Who are RMT ? North East’s leading Independent accountancy practice 6 directors & 70+ staff Started in 1954 National and international networks Full range of service “One-Stop Shop” Owner Managed Business Specialists
IP Exploitation Concept Research Business Plan IP Protection Funding Package Product Dvpt Commercial- isation Working Capital Strategy Dvpt Market Research Company Set Up Idea Dvpt Risk Management Revenue Generation Strategy Commercialisation Lifecycle
New and Highly Entrepreneurial Disruptive Technology Addressing an Unmet Need Growth Focussed and Scalable Has the Ability to Achieve a Big Outcome (Exit / IPO) What is a start up? A distinct type of business with 5 key attributes
Strong Management Team Large and Growing Market Sector Scalable and Capital Efficient Business Model Competitive Advantage: IP / Technology Realistic Exit Opportunities Five Factors of a Fundable Business
Businesses that scale are businesses with Operating Leverage % Annual growth Time / Years Revenue Operating Expenses Adding Operating Costs (Technology, Sales, Staff etc.) at the same rate as which Revenue grows does not equal scale. What is a scalable business?
What is a Scalable Business? Businesses that scale are businesses with Operating Leverage % Annual growth Time / Years Businesses that achieve exponential revenue growth with only small and incremental increases in operating costs are scalable businesses. Revenue Operating Expenses What is a scalable business?
1. Market Demand (What do your target customers want?) 3. Product (What do you do best? What can you do best?) 2. Competition (What unoccupied markets exist?) Describing your Start-Up’s “value zone” is about working out where the 3 circles intersect: Your business plan should position your start-up here Articulating Product/Market Fit
The Structure of an Investor Ready Business Plan Executive Summary Introduction Business Model Market and Competitor Analysis Customer/User Acquisition Strategy Product Roadmap Management Team Financial Projections 1 2 3 4 5 6 7 8 Product & Technology Overview Make up of an investor ready business plan
What Investors Want To Know What is your IP and can it be protected? What barriers are there? What is so compelling about your product/service? Why will people want to buy it? Who are the key competitors and how are you different? How scalable is the business? What is your market? Do you have a clearly defined revenue model – how will your business make money? What is your route to market? Can you add credibility to this? Complete and robust financial projections – the return! The risks – SWOT and PESTLE Confidence in management team – technical and non-technical. Are they incentivised? Exit plan
The most important word in raising early-stage funding is Credibility. This starts with the CEO. What impression do you think you are making with an investor? You can will make it work at all costs (convincing) Track record with other technology start-ups (growth/exit) Deep subject matter expertise and/or industry knowledge Demonstrated commercial savvy (not just technical) Growth ambitions that are also believable and pragmatic Know your business plan and model inside out Credibility Builders
Over- Claiming Vagueness – Lack of Clear Facts Not Being Able to Explain the Business Plan Going too Early (Under- Developed Idea / Model) Not Delivering on Requests (Delays) No Believability to the Strategy Credibility Failures Compromising your credibility
Typical Mistakes in Investor Ready Business Plans Nothing to Visualise the Product High Burn Rate (Small Runway) Limited Time Between Funding Rounds No Slack in the Company's Operating Capital Next Round Required Before Company Hits Revenue Too many Revenue Streams Typical Mistakes in a Business Plan Seeking to Raise Finance
“Start-Up X will achieve its projected revenues by taking just 1% of the £48bn Global market” …and the classic mistake
The Investor Pitch Find out how long you have and who is attending. All of your Management Team should attend. Be confident and show passion but explain what you do in English. Investors will not spend time trying to find out about your product. Treat objections as a sign of interest. Do not get defensive - investors will push you to test you. Address objections with specific data – build their investment case for them. Answer questions factually and to the point (don’t waffle) Investors see lots of presentations. You have to stand out. A bad presentation is a missed opportunity – you won’t get a second chance.
Introduction (Including Elevator Pitch and Team Introductions (5 Minutes) Concisely say who and what you are. Elevator Pitch and Team introductions. Summary and Call to Action Problem Solution (Including Demo) Underlying Technology Business Model User Acquisition Team Headline Financials Timeline and Milestones 5 Minutes Core of the Presentation: 15-20 Minutes 2 Minutes One Slide Each The Slide Deck
Back Up Slides (After Your Final Slide): Market Data Details of Technology Financials Competitors Patent Applications Customer Correspondence Letters of Intent Do Not Present These but have them in reserve: Be ready with back up slides / materials on more detailed areas outside of what the slide deck covers in case you are asked. Use the relevant slide to then explain your point or answer. The Slide Deck should give a summary overview of the Business Plan The Slide Deck
Tax Relief for Angel Investors Income tax relief Reduction in tax bill of 30% of investment (up to £1m per tax year) CGT deferral relief On disposals one year before investment to three years after CGT exemption If shares qualify for income tax relief no CGT on disposal EIS Income tax relief Reduction in tax bill of 50% of investment (up to £150k per company, max £100k per investor) CGT relief 50% of gains made in the year reinvested (2013/14) CGT exemption If shares qualify for income tax relief no CGT on disposal Shares must be issued within 2 years of commencement of trade Seed EIS Effective for shares issued from 6 April 2012
Research & Development Tax Relief Activities/projects which seek to: “extend overall knowledge/capability in the field of science or technology” Eligible expenditure: Wages and salaries, consumable materials, power, water, fuel, computer software Tax Reliefs Enhanced deduction of 130% to 225% against profits from 1 April 2012 chargeable to corporation tax, or Repayable tax credit (up to 25p per £1) if loss making
Patent Box Elect to Apply 10% Tax Rate to Profits Arising from Qualifying Patents
Grants NBSL www.nbsl.org.ukwww.nbsl.org.uk Business & Enterprise Group www.investment4growth.co.ukwww.investment4growth.co.uk Newcastle Science City www.newcastlesciencecity.comwww.newcastlesciencecity.com Growth Accelerator www.growthaccelerator.comwww.growthaccelerator.com BICC Innovation Programme www.ne-bic.co.ukwww.ne-bic.co.uk Local councils Lets Grow – RGF – http://www.thejournal.co.uk/all-about/let's%20growhttp://www.thejournal.co.uk/all-about/let's%20grow Research & Development Grants – www.innovateuk.orgwww.innovateuk.org Technology Strategy Board – www.innovateuk.orgwww.innovateuk.org
Venture Capital Proof of concept – www.northstarventures.co.ukwww.northstarventures.co.uk Early stage seed funding (Accelerator) – www.northstarventures.co.ukwww.northstarventures.co.uk Technology – www.ipgroupplc.comwww.ipgroupplc.com Angel match fund – www.riverscap.comwww.riverscap.com Business Angels – www.bbaa.org.ukwww.bbaa.org.uk Private Sector Venture Capital – www.bvca.co.ukwww.bvca.co.uk NESTA – www.nesta.org.ukwww.nesta.org.uk Local Angel Groups – www.big-angels.co.uk www.gabriel- investors.comwww.big-angels.co.ukwww.gabriel- investors.com
Example – Would you invest? Belle and Sebastian want to start up in business together. They have both been working in the club scene for over ten years, Belle as a DJ and Sebastian as a venue manager. They have had an idea of creating a website to endorse up and coming DJ’s by giving them the opportunity to record, promote and sell their music. They have £20,000 between them to put into the business but need to raise a further £30,000 to get the business off the ground. Where are the concerns for an investor?