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Slide deck Guide to Sources of Finance for London Entrepreneurs

March 2012

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Next Generation Finance Consortium Members

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• Bootstrapping through Personal resources (time and money = sweat equity you are investing)• FFF- Family Friends & Fools – People who will give you funds with little questions asked including

reward based crowd funders such as Peoplefundit. • Government Grants• Customers and Suppliers- “Build slowly at low risk by obtain credit from suppliers and growing

business through profits from paying customers”• Loan providers- “Increase business growth ambitions by increasing investment by taking out debt”

– Banks ( Overdraft-unsecured and secured loans)– Community Finance Institutions ( Soft/ unsecured loans for riskier ventures)– Leasing Companies.– Invoice lenders (Factoring, invoice discounting)– New loan markets such as Market Invoice and Funding Circle.

• Investors-– Private Investors- Business Angels such as Angel Capital– Venture Capitalist– Crowdcube– Government Backed Investment FundsMatching the right mix of sources to the right stage and type of finance is the key to successful

fundraising

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Banks only make a margin on loans of between 2-7% -so they can only afford very low default rates and this means they will not lend to a business or entrepreneur that is deemed “risky”. And you are deemed an unacceptable risk if:1. You have a bad credit history2. Failure rate in you business sector is high3. You have no confirmed customer invoices- no evidence of sales = no evidence you can re-pay the loan4. The business has no trading history – difficult to get a loan unless been trading for over 6 months5. You are unable to offer security to cover the bank if the business fails.6. Your customers are overseas –so there is a risk they cannot be legally forced to pay for goods ordered. 7. What you want to do with the borrowed money is widely regarded as having a poor success rate e.g.

Research and developing a new product and especially marketing.

If any of the above applies to you then look at the Next Generation Finance Consortium Members.

You can’t a business loan from a bank because?

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Step 3- Match the funding need to purpose?

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Where do NGFC members fit

Figure 1. 4 Steps to developing a high growth business. ( Source HBR)

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NGFC Member Funding Match- Where & When we can help. Capital Enterprise can help early stage entrepreneurs sources of “proof of concept” funding ( including R&D grants) and help entrepreneurs to develop scalable business models and plans. Peoplefund it can help early stage businesses raise funds to develop and test proto-types and fund market launches. CDFA members & North London Community Finance can help pre-revenue entrepreneurs raise small loans (£5-10K) to launch a business and provide income generating growing businesses larger ( £10-25K) unsecured loans to fund cash-flow

Crowdcube can help scalable businesses with some to market validation to raise seed funding ( £50K+ )from a “ crowd” of small investors. Angel Capital is looking to use the Seed Enterprise Investment Scheme to help raise £100-150K for entrepreneurs with proven scalable business models. Angel Capital can also help raise up to £1m for scalable businesses with proven management teams

Market Invoice has a market of lenders willing to issue relatively cheap loans to companies needing cash to fund individual confirmed orders including those from overseas.

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Information:

• Capital Enterprise What’s On in London- www.capitalenterprise.org/whats-on • Business Link - www.businesslink.gov.uk • Start- up Britain - http://www.startupbritain.org • British Library- www.bl.uk/bipc • HMRC Small Company Enterprise Centre- Source of advice and help

http://www.hmrc.gov.uk/manuals/vcmmanual/VCM10050.htm• HMRC R& D Tax Credits www.ucl.ac.uk/advances/advances-news/hmrc• HMRC Guide & Support- http://capitalenterprise.org/guide-to-rd-tax-credits • British Business Angel Association: www.bbaa.org.uk • Guide to Early Stage Investment: http://

www.paloalto.co.uk/about_us/Early_Stage_Investment_by_Alan_Gleeson.pdf

• Guide to 100 offers for start-ups – www.capitalenterprise.org

And if you have not checked them out please look at the latest schedule of advice and training events at :www.ngfc.org.uk .

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Need less than £10K to start?

- Sources of Grants- www.j4b.co.uk - Competition funding £1000 issued to 10+ businesses per month- http://www.shell-livewire.org - Princes Trust http://www.princes-trust.org.uk/need_help/enterprise_programme.aspx - New Enterprise Allowance Scheme – Check who delivers the scheme in London by e-mailing Capital Enterprise.- Community Development Finance Associations- http://www.cdfa.org.uk - Also check out North London Community Finance- ELSBC Access to Finance – Business Plan support for those looking to raise up to £10K

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Sources of Finance for those looking to start and grow a scalable business ?

( i.e. need more than £10K?)

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Accelerators : Training & Mentoring programmes that provide fast-track to seed funding for scalablenew businesses• Lean Camp : http://leanca.mp • Seed Camp: http://www.seedcamp.com • Start-Up Weekend: http://london.startupweekend.org • Launch 48: http://launch48.com• Tech Hub : http://www.techhub.com • The Business Bootcamps- www.thebusinessbootcamp.org• Accelerator Academy- http://acceleratoracademy.com • Innovation Warehouse- http://www.theiw.org • Hubventurelabs - http://hubwestminster.net/hubventurelabs Practical Help with Accessing Finance and Business Planning• CEME Gateway to Investment Service• Enterprise Enfield- Invest in Success • Prevista –Raising Finance Service • UCL Advances-HELO Project ( Student Interns)- http://www.ucl.ac.uk/advances/business/support/helo • E-Innovate- http://www.gle.co.uk/advice/developing-innovation.php • Enternships- http://www.enternships.com • Enterprise Agencies offering 1-2-1 support- www.capitalenterprise.org/members • Mentors Portal- www.mentorsme.co.uk

Getting ready for finance?

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Debt Funding Initiatives- Trading Businesses Only• CDFA ( Soft Loans from Community Finance Institutions willing to provide unsecured loans to trading

businesses who banks are unlikely to fund)- http://www.cdfa.org.uk - Frederick Foundation- http://www.fredericksfoundation.org - East London Small Business Centre- www.goeast.org

- North London Community Finance- http://www.northlondoncommunityfinance.org/ • Enterprise Finance Guarantee ( Government underwriting UK banks business loans so SME’s can get

unsecured loans) http://www.rbs.co.uk/business/borrowing/g1/firms.ashx • Examples of New types of funding: • http://www.marketinvoice.com- : Need to fund an export order, government contract or orders from

late paying large customers then check out this new and very cheap source of funding. • http://www.fundingcircle.com

• Green/ Energy Efficiency loans: http://www.carbontrust.co.uk/cut-carbon-reduce-costs/products-services/financing/pages/financing.aspx

Looking to Borrow from an alternative to traditional banks and finance providers ?

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Crowd funders-

Crowd Cube: http://www.crowdcube.com – The UK site for those looking to raise investment (£20K-£1m)froma “crowd” of small investors.

Business Angels-

• London Business Angels: http://www.lbangels.co.uk • London Seed Capital - http://www.londonseedcapital.com/• NESTA - www.nesta.org.uk/investments • Start-up funding club- http://www.startupfundingclub.com • Oxford Early Investments- http://www.oxei.co.uk/about.php• Envestors- www.envestors.co.uk

Early Stage Venture Capital Firms• Amadeus- http://www.amadeuscapital.com/about-seed.php• Balderton- http://www.balderton.com• DfJ Esprit - http://www.dfjesprit.com • Doughty Hanson- http://www.doughtyhanson.com/technology-ventures.aspx • Early Bird Ventures- http://www.earlybird.com • Index Ventures- http://www.indexventures.com • Octopus- www.octopusventures.com

Looking for investment?

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Seed Enterprise Investment Scheme-SEIS is a tax break launched in April 2012 for UK tax payers to encourage them to buy shares in start-up companies registered in the UK The Facts: • SEIS investors can input £100,000 in a single tax year rising to a maximum £150,000 over two or

more tax years in to a single company• Investors cannot control the company receiving their capital• Investors pick up 50% tax relief in the tax year the investment is made, regardless of their

marginal rate.• In the 2012-13 tax year, tax payers can roll any chargeable gain in the tax year in to a SEIS with a

full capital gains tax exemption (another 28%)• The business must be a start-up company -registered in the UK within 2 years of claim. • The company must not employ more than 25 workers.• The company must have assets of less than £200,000.• The company has to trade in an approved sector – generally not in finance or investment, for

example, a property company raise capital as a SEIS.

SEIS- Tax breaks to encourage investment in start-ups

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Grants & Awards• J4B- Portal for grant finding http://www.j4b.co.uk• Technology Strategy Board ( R&D Funding) - http://www.innovateuk.org - http://

www.innovateuk.org/content/competition/grant-for-rd-single-business.ashx • E Funding for SME R&D - http://www.eurostars-eureka.eu/what.do• EU Funding for R&D collaborations: http://ec.europa.eu/research/participants/portal/page/calls • Knowledge Transfer Partnerships funding support-

http://www.ktponline.org.uk/ktp-what-will-it-cost-my-business

Translation/ Follow on research funds. • www.rdfunding.org.uk/bulletin/queries/Search.asp?TheCloseMonth=July&TheYear=2011.• http://www.rcuk.ac.uk/kei/ktportal/Pages/Followon.aspx• https://ktn.innovateuk.org/web/145175/overview• http://www.wellcome.ac.uk/Funding/Technology-transfer/Awards/Translation-Awards/index.htm

Crowdfunding Platforms- Peoplefund.it – will help you to raise funding to build a proto-type and market test a great idea or product.- www.peoplefundit.org

Looking for funding to turn your idea into a proto-type product/ service ?

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New Initiative’s launched in 2012.

• The CISCO Big Awards- Come up with a great business idea and win £200,000 https://www.thebigawards.co.uk

• Dreamstake- launch of their accelerator platform on the 22nd March http://www.thebusinessbootcamp.org/pivot-party-dreamstake

• Green Accelerator – led by well- known Green Entrepreneur James Cann - http://bertiinvestments.com/berti-green-accelerator/

• TECH- There are also a few impressive pitching for investment events coming up for tech entrepreneurs.

– http://innotechsummit.com/ – http://www.globalcorporateventuring.com/article.php/3265/tech-scout-awards-and-sympos

ium-14-15-may-2012?mgs1=15d975st0T

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• The quality and “connections” of the management team• The size of the business opportunity/ funding need• The scope for building a sustainable competitive advantage• The level of risk/ security. • And the timeliness of the proposal

Will determine the attractiveness of your business to investors, lenders and funders

• The ability of the entrepreneur to negotiate well and of the team to execute the business plan convincingly-

Will determine the type, price and quality of the deal that can be achieved

Step 5: So remember –What’s important when seeking finance