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How to raise capital - for small business owners and entrepreneurs

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    Presentation Transcript
    1. Raising Capital

    2. 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

    3. Introduction • Why I’m qualified to talk here today • Been raising finance for over 20 years • Helped create lots of millionaires in 30 years

    4. Client example 1 • Michael Kraftman - Optical Partners

    5. Client example 2 • Andy Hunt - Clearsky overseas properties

    6. Through this presentation, think: • How does this apply to me? • How do I take action?

    7. 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

    8. 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

    9. You get huge leverage from… • OPM – Other People’s Money • OPE – Other People’s Efforts

    10. How much are you looking for? • To raise £5 million – same effort as raising £50,000 • Are you seeking enough?

    11. Why are you looking for funding? • To start up • To expand • To…

    12. 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

    13. 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…

    14. 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…

    15. 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

    16. 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

    17. 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

    18. 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

    19. 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!

    20. 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

    21. Ecademy.com • Business network • Idea from Ron to Thomas Power in - 1997 • Over 100,000 members • Now seeking £6 million to expand

    22. Client example 3 • Neil Murphy - Armchair

    23. What investors want - 1 • Good management team • Good track record and industry experience • Scalable business • Systemised – function without entrepreneur • Multiple streams of income

    24. 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…

    25. 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

    26. Where to find investors • Business angel networks – Beer & Partners, Envestors, Angels Den + 50 others • Via brokers, agents and introducers

    27. 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

    28. 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

    29. What’s your dream and passion? • Your commitment and resolve will be tested • Would you rather be doing something else?

    30. Negotiation • How much equity to give away? Share the wealth • How much equity to sell?

    31. Case study • Xanadu Plc

    32. 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?

    33. 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

    34. 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

    35. More case studies • Some successes and failures

    36. How to de-risk an investment • Development • Manufacturing • Marketing • Management • Growth - Cash flow and profits, expansion, international • Research • All the ducks in row…

    37. Possible exit strategy • Trade Sale • Merger • Flotation on AIM, PLUS or another stock market • Sell out to management - MBI or MBO

    38. 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

    39. 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?

    40. 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

    41. Good luck with your fund-raising!