Practical Fund Raising (for a hi-tech startup) David Moore QUBIS Ltd QUBIS Ltd - ‘Turning Research into Wealth’

Overview Why raise external funds? Investment opportunity (viewed from the other side of the table). Typical sources (levels of risk and return). Realistic amounts and timescales. QUBIS Ltd - ‘Turning Research into Wealth’

Why do you need funding? Product Development, primarily salaries Equipment Working Capital However - Early stage Fund Raising is difficult and time consuming! QUBIS Ltd - ‘Turning Research into Wealth’

Investment Opportunity Very high risk! Trust an unproven management team to develop (and then sell) a conceptual product to a theoretical market at a profit!! Wait 5-25 years for a return!!! QUBIS Ltd - ‘Turning Research into Wealth’

Business Plan Bugbears! ‘Hockey stick’ revenue growth. ‘We only need 0.1% of £5bn market to achieve £5m sales’. ‘Top down’ rather than ‘bottom up’ approach. This product will ‘sell itself’ QUBIS Ltd - ‘Turning Research into Wealth’

‘Hockey Stick’ Sales QUBIS Ltd - ‘Turning Research into Wealth’

Business Plan Bugbears! ‘Hockey stick’ revenue growth. ‘We only need 0.1% of £5bn market to achieve £5m sales’. ‘Top down’ rather than ‘bottom up’ approach. This product will ‘sell itself’ QUBIS Ltd - ‘Turning Research into Wealth’

0.1% of £5bn Market QUBIS Ltd - ‘Turning Research into Wealth’

Business Plan Bugbears! ‘Hockey stick’ revenue growth. ‘We only need 0.1% of £5bn market to achieve £5m sales’. ‘Top down’ rather than ‘bottom up’ approach. This product will ‘sell itself’ QUBIS Ltd - ‘Turning Research into Wealth’

Investment Decision Man - team, experience, skills, contacts etc Market - growth potential, competition, channels, knowledge etc Money - funding requirement, sources of funds, break even etc QUBIS Ltd - ‘Turning Research into Wealth’

Sources of Funds Self, personal savings ‘Sweat Equity’ ‘3 Fs’ - Friends/Family/Fools Free equity to obtain staff Customers InvestNI - PoC, GAP, Grant for R&D Private Investors, ‘Business Angels’ Seed funding, e.g. QUBIS Ltd, QUBIF Venture Capital QUBIS Ltd - ‘Turning Research into Wealth’

‘Bootstrapping’ Possibly the ideal funding mechanism for start-ups in today’s investment climate. Using your ingenuity to raise funds from whatever sources are available. Investors are normally not interested in getting involved before a revenue stream is established. QUBIS Ltd - ‘Turning Research into Wealth’

Sources of Funds Self, personal savings ‘Sweat Equity’ ‘3 Fs’ - Friends/Family/Fools Free equity to obtain staff Customers InvestNI - PoC, GAP, Grant for R&D Private Investors, ‘Business Angels’ Seed funding, e.g. QUBIS Ltd, QUBIF Venture Capital QUBIS Ltd - ‘Turning Research into Wealth’

Sources of Funds Self, personal savings ‘Sweat Equity’ ‘3 Fs’ - Friends/Family/Fools Free equity to obtain staff Customers InvestNI - PoC, GAP, Grant for R&D Private Investors, ‘Business Angels’ Seed funding, e.g. QUBIS Ltd, QUBIF Venture Capital QUBIS Ltd - ‘Turning Research into Wealth’

Types of Capital Loan Government Risk QUBIS Ltd - ‘Turning Research into Wealth’

Bank Banks provide Loan Capital. Overdraft, short term, payable on demand. Business Loan, fixed term. EFG, reduces risk to bank Key issues: Security, interest & capital repayment i.e. not suitable for hi-tech start-up ventures, little security and no early cashflow. QUBIS Ltd - ‘Turning Research into Wealth’

Government Agencies InvestNI, InterTrade Ireland provides Grant and/or Repayable support. Business Development PoC, R&D, GAP Key issues: Additionality, Admissibility, percentage contribution, export focus. QUBIS Ltd - ‘Turning Research into Wealth’

Business Angels Business Angels provide Risk Capital seeking a return over 5-10 years. High net worth individuals Probably have successfully ‘exited’ from previous venture Bring skills, expertise and cash. Key issues: <£50k, ‘hands-on’ role, capital growth. QUBIS Ltd - ‘Turning Research into Wealth’

Venture Capital (VC) Investment fund of Risk Capital, which will seek a return in circa 5 years. May bring sectoral expertise, contacts and experience of similar ventures. Relatively high investment threshold, high fixed costs. Key issue: >£250k, capital growth, Board seat, focus. QUBIS Ltd - ‘Turning Research into Wealth’

QUBIS Ltd Wholly owned by QUB Aim, create wealth through the commercialisation of university research. Invest cash and IPR in return for an equity stake, Seed Capital. Typical investment size £5k-£50k. for more info QUBIS Ltd - ‘Turning Research into Wealth’

QUBIF Overall fund size £1m Commercialisation of research from QUB Typical investment £15k-£50k Willing to take a staged approach to a max of £200k QUBIS Ltd - ‘Turning Research into Wealth’

Return on Investment Investors, whether business angels, venture capitalists, banks will all be looking for a return on their investment. The size of that return and the cost of their money is governed by the risk of the project. QUBIS Ltd - ‘Turning Research into Wealth’

Typical Returns Business Angels, Seed Capital & Venture Capital all seek capital growth. Returns sought circa 20%-50% per annum. Banks seek a 1%-3% (over base rate) return on their money, they do not want to lose any of their capital. QUBIS Ltd - ‘Turning Research into Wealth’

Funding Round 1 InvestNI PoC£60,000 Total£60,000 Prove technology in lab, pre company.

Funding Round 2 Founders (4x£1k)£4,000 QUBIS Ltd £10,000 + IP QUBIF£50,000 Total£64,000 Develop ‘pre-production’ prototype within NewCo Ltd QUBIS Ltd - ‘Turning Research into Wealth’

Funding Round 3 QUBIS Ltd/QUBIF £25,000 Private Investors£25,000 Internal Funds£20,000 InvestNI (Bus Dev)£50,000 Total£120,000 Launch product, build initial sales revenues. QUBIS Ltd - ‘Turning Research into Wealth’

Funding Round 4 Internal Funds£50,000 InvestNI (Bus Dev)£45,000 Bank (EFG)£100,000 Total£195,000 Continue to grow sales revenues, strengthen team. QUBIS Ltd - ‘Turning Research into Wealth’

Funding Round 5 Internal Funds£50,000 INI Grant for R&D£100,000 Bank (EFG)£150,000 Total£300,000 Major new product development, substantial sales and marketing. QUBIS Ltd - ‘Turning Research into Wealth’

Funding Round 6 Internal Funds£100,000 InvestNI (Bus Dev)£100,000 Qubis £50,000 VC Investment£400,000 Total£650,000 Major growth phase, management team, new product development, substantial sales and marketing QUBIS Ltd - ‘Turning Research into Wealth’

Funding Summary Round 1£60,000 Round 2£64,000 Round 3£120,000 Round 4£195,000 Round 5£300,000 Round 6£650,000 Total£1,389,000 QUBIS Ltd - ‘Turning Research into Wealth’

Funding Summary Round £cash Time Sales Round 1 £60k 6 mths Round 2 £64k 2 yrs Round 3 £120k 2.5 yrs £0 Round 4 £195k 4.5 yrs £250k Round 5 £300k 6.5 yrs £500k Round 6 £650k 8.5 yrs £1m QUBIS Ltd - ‘Turning Research into Wealth’

Funding Summary Round £cash Time Sales Round 1 £60k 6 mths Round 2 £64k 2 yrs Round 3 £120k 2.5 yrs £0 Round 4 £195k 4.5 yrs £250k Round 5 £300k 6.5 yrs £500k Round 6 £650k 8.5 yrs £1m Difficult, Possible, Support. QUBIS Ltd - ‘Turning Research into Wealth’