
He offered the reward and people got involved.
What have we achieved so far
History
Working with Partners
Partners
“Our scalable, cost effective way of reaching audience”
Crowdfundi
ng Charities Crowdfunding
Cornwall &
The University
Crowdfunding
Food Crowdfunding
Communities
Speak to us if…
Come talk
1. You have a project to fund
2. Your clients/customers have project to fund
3. You are a potential partner wanting to make a difference
4. You would like to be part of our growth
Who Are SWIG?
CDFI
CDFIs lend money to businesses, social enterprises and
individuals who struggle to get finance from high street
banks…They offer loans and support at an affordable rate
to people who cannot access credit elsewhere…
A key plank of Governments’ Access to Finance Strategy
‘
Call: 01872 223883 [email protected] www.swigfinance.co.uk
’
Operating across the
South West for 25 years
Over £25 million to over 1,500 local businesses
HOW CAN WE HELP?
We provide FINANCE to
Start up and Growth
businesses
Business Support We are linked into a wide variety of business
support agencies and other sources of finance
Your Business Business support Business Growth
+ =
Get in touch
www.swigfinance.co.uk [email protected]
01872 223883
SWIG Services Ltd
Lowena House, Glenthorne Court, Truro Business Park
Threemilestone, Truro, Cornwall, TR4 9NY
B Y D A V I D B R O W N
• Alternative Funding
• A Market Place to bring lenders & borrowers together
• Varied concepts across increasing number of Companies and Platforms
• Business loans now available
PEER TO PEER/CROWDSOURCING DEBT
• Began in 2005 with Zopa
• 121% sector growth in 2013
• Q4 2013- £843M lent
• To be Regulated by FCA April 2014
• UK has most advanced website platforms
• Folk2Folk 6th largest in UK
PEER-TO-PEER LENDING SECTOR
• P2P Companies match creditworthy borrowers with investors looking for competitive returns
• Loans posted onto website and auction the right to participate in Loans
• Subscribed by multiple lenders, loan executed once sum raised
• Website based platforms with varied models used in assessing Loans
HOW IT WORKS
• Secured Lending only
• Speed of decision making
• Auction letters of credit
• Local knowledge
• Face2Face in addition to online proposition
FOLK2FOLK IN THE SOUTH WEST
• Set up by the owners of Parnalls Solicitors in Launceston
• Financial and Legal sector professionals
• Local expertise
• Quick decisions
• Personal touch
BACKGROUND
• Alternative option for their savings
• Attractive returns
• Secured loans
• Spreading risk
• Investing in the South West economy
LENDERS BENEFITS
• Fast Local decision
• Any purpose
• Interest Only
• Flexible
BORROWERS BENEFITS
SECTORS
43%
8%
20%
15%
8%
6%
Property Build/Purchases
Renewables
Commercial Development
Agriculture
Leisure
Other
SANTANDER GROWTH CAPITAL
PETER ABEL, DIRECTOR
SOUTH WEST
GROWTH CAPITAL FILLS THE FUNDING GAP as identified in the Rowland
Report
OUR BROAD CRITERIA – WHAT ARE WE LOOKING FOR?
Annual turnover
£0.5m – £25m
Demonstrable Growth
in a combination of
sales and / or profits
Track record of
operating profitability
and cash generation
Proven management
teams with ambition
Privately owned
businesses rather than
Private Equity backed
Not start-ups.
At least 3 years of
financial history
AREAS WHERE GROWTH CAPITAL SUITABLE
Capex investment to
support growth plans
Investment in New
Product Development
Investment in sales &
marketing overhead
for new products /
areas
Acquisition funding
support
Funding of proven roll-
out concept
Expansion projects to
drive rapid growth
OUR GROWTH CAPITAL PROVIDES KEY BENEFITS TO SMEs
Debt offering - No
warrants and no
dilution of equity
Preserves cash -
Interest only. Cash
interest is L+5%.
Rolled interest of 5%
Enhanced debt
capacity - Cash flow
lend not limited to
tangible security
No prepayment
penalty fees -
Provides flexibility on
term
Full banking and
security - No
automatic requirement
for PGs
Access to
Breakthrough
programme -
Additional support
BREAKTHROUGH PROGRAMME – NOT JUST FUNDING
The Breakthrough programme will invest £200 million in fast-growth SMEs, supporting local enterprise and community
initiatives, creating jobs, inspiring entrepreneurs of the future and turbo-boosting a private sector led economy
This initiative will help SMEs participating in
the Breakthrough programme to reach new
overseas markets if their growth plans and
ambitions are beyond the UK. It includes
subsidised trade missions, educational
roadshows and support accessing
information on exporting.
Santander is running a unique experience
programme for fast-growth SMEs that takes
them behind the doors of the world’s most
iconic and best fast-growth businesses, to
learn first hand how they did it – real
experience to help their own growth journey.
In keeping with our focus on responsible
business, Santander has launched a
number of initiatives to encourage more
responsible and inclusive business practice
and to invest in Social Enterprise
development.
Santander is running regional Breakthrough
Live conferences for fast-growth SMEs.
Working with Santander Universities the
Breakthrough Live conferences bring
together leading entrepreneurs to share
experiences.
Santander has launched an online portal for
SMEs participating in the Breakthrough
investment programme to access the best
student and graduate talent across our
partner University network – including
Universities in Scotland.
Santander has up to £200 million to invest
in fast-growth SMEs turning over between
£500k – £25m across the UK. The
investment programme will run over the
next 3 – 5 years and invest in up to 200
SMEs.
1. Breakthrough Growth Capital
4. Breakthrough Talent
2. Breakthrough Live
5. Breakthrough Responsibly
3. Breakthrough Masterclasses
6. Breakthrough International
www.santanderbreakthrough.co.uk
Communications Technology
Completed July 2012
£1m Growth capital loan
10 new jobs
Vet Practices
Completed July 2012
£1.25m Growth capital loan
120 new jobs
Engineering
Completed September 2012
£0.4m Growth capital loan
20 new jobs
Legal Services
Completed January 2013
£1.1m Growth capital
20 new jobs
Software
Completed January 2013
£0.5m Growth capital loan
6 new jobs
Healthy Fast Food chain
Completed March 2013
£1.25m Growth capital loan
150 new jobs
Telecommunications
Completed March 2013
£1m Growth capital loan
50 new jobs
Software
Completed March 2013
£0.5m Growth capital loan
14 new jobs
Software as a service (SaaS)
Completed April 2013
£0.5m Growth capital loan
14 new jobs
Thai restaurant chain
Completed September 2012
£2.4m Growth capital loan
90 new jobs
Healthy Fast Food chain
Completed May 2013
£0.7m Growth capital loan
50 new jobs
Media services provider
Completed April 2013
£0.7m Growth capital loan
15 new jobs
Cleaning products
Completed September 2012
£0.85m Growth capital loan
5 new jobs
Women’s clothing e-tailer
Completed September 2013
£0.7m Growth Capital loan
30 new jobs
SOME OF OUR GROWTH CAPITAL INVESTMENTS
THANKYOU
PETER ABEL, DIRECTOR
SANTANDER GROWTH CAPITAL, SOUTH WEST
Tel: 07809 493791
Email: [email protected]
Website: www.santanderbreakthrough.co.uk
……a bank for your ideas!
Equity – why
even Boris is
talking about
it..
Nick Woodmansey –
Corporate Finance
Senior Associate
www.francisclark.co.uk
Equity
Who is talking about it?
• Francis Clark
• CBI – “Slice of the Pie – tackling the
under-utilisation of equity finance”
• Boris Johnson - “The real opportunity for
Britain is to move away from just bank financing
towards equity financing of all kinds, to try to get
private investors to put money into startups - so
that you're not relying on the banks who've not
traditionally been brilliant.”
www.francisclark.co.uk
Background to equity
• Why equity?
• In banking terminology – an equity proposition!
• Ambitious growth
• Lack of security
• Lack of track record
• More than just the initial money
• Drive growth
• Mentoring & discipline
• Introductions
• Further capital
www.francisclark.co.uk
Structuring equity investments
• Cash investment made into:
• Shares
• Loans
• Required return
• 20 to 40% IRR (annual yield)
• 3 – 5 x cash multiple
• Majority of the equity return is on exit
• Portfolio return is lower
www.francisclark.co.uk
Enterprise Investment Scheme (‘EIS’)
• Investor income and capital gains tax relief
• Unquoted
• Unconnected
• Minority stake
• But there are exclusions!
• Watch compliance!
• Two formats
• EIS
• Seed EIS
www.francisclark.co.uk
Enterprise Investment Scheme
EIS SEIS
Investment limit
£1,000,000 £100,000
Investment timeframe
3 years 3 years
Income tax relief
30% 50%
Capital gains tax on sale
No tax charge No tax charge
Reinvestment of
previous gains
Defer tax Exempt gain
Loss relief
Against personal tax liability
www.francisclark.co.uk
Sources of, and/ or, routes to equity?
• Friends, Families and Fools
• Virtual Networks - e.g. Crowdcube
• Angel Networks - e.g. SWAIN
• Venture capitalists and Private Equity
• Active in SW include
“Q1 2013 showed the lowest ever level of use of
external finance by SME’s” – SME Finance Monitor, Aug ‘13
“Access to finance is a “major barrier” to growth for
more than one in five small companies” – FT, Mar ’12
“Less than one in five SME’s have attempted to
raise finance in the last year – with 40 per cent of
applications rejected” – RealBusiness, Sept ‘13
The problem
Crowdcube is the world’s first and leading equity crowdfunding platform
giving entrepreneurs a new way to raise investment
Fully authorised and regulated by the Financial Conduct Authority
The solution
The solution
Success so far
£19 million funded so far…
£250,000 largest single investment
>60,000 members
95+
£1.9 million biggest deal
£2,800 average investment
Successfully
funded deals
£180,000 average deal
Stage of Growth
By Category
Case studies
What are the benefits?
New way to raise finance
UK wide investor reach
Easier to promote
Cost effective
Marketing effect
Crowd feedback
Financial return
‘Armchair Dragon’
Support friends and family
Participation
Lower/spread risk
Simple to invest
Finance in the South West
February 2014
Angel Investment
Philip Tellwright
Chief Executive
SWAIN
Business Angel networks
Copyright SWAIN 2013
Copyright SWAIN 2013
Area of operations
Copyright SWAIN 2013
Statistics
11%
5%
17%
8%
17%
24%
18%
Deals done by sector
Cleantech
Food/drink
IT
Manufacturing
Media/comms
Medical devices
Service
Copyright SWAIN 2013
Stats
Copyright SWAIN 2013
10 years 103 companies financed 144 rounds of funding £75m raised in total Failure rate 29% Ytd to March 2014 15 deals £1.1m 4 more completions anticipated
Original ethos
Copyright SWAIN 2013
Key features business angel activity
Copyright SWAIN 2013
• Personal – preferably regional • Confidentiality • Understand more complicated
businesses • Add value • Provide support • Will follow their money because
of the relationship which has been established
Keeping pace with fashions
Copyright SWAIN 2013
Where value is generated
John - 30 investments
• Currently @ 3.5x money
50% 30% 20%
Value Added Selection End Sale
Copyright SWAIN 2013
banc
Why do investors invest?
1. To make a return
2. To participate and
contribute
3. Because returns are
poor elsewhere
4. Because they get tax
relief
Right product; right
people
Add value
Typical Investor Requirements
5x – 10x cash
3-5 years
Exit
Seat on the Board
Some influence and control
Copyright SWAIN 2013
Nesta Research 2009 (1)
Copyright SWAIN 2013
Nesta Research 2009 (2)
Copyright SWAIN 2013
Investors “ought to…”
Copyright SWAIN 2013
Changing face of funding sources
Copyright SWAIN 2013 Source Platform Black
Crowd plus lead investor
Copyright SWAIN 2013
The road ahead
Copyright SWAIN 2013
Finance in the South West
February 2014
Angel Investment
Philip Tellwright
Chief Executive
SWAIN
PRIVATE EQUITY AN INTRODUCTION
George Adams
Piper Private Equity LLP
1
Private Equity
It’s Position In The Milky Way Of Company Funding
2
Private Equity
Let’s Look A Bit Closer
3
What Are Private Equity People
Like?
4
We’re quite normal – but there is a big variety
We’re focused on growing value
We can bring expertise, further cash, opportunities and contacts
We have some rules, but can be extremely flexible
Not every company is suitable
The Reality
5
o Expertise: Varies by type of PE House eg sector specific eg issue specific o Rules: Information & Data Behavioural Ultimately relationship is key o Flexibility: Cash In/Out Minority / Majority Management In / Out / New Higher Risk / Steadier Returns
A Few Aspects
6
Piper
Passionate about brands
We Invest in consumer brands
Retail, Leisure, Consumer Products & Services
£3m to £15m
7
Passionate about brands
We have an excellent track record and have developed deep sector knowledge in each of
these markets
Delivered diet company Family clothing catalogues Latin American restaurant chain Luxury handmade rugs
Casual clothing brand Sports nutrition products
Food Service brand
Womenswear catalogue for over 45’s
Travel clothing retailer
Bar chain Burger restaurant chain
Upholstered furniture retailer
Exam revision specialist
Cocktail bar chain
Café / bar / restaurant chain
Adult soft drinks
Luxury footwear
Our Track Record
8
Beach and resort clothing for men
Chain of Caribbean restaurants
We look at:
The Consumer Proposition
Team
Growth
Exit
What Piper Looks At
9
The End
Thank You
10
Growth Capital Investors
Introduction to BGF
Edwin Davies, Investment Associate 26.02.14
Growth Capital Investors
About us BGF
Long-term growth capital for UK companies
£2.5bn of capital from five of the largest UK banks
Long-term business builder through expertise as well as capital
Independent, quick and autonomous decision making
90+ staff, 7 regional offices, local deal origination, execution and support
Growth Capital Investors
Investment Criteria Long-term growth capital for UK companies
Established UK companies with sales of c. £5 – 100m
Businesses with past and potential future growth
Capable management team
£2-10 million equity requirement (per funding round)
Minority equity stakes
Growth capital funds can be used for:
Acquisitions, working capital, R&D, capital investment, overseas expansion
Some “cash out” to shareholders but this must be less than 50% of the BGF investment
Generalist sector focus but excluding:
Property investment and development; Some regulated financial services businesses; Some on ethical grounds
Growth Capital Investors
Growth Capital Investors
Why are we different BGF
Focus on growth capital for SMEs
Flexible, long-term view on exit
Flexibility on investment structures
Minority investor and partnership approach
Regional office network
Huge network of experienced business leaders to support growth at board level
Focused diligence process and sensible investment timelines
www.francisclark.co.uk
Break
Session 3 start time
11.30am
Finance in the
South West 2014
Investment ready,
Business support and
closing address…
Lewis Banfield - Partner
www.francisclark.co.uk
Structure of morning
• Background and Grants (8.30am to 9.35am)
• Key note speaker
• SME, LEP and the ‘funding gap’
• Grant schemes
• SME experience, rewards, debt and equity (9.55am to 11.10am)
• Investment ready, business support and
closing address (11.30am to 12.35pm)
• Q&A one to one / Networking (12.35pm to 2pm)
Investment
ready…
Matthew Willmott – Corporate
Finance Associate
www.francisclark.co.uk
Matching requirements
Understand your
requirements
Understand funding
options and funders
requirements
www.francisclark.co.uk
The Readiness Process
• When, why and what funding is needed
• Communicating the business proposition -
Business plan and projections
• Viable plan and credible management
• Building the relationship
www.francisclark.co.uk
Investment ready – housekeeping
• Compliance and Legal
Licences / contracts/ legal title?
IPR ownership in the company?
Statutory Accounts/management accounts
VAT, PAYE/NI, Books and records in order?
www.francisclark.co.uk
Requirements: Grants
• “Project” eligibility – sector, size, location…
• Timescale – prescriptive, process and panels, not
retrospective
• Match funding
• ‘Need for grant’ versus viable proposition
• Other factors - Environment, Equality, on going
requirements
www.francisclark.co.uk
Requirements: Debt
• Serviceability & Headroom
• Security / Personal Guarantees
• Conduits for government initiatives
• Covenants – achievable / appropriate?
www.francisclark.co.uk
Requirements: Equity
• Exit route and returns to the investor
• Investors expertise vs. loss of
independence?
• Be prepared to discuss valuation
• Be aware of FSMA regulations
www.francisclark.co.uk
Investor Ready - Conclusions
• Appropriate funding / understand the funder
• Business Case
• Plan B?
• Know the ‘deal breakers’ – due diligence
• Build in extra time
Business Plans
and Financial
Projections
Nick Tippett – Corporate
Finance Associate
www.francisclark.co.uk
“Business Plan”
• Business case
• Tailor to audience
• Informing v giving away IP
www.francisclark.co.uk
Structure of a business plan
• Front cover
• Contents
• Executive summary
• Background to the business
• Products and services
• Customers and markets
• Business operation
• Management
• Financial history
• Financial projections
• Appendices
www.francisclark.co.uk
Projections: the perfect scenario
• Monthly integrated profit and loss, cashflow and balance
sheet covering a period of three years
• Documented assumptions
• Ability to sensitize the model
www.francisclark.co.uk
Projections: the real world!
• Choose an approach that works for the business
• Focus on the KPIs of the business
• Make basic assumptions
• Compare to actual results
www.francisclark.co.uk
Common issues
• Inconsistencies between Business Plan (narrative) and
Projections (figures)
• Profit ≠ cash
• Do not forget about tax (VAT and tax on profits)
• Match funding to cash requirements, business model &
exit strategy
• Read through documents ‘cold’
Access to Finance Masterclass 3
July 2013
GrowthAccelerator overview
www.growthaccelerator.co
m
Presented by Bruce Colley
26th February 2014
www.growthaccelerator.co
m
1-2-1 Coaching
Workshops
Master Classes
Connectivity
Growth Mapper
Growth Manager
Access to
finance Business
development
Help to Innovate
Leadership & Management
Funding
1
5
9
“My bank want me
to factor – is it the
best option?”
"I haven't had to
raise finance before
- what are my
options?”
"I want an investor
who will bring in
expertise and
contacts”
"My bank won't
support me with my
funding
requirements“
“I want to grow my company, but.......”
Access to Finance Masterclass 3
July 2013
• SMEs only - less than 250 employees, £40m turnover
• Ambition to double in turnover, profits or employees in 3 years
• Registered in England
• Independently owned
• Any sector
Eligibility?
18th December 2013, Tortworth Court, Bristol
Access to Finance Masterclass 3
July 2013
1. This is a Selective Service, only for those with the ambition
to double in the next three years
2. It is Personalised to Address Your Business Challenges
3. It is the UK Government Investing in High Growth
Businesses, delivered by a consortium of private sector
partners
4. It use commercial, experienced coaches (800 across the
country – 200 specialist Access to Finance)
5. The service is focused on Results
What makes this service unique?
18th December 2013, Tortworth Court, Bristol
Access to Finance Masterclass 3
July 2013
1. Worked with over 11,000 high growth businesses across
England
2. Raised finance for a wide range of companies in the South-
West – ranging from: traditional debt, invoice finance, asset
backed RDF, matched funded TSB, angel (traditional and
crowd), funding circle and VC
Progress to date?
18th December 2013, Tortworth Court, Bristol
Access to Finance Masterclass 3
July 2013
Scope of the service Current position Post funding
Core support Review of your
business.
Business diagnostic.
Establish eligibility
and suitability.
Review coaching and
package of support.
Access to finance
require a reasonable
business plan to be in
place
Funding
requirements
Debt or equity (angels,
crowdfunding,
networks, syndicates,
banks, specialist
financiers, VCs…)
Review suitability of
business plan
Agree finance action
plan
Investment readiness
Fine tuning of business plan
Developing thoughts in line
with appropriate
masterclasses
Agreeing the opportunity note
and the pitch proposition
Identifying gaps in the due
diligence
Reviewing on-going
professional support
Introduction
Agreeing priorities and
schedule for introductions
Introductions to up to
three sources of finance
Liaising with Investment
relations team
Hand over to corporate
finance advisor / lawyer as
appropriate
Connectivity
On going
leadership and
management
training
Masterclasses
Leadership &
Management
Investment
relation team
Fast track
workshops
Access to finance support
MC1: Understanding finance - To understand advantages/disadvantages of
alternative sources of external finance
MC2: Preparing for finance - To craft a strong ‘pitch’ to increase your success of
accessing external finance
MC3: Closing the deal – Legal and Valuation - To maximise your ability to complete
a financing deal
The fast track w/s programme is an intensive series of workshops backed up by
one-to-one coaching that gets you ready for finance and helps to put you in front
of investors and other sources of finance (micros and start-ups)
£2000 matched funding towards leadership and management training per senior manager.
Can be effective in developing the management teams ability to further develop the investment
proposition (i.e. marketing plan, financial planning etc.)
Also available post investment to help develop management capacity
Provides additional information on relevant VCs, banks, angel syndicate and
networks. Also providing feedback on your opportunity note
Access to Finance Masterclass 3
July 2013
Contact me:
Bruce Colley [email protected] 07436 108297
What do I do next?
18th December 2013, Tortworth Court, Bristol
The Growth Acceleration and Investment Network
The Peninsula’s Growth Hub
www.gaininbusiness.com
GAIN…
• Is a network of business service providers dedicated to raising awareness and increasing take-up of the support available
• Adds value to, and does not duplicate, existing networks and business support
www.gaininbusiness.com
Helping business find the right support…
• GAIN Business Engagement Service – A phone / e-mail based light touch diagnostic,
signposting and brokerage service for any business
• The GAIN Digital Exchange – gaininbusiness.com
Both to be launched in April 2014
For more information - 0800 052 5600
www.gaininbusiness.com
Flexing provision and filling gaps
MAS for marine
Innovation Vouchers
Start Up Support
Export Support Programme / Web fuelled
Enhanced FDI
Finance Partnership
www.gaininbusiness.com
Business
support - other
David Bullen – Corporate
Finance Senior Associate
www.francisclark.co.uk
Business support (and funds?)
• MAS
• UKTI
• Business Growth Vouchers
• There are others…
www.francisclark.co.uk
MAS
www.francisclark.co.uk
UKTI
Support to........ • Develop an export strategy – Passport to Export (£3,000), Gateway to
Global Growth (£3000)
• Undertake market research (including identifying potential partners) –
EMRS (50% match), OMIS (subsidised)
• Visit & develop new export markets – MVS (£200-£850)
• Improve international communications: website, email, languages &
culture – ECR (subsidised), ECR EV (£3000)
• Exhibit overseas – TAP & TAP SOLO (£1,000 to £2,500)
• Carry other marketing and sales development activities - European
funding (ERDF) (£1,000 to £30,000)
www.francisclark.co.uk
Business Growth Vouchers
• Up to £2,000 support (50% match funded)
• 5 categories of support: - Managing cashflow, late payments and negotiating finance
- Developing skills and taking on staff
- Improving Leadership and Management
- Marketing, attracting and keeping customers
- Making the most of digital technology
• FC registered for the first point above
• http://enterprisenation.com/marketplace
• https://www.gov.uk/apply-growth-vouchers
www.francisclark.co.uk
Michael Portillo
Finance in the South West
2014
Finance in the
South West 2014
Thank you
and please network
Lewis Banfield - Partner
www.francisclark.co.uk
Structure of morning
• Background and Grants (8.30am to 9.35am)
• Key note speaker
• SME, LEP and the ‘funding gap’
• Grant schemes
• SME experience, rewards, debt and equity (9.55am to 11.10am)
• Investment ready, business support and closing address (11.30am to 12.35pm)
• Q&A one to one / Networking (12.35pm to 2pm)
www.francisclark.co.uk
Summary
• SMEs – the country needs you
• SW a great place to do business
• Some great businesses in the SW
• Confidence?
• Funding and support – options
• Thank you
www.francisclark.co.uk
Network: there are here to speak to you
…and many more
www.francisclark.co.uk
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