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LINC Scotland

LINC Scotland. Who are we? What is Informal Investment? Direct Investment by Syndicates or “Private Houses”. Funding usually in the “Equity Gap” i.e. £20k to £500k. Direct Investment by individual Angels usually no more than £100k per deal.

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LINC Scotland

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  1. LINC Scotland Who are we? What is Informal Investment? Direct Investment by Syndicates or “Private Houses”. Funding usually in the “Equity Gap” i.e. £20k to £500k. Direct Investment by individual Angels usually no more than £100k per deal. Brian Hale www.lincscot.co.uk

  2. Investment Activity18 Syndicates c.500 + ‘solo’ angels c.100.Member activity-78 deals- £34.7M (members £12.2m SCF £8.3m £14.2m other)

  3. Characteristics of Angel Deals • Angels invest close to home. • Due Diligence will take average 4 months. • Company will need 3 or 4 further rounds. • 6 years to a (successful) EXIT. • Must have potential for very high returns (5X to 20X) .

  4. Business Angel Survey Headlines Factors influencing investment decision NoneLittleSome Great EIS 16% 15% 47% 22% Sector 5% 12% 48% 35% Sector Expertise 7% 15% 39% 39% Adviser 16% 44% 38% 2% Acquaintances 12% 26% 55% 7% Business Plan 2% 20% 48% 30% Entrepreneur 0% 4% 7% 89%

  5. Improving Access to Angel Investment • Basics - defining the business model. • Choosing your angel. • Understanding diligence. • Understanding the investment process. • MANAGE INVESTOR RISK.

  6. What Companies Need to Demonstrate • High calibre team that will listen. • Unfair advantage (e.g. proprietary technology ). • Real understanding of customers. • Scalable and sustainable revenue model. • Scope for at least 10 times money return. • Shared vision on future direction and exit.

  7. Delivering the Plan Be Clear and Simple: • Who exactly are your customers? • How are you going to reach them? • How soon are you going to generate cash? • Justify your assumptions. • What are the key value-added milestones which this investment will pay for?

  8. Why Angels do Due Diligence • Evaluate the opportunity against their investment criteria. • To reduce their risk. • To understand the ‘pressure points’ - identify areas for focus. • To get to know the management, including… • Seeing the management under pressure.

  9. Scope of Diligence Market TechnologyIP Size Technical Risks Patents Trends Competing Technologies Trademarks Competition Product Manufacture Know-how Oppts & Threats Design Rights Sales & MarketingPeople Value Proposition Management Business Model Key Staff Sales Forecasts Roles & Routes to Market Responsibilities Operations FinanceLegal Product Delivery Balance Sheet Staff Customer Support Cash Flow Premises Systems/Controls P&L Suppliers Health, Safety Management Info & Customers Environment Internal Controls

  10. Choosing Your Angel Not all £s are the Same What else the Angel can give? • Sector relevance – contacts and market knowledge. • Experience and skills/ Reputation/ introductions/ more cash. • Investment capacity – can they follow on? • Their role in your business.

  11. Understand the Investment Process • Study a couple of investment agreements. • Know which conditions are ‘standard’ and don’t waste time on them. • Prepare for diligence. • Expect delay. Good luck!! Brian Hale www.lincscot.co.uk

  12. Truisms of Valuation • It’s only worth what someone will pay! • What company has now more valuable than a future promise. • All assumptions are subjective. • Supply of Capital always wins – Angels don’t have to invest. • “Blow” your own credibility!!!

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