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Raising capital PowerPoint PPT Presentation


How to raise capital - for small business owners and entrepreneurs

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raising capital

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Raising capital l.jpg

Raising Capital


House keeping l.jpg

House-keeping

  • Make a note of questions - ask at END of each section

  • We’ll ensure all questions are handled here today

  • One-to-one phone consultation – details at the end


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Introduction

  • Why I’m qualified to talk here today

  • Been raising finance for over 20 years

  • Helped create lots of millionaires in 30 years


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Client example 1

  • Michael Kraftman

    - Optical Partners


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Client example 2

  • Andy Hunt

    - Clearsky overseas properties


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Through this presentation, think:

  • How does this apply to me?

  • How do I take action?


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How finance fuels the planet

  • Billions traded daily on stock exchanges

  • 100s of IPOs – new capital

  • Over 1 million business angels

  • Over 1,000 banks


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A few examples…

  • Google - $12.5m investment became worth $2.03 billion in 5 years

    - invested by Kleiner Perkins and Sequoia in 1999 for 10%

  • Microsoft, Starbucks, etc

  • Body Shop, Carphone Warehouse, Virgin


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You get huge leverage from…

  • OPM – Other People’s Money

  • OPE – Other People’s Efforts


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How much are you looking for?

  • To raise £5 million – same effort as raising £50,000

  • Are you seeking enough?


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Why are you looking for funding?

  • To start up

  • To expand

  • To…


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First places to look

  • Family, friends and your warm market

  • Your bank –

    - 100s of unsecured loans and credit cards

  • Small Firms Loan Guarantee Scheme

  • Secured loans and second mortgages


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Next…

  • Business angels – £30,000 to £250,000

  • Venture capital - £500,000 or more

  • Private Placement

  • AIM, Plus markets, going public

  • On-line stock exchanges

  • Strategic alliance partners or joint ventures

  • Grants

  • Other…


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Why 90% of people fail to get funding - 1

  • Approaching wrong source

  • Over-valuing their business

  • Trying to do it for free, for zero fees

  • Business is not systemised

  • Contacting too few sources

  • Trying to do it all alone…


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Why 90% of people fail to get funding- 2

  • Proposal is badly packaged

  • Not orientated toward investor

  • Emphasis on too many minor points

  • Poor preparation

  • Presentation not practised


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Risk-reward ratios

  • Where were you when the penny shares were dished out?

  • Different investors come in at different stages

  • Learn how to qualify who you are talking to


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Mindset required - 1

  • Enthusiasm and passion for what you do

  • Positive attitude

  • Commitment, focus and dedication

  • Be persistent

  • Don’t just take No – ask why!

  • Improve your proposition as you go


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Mindset required - 2

  • Some sales and closing skills

  • Become good at follow-up

  • Next…!

  • And just ask for the money!

  • Learn to handle fear and failure

  • Break through rejection and frustration


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Time-line to get the money

  • Takes dozens of man-hours

  • Phone calls, meetings, travel, emails, research

  • For a start-up: 3 to 12 months

  • Growth business:

  • Movie ‘Forrest Gump’ took 7 years to get funded!


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Your business network

  • Don’t be shy – ask for referrals

  • Keep expanding your network

  • On-line: use Ecademy, LinkedIn, etc

  • Our own Black Book of Contacts


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Ecademy.com

  • Business network

  • Idea from Ron to Thomas Power in - 1997

  • Over 100,000 members

  • Now seeking £6 million to expand


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Client example 3

  • Neil Murphy

    - Armchair


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What investors want - 1

  • Good management team

  • Good track record and industry experience

  • Scalable business

  • Systemised – function without entrepreneur

  • Multiple streams of income


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What investors want - 2

  • Are you building a valuable brand?

  • Defend against new competitors

  • Not just ‘have legs’ – ideally have wings!

  • Provide a fabulous return – to hit a ‘home run’

  • Profitable exit

  • Other…


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How much will it cost?

  • All transactions in finance industry are driven by fees

  • The bigger the fees, the more interest in the deal

  • Up to £100,000 – expect to pay up to 20%

  • To £500,000 – up to 15%

  • Over £1 million – up to 15%

  • Mix of fixed up-front fees and success-based

  • Wisdom in knowing how to structure fees


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Where to find investors

  • Business angel networks – Beer & Partners, Envestors, Angels Den + 50 others

  • Via brokers, agents and introducers


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12-step plan to get funded - 1

  • Preparation

  • Research

  • Market demand for your product or service

  • Revenues, profits – and cashflow!

  • Your competitors, comparatives

  • Your experience


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12-step plan to get funded - 2

  • Your management team

  • Your plan

  • Target potential sources of finance

  • Approach - Make presentation - Refine - Repeat!

  • Build your profile – via PR, etc

  • Build your perception – as valuable, desirable, attractive, unique


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What’s your dream and passion?

  • Your commitment and resolve will be tested

  • Would you rather be doing something else?


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Negotiation

  • How much equity to give away? Share the wealth

  • How much equity to sell?


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Case study

  • Xanadu Plc


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How a business is valued

  • Start- up: zero revenues and profits

  • Existing business: 3 to 6 times net profit

  • Would you buy your business if it was for sale today?

    - for how much?


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How to get Investor-Ready

  • Your dream team

  • Get professional advisers

  • Your product or service

  • Cost-effective marketing

  • Get professional documentation

  • What’s the story? Your story…

  • Understanding risk-reward ratios


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Specific documentation

  • Business plan - do you want to make God laugh!

  • A prospectus

  • Sales brochure

  • Drawing on the back of a fag packet

  • The Bible


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More case studies

  • Some successes and failures


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How to de-risk an investment

  • Development

  • Manufacturing

  • Marketing

  • Management

  • Growth - Cash flow and profits, expansion, international

  • Research

  • All the ducks in row…


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Possible exit strategy

  • Trade Sale

  • Merger

  • Flotation on AIM, PLUS or another stock market

  • Sell out to management - MBI or MBO


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Closing the deal

  • Due diligence

  • How much money for how much equity - 50% idea, 50% for money

  • Valuations - yours and theirs!

  • Pride of ownership can be expensive

  • Time-frames

  • Legal agreements


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Life after investment

  • Their man on your board

  • Can you buy them out?

  • What else do they bring to the party?

  • Will they help or hinder?


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Multiple streams of income

  • Loosely used by Robert Allen

    - mainly for the US market

  • Real Secrets of Multiple Streams of Income

  • What it really means

  • How MSI will provide you with a phenomenal lifestyle

  • Generate assets and income

  • Focus on passive

  • Examples of deckchair millionaires


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Good luck with

your fund-raising!


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