1. © Finance Tree ltd, 2013 Raising investment 16 October 2013 Jonathan Gold www.financetree.bizwww.financetree.biz www.riverscap.com

2. © Finance Tree ltd, 2013 Finance Tree works with businesses to help them understand the needs of investors and find the right investment. 2005 NStar Corporate Finance established 2006 Finance and Business launched 2008 (April) Management Buyout and creation of Finance Tree 2009 (April) created Rivers Capital Partners 2010 Managers of the £7.5m North East Angel Fund 2012 Invested in 40 businesses and total 80 investments www.riverscap.com

3. © Finance Tree ltd, 2013 No free lunch…money costs Banks Grants Other lenders (ie: UK Steel Enterprise… NESTA) FFF Venture Capital / Business Angels Sales !!

4. © Finance Tree ltd, 2013 Unreasonable risk for an unreasonable return

5. © Finance Tree ltd, 2013 Venture Capital / Private Equity… “Private Equity is medium to long-term finance provided in return for an equity stake in potentially high growth unquoted companies”. Source: British Venture Capital Association (BVCA) 2005 NB: Almost all are… FSA regulated collective investment schemes…

6. © Finance Tree ltd, 2013 Are you 1 in 100 Most VCs probably invest in 1 in 10 they look into But at least another 90 have tried So what makes you stand out ? How can you blow everyone else away 1.Displace the competition? 2.Convince people to buy-in and buy? 3.Do more than collect hits on a website 4.MAKE A RETURN…

7. © Finance Tree ltd, 2013 Sources of capital of capital

8. © Finance Tree ltd, 2013 Venture capital is often a crucial element in… Getting a new business going Start-up Funding a step-change in the business Rapid organic growth or M&A Effecting a change of management or control Buy-in / buy-out / public-to-private Funding long-term development pre-revenue Typically high technology

9. © Finance Tree ltd, 2013 The investment model Time … since investment Investment in… Generating £ cash… Sale of company… or “exit “ Development & early sales (losses…) …10x return in 5 yrs

10. © Finance Tree ltd, 2013 Finance for Business North East Funds

11. © Finance Tree ltd, 2013 Statistics of VC portfolios… 10 Investments 4 Fail 4 Living dead 2 Stars

12. © Finance Tree ltd, 2013 Why bother? VC should add real value to your business Recruitment of the senior team and suitable NXDs Extending your contact base of customers/partners Assisting the business to enter new markets Providing support on complex deals (eg: acquisitions) Acting as a friendly outsider in strategy debates Securing additional funding & negotiation of exits

13. © Finance Tree ltd, 2013 So is there a downside? Lose some control – –there will be another owner of your business VC will normally want a seat on your Board Full transparency in terms of information & business Typically look to agree a growth and exit strategy up front.

14. © Finance Tree ltd, 2013 Applying…process

15. © Finance Tree ltd, 2013

16. 16 Financial value drivers

17. © Finance Tree ltd, 2013 Value & IRR Ultimately its what an investor will pay ! Investment required Time to a given return Return the investor needs RISK Valuation Pre-investment Post-investment % ownership to give return

18. © Finance Tree ltd, 2013 IRR… internal rate of return YEARS Multiple

19. © Finance Tree ltd, 2013 Indicative timeline…end game BLUE internal RED externally driven

20. © Finance Tree ltd, 2013 What do investors look for ? © J.Gold, 2011 all pictures by J.Gold rights reserved

21. © Finance Tree ltd, 2013 Lessons from Venture capital… What are investors looking for

22. © Finance Tree ltd, 2013 Business models not Business plans... © FinanceTree ltd, 2011 …and EXITS/returns !

23. © Finance Tree ltd, 2013

24. Last but not least…EXITS… PLANNED from day one Fund Manager will want a well defined EXIT Investment Return to the fund from growth of company… Common exits Further investment round (someone else buys out fund) Listing on a stock exchange (IPO) Trade sale, sold to another corporation.

25. © Finance Tree ltd, 2013 25 Thank you 16-18 Hood Street Newcastle-upon-Tyne NE1 6JQ 0191 230 6370 www.riverscap.com www.financetree.biz www.twitter.com/financetree