Raising money from Business Angels
3 May 2012
Recently, UCL Advances along with partner organisations Capital Enterprise, NGFC, Rapid Innovation Group and Keystone Law ran a series of workshops for companies interested in pitching for investment.
'From Idea to Investment' on 19th April saw experts including Dan Somers founder of Angel fund Boundary Capital, Stuart Histon, CEO of Constellation Capital and Tom Billings, Manager at the Angel Group Envestors talk about how to get a business from the idea stage to the point of getting investment because only 2% of companies who submit business plans/ applications to Business Angels get funding.
This is the result of a combination of problems including lack of skills in the management team, no market opportunity, the business model is not scalable or is too complex. The speakers recommended companies seek business advice - only 8% of SMEs get strategic advice and support but those who seek strategic advice have an 18 times greater chance of producing a scalable business. It helps to be backed by someone with industry experience, preferably in the form of a business partner.
Not every company needs a business plan but the speakers suggested successful business plans are based on specialist knowledge, competencies and 'tangible' (e.g. money) and 'intangible' (e.g. contacts) assets. Entrepreneurs succeed because they prove the Business Model before developing a business plan, they aim for affordable loss rather than expecting profits straight away, they focus on the customers' wants, they build strategic alliances, and they explore new potentials outside existing knowledge boundaries.
The second workshop on 24th April centred around a presentation by Keystone Law's Tom Daltry, expert on the Enterprise Investment Scheme (EIS), the changes to this scheme passed in April 2012, the introduction of the Seed Enterprise Investment Scheme (SEIS), and what this all means for SMEs looking for investment. Tom talked about how under EIS investors can get income tax breaks of up to 30% when they buy new shares in a SME, with a minimum subscription of £500 per company and a maximum subscription of £1m per investor per annum.
The new SEIS legislation that should be passed in the summer of 2012 will give income tax relief of up to 50% to investors in companies within the first two years of commencing trading, with an annual limit of £100,000 per investor. However, under EIS and SEIS if the company folds or the investor withdraws his money within three years of making the investment they forfeit the tax breaks, but in the case of SEIS having this three year incentive encourages more stability for early stage companies. The evening rounded off with an opportunity for attendees to question a panel of partners from Keystone Law on how EIS and SEIS could affect them and what advise the panel had to offer on the topic.
In the third part of the series eight companies were given the opportunity to work with Annette Krammer on a one-to-one basis improving a pitch to take to investors. Having given them homework before the session Annette asked the attendee to introduce themselves, their company and to pitch what they had prepared. She then worked on many aspects of the presentation from poise and presentation of self to the vocabulary and images used in their slide decks. Here are some of her key tips:
- If companies use slide decks when pitching they should limit the number of slides to between 6 and 10
- Slides should contain just key words and images; lines should be no longer than 5 words
- Presentations should include 'What is the problem your company is solving?', 'What's the solution to this problem?', 'Why are you the one to solve it?' and 'Why should the investor believe you?'
- Saying people trust you is stronger than demonstrating lots of numbers on e.g. social media
- Facts and figures are strong but do not cram them together because this undermines the power of each one
- Be aware of the vocabulary you use; use action words such as 'we enable', use words such as 'successful' over 'new' and don't say 'we want to', say 'we do'. Leading with strong words shows a clear business head meaning you are more likely to be successful.
Companies that took part in the workshops that are ready to pitch to investors will be introduced to angel investors. And for companies that are not at this stage just yet they can still benefit from further advice from the partners of these events and can join the SMILE and HELO programmes offered by UCL Advances to find business mentors for companies, or to match a company to a group of students who can help deliver a project.