Financing early-stage businesses The Peter Cullum Centre for Entrepreneurship

1. Financing early-stage businessesThe Peter Cullum Centre for Entrepreneurship Jane Reoch March 2012

2. Presentation to City and Cass Students • Start-up and early-stage financing – Overview of the market, How to make your business more attractive to investors • History and Purpose of Peter Cullum Centre (and the Fund) • Examples of Cass and City Entrepreneurship and Success • The Opportunity • Questions

3. Financing of small businesses • No bank loans, too risky • Equity rather than debt funding • A notoriously difficult market for investors, historic returns have been very low or negative (both UK and US) • At start-up stage, companies are typically funded by: • Grants, possibly business plan competitions • Friends and family • Business angels – hit particularly by the recession. • Seed funds – but limited • Most VCs looking for £1m+ revenue before interested

4. How to make yourself more attractive (for funding) • Prove your market, find some customers • Show it is a scalable product or service • Have the basis of a team in place. Technical and commercial skills • Try to get a friendly Advisory panel in place. • Have a disruptive business model – show what you are doing better/ cheaper/ more efficiently than your competition • Know your market and your business inside-out; and quote numbers. Conversion rates, metrics, growth of competitors, margin analysis • Ask for help not money to start, particularly with business angels

5. How to make yourself more attractive (for funding) • Network and try to get a warm introduction; only 1% of introductions to funds get financed – you have a higher chance of getting a meeting through a trusted introduction. • Never say there is no competition. If there is no competition there is no market for your business • Valuation – art not a science – don’t overpitch, easiest way to put off an investor. Also pitch your exit plan. • There is almost no value in an idea, the value is in execution. The more you have proven the more valuable your business is • Be cost-conscious; show investors how you have used money to create value in your company

6. The Good News for Financing • A huge political focus on this politically over the last couple of years • Seed EIS tax relief for High-Net Worth Investors 2012 only • For City and Cass – proximity to Silicon Roundabout • More business angel networks emerging – BBAA.org • Online acceess to finance – CrowdCube • For Cass and City – free advice, guidance and a dedicated £10m fund at Cass Business School

7. Centre for Entrepreneurship – History and Purpose Founded in 2009 with generous support from Peter Cullum, one of Cass’ most successful entrepreneurs as Founder of Towergate Insurance. Fund closed in 2010, investments from April that year. Purpose: An integrated development funding and support hub for high potential entrepreneurs....putting Cass literally inside the next generation of fast growth businesses Giving Cass/ City entrepreneurs a disproportionate chance of success

8. The Peter Cullum Centre for Entrepreneurship • Education programmes: New Venture Creation Programme & YBYF • Incubation space • Cass Entrepreneurship Fund

9. Cass Entrepreneurship Fund • £10m Venture Capital Fund • Support of Peter Cullum • £50-500k investment • Start-up and early stage businesses • Minority equity stakes • First 6 investments completed

10. Cass Entrepreneurship Fund Investments Reputation management Cloud migration and development Legal outsourcing – solicitor training Fraud prevention software Instant brand identities Geolocation /events listings

11. Summary • Convergence of opportunity at this point in history • Location: Proximity to Silicon Roundabout; investors want technology and commercial skills. Do you have both? • Politics and Financing: Seed EIS relief 2012, The Cass Fund. • Huge opportunity for Students and Alumni to build great businesses of the future