Finance in the South West 2017 - Established (>2 Years) Session

Finance in the South West
Nick Farrant, Partner
Businesses trading for > 2 years…….

pkf-francisclark.co.uk
Structure of morning
• Background, Debt and Business Support (8.30am to
10am)
• Heart of SW LEP
• Banks: an overview
• Equity and Grants
• Growth Hub
• Coffee Break
• Funding, Business Support, Investment Ready
and SME perspective (10.25am to 12noon)
• Start Up (trading for < 2 years) or Established Business
• Lunch and Networking (12noon to 1pm)

• 10 minute presentations on:
• LEADER (grant)
• Marketplace lending – unsecured loans
• Peer to Peer – secured debt
• Debt – the range
• Growth Capital (equity)
• Venture Capital / Private Equity
• Investment ready
• SME Perspective
Funding and support – for business > 2 years old

LEADER Funding Programme
•Sophie Price, Project Advisor
•The DR Company

Background to LEADER
•Part of the Rural development programme
•Managing authority is RPA (Rural Payments Agency)
•Focus on jobs/growth/economy
•Primarily capital investment
•Greater Dartmoor LEAF £1.5m
•South Devon Coastal LAG £1.2m
•Runs to 2020 – Brexit?

Greater Dartmoor LEAF / South Devon Coastal
LAG
(Rural Development Programme for England 2015-2020)

Greater Dartmoor LEAF / South Devon Coastal LAG
•Grant or loan?
•Who can apply?
•How much for?

•What to include in an application
•What’s the process and how long does it take?
•How and where do we start!
www.drcompany.co.uk 01837 658643 admin@drcompany.co.uk

Selection of successful
projects so far…..

Marketplace Lending – Unsecured Loans
Sarah Beard – Business Development Manager South West
22nd February 2017

• Online platform specifically designed to revolutionise traditional banking
methods. Our priority is to secure a better deal for everyone
• Access in as little as 1 week, to fast affordable business loans for working
capital, expansion, tax funding and much more …
• Marketplace lenders are not banks. Put simply, we directly connect
business borrowers looking for finance to grow their business, with
investors who want to lend
What is a Market-place lender?

A simple model: Lenders can spread risk by lending
small amounts to hundreds of businesses
Traditional lending
Investors have control over their investment
Marketplace lending
Loan
parts
Loan
parts
Loan
parts
Loan
parts
Loan parts
Loan parts

Funding Circle – Who are we?
“Were passionate about small businesses”
“Thousands of people, financial institutions and the British Business Bank have lent
over £1.8 billion to British businesses since 2010.
At rates that suit everyone.”
3 Founding Members – set up in 2010
Over $2.5 billion lent worldwide
600 Staff in the UK
300 Staff in CE/USA
Aim is to become the leading global market-place for investing and borrowing for SMEs

Funding Circle is the leading global lending platform for small
businesses
14
0
500
1,000
1,500
2,000
2,500
2010 2011 2012 2013 2014 2015 2016 E 2017 F
FundingCircleannualorigination($m)
Group Originations*
October 2013
Launch in the US
October 2015
Launch in Germany,
Spain & Netherlands
Originated over $2.5B to tens of thousands of small businesses since 2010

Filling The Cashflow Funding Gap
At Funding Circle, we are committed to helping you:
• Grow your business
• Boost working capital
• Cover one-off business costs
• Buy an asset
• Develop a property
• Hire extra staff

Unsecured Loan
£5k - £350k
Suitable for a wide range
of purposes
6 months to 5 year term
Fixed interest rates from
4.9%
No ERP’s
Secured Loan
£150k - £1m
 All asset security
agreement
 Charge on specific
properties or
assets
Products
£150k-£3m
 Development
 Commercial
 Investment
 Fixed interest
rates
 No early
repayment fees
Property Finance

Any Sector, Any Purpose…
Loan Purpose
Working capital
Expansion/growth
Capital
Asset purchase
Other
Residential property
development
Asset finance
Refinancing a loan
Tax payment
Tax liability
Sector
Automotive
Finance
Leisure & Hospitality
Education &
Training
I.T and
Telecommunications
Agriculture
Consumer Services
Healthcare
Manufacturing and
Engineering
Other

Funding Circle – Top Deals
• Garage repair centre. Borrowed £52,000 (7.5% rate) 60 months. Risk Band A+
Raising funds to purchase new equipment, plus marketing and recruitment spend
• Haulage company. Borrowed £30,000 (10.5% rate) 60 months. Risk Band B
To purchase new equipment and help with cashflow
• Hotel. Borrowed £205,000 (7.5% rate) 60 months. Risk Band A+
Working capital and wanted to carry out refurbishments
• Scaffolding business. Borrowed £298,000 (9% rate) 60 months. Risk Band A
To purchase assorted scaffolding equipment for new and ongoing contracts

Underwriting - Simple Credit Criteria
A minimum
of 2 years
trading history
At least 1 year
of filed or formally
prepared accounts
No outstanding CCJs
larger
than £250
What We Look For…
• Sole traders, partnerships, LLPS and Limited companies eligible
• Trading for 2 years with at least 1 years of filed accounts
• Clean personal credit – no CCJs, CVA, CVL or liquidated companies within past 6 years
• No consecutive losses
• Beneficial ownership in UK
• Non limited – must be a home owner
• Limited companies – will only lend up to £50k for non homeowner

20
• In 2013/14 the British Business Bank lent Funding Circle £60m, which has
been channeled into more than 10,000 businesses across the UK.
• To this day, 10% of every loan funded on the partial loan marketplace is
financed by the UK government
• In January 2017 Funding Circle proudly announced it had secured a further
£40m from the government to continue to support UK SMEs
The Government’s commitment to supporting SMEs
through Funding Circle

P2P Secured Debt
Jane Dumeresque
CEO, Folk2Folk

AgendaWhat is P2P secured debt?

•Individuals lending
money

money
•Typically faster

money
•Typically faster
•Backed by collateral

A FAIR way of enabling
individuals to lend money to
others while mitigating the risk
of default by providing collateral.

We want to offer the
best protection
for Borrowers &
Lenders

Yes we can
• Need a quick decision
Get a yes or no within 24-48 hours
• Need funds within weeks rather than months
• Time poor
• Wearing many hats
• Turned down by their bank

Yes we can
Funds within 7-10 days
• Time poor
• Turned down by banks

Yes we can
• Time poor
Easy application

Yes we can
• Time poor
Easy application
Simple and straightforward

Yes we can
• Time poor
Easy application
Simple and straightforward
We don’t follow same judgement criteria

We’ll sort out the finance so you
can focus on your business.

If you believe
you can, we
believe you
can.

Simple process
1
Apply online, call us
or drop into a branch

Simple process
1 2
Decision within 24-48
hours

Simple process
1 2 3
Decision within 24-48
hours
Funds released in 7-
10 days

Amount:
• Min £25,000
• Max 60% LTV
Duration:
• Fixed or flexible loans
Security:
• Land or property (not your home)
Cost*:
• Interest only loans at 5.5% or 6.5%
• 2% set up fee, 1% annual service charge
Straightforward loans
* 3rd party fees and disbursements also apply

Your property against which the loan is secured could be at risk if you
do not meet payments.

Growth Capital Investors
EdwinDavies, Investor
Edwin.davies@bgf.co.uk 07880
384983
Introduction to BGF
Daniel Tapson, Investor
daniel.tapson@bgf.co.uk 07964 904443

BGFisaninvestment firm that
provides growthcapitalof£2m
-£10m toUKbusinesseswith
turnover of£5m -£100m.
Who we are.
Funding for growth and equity release
Day 1 investment of £2m – £10m for a
minority stake
Long-term and patient capital, no forced
exit
Access to huge network and support
Fast and focused investment process

BGF in numbers…
£2.5bn–total fund
£1.1bn–investedtodate
160 –total currentinvestments
102 –non-executives introduced
40% –maximum stake
9–investorsinthe Bristolteam
9–UKoffices
£5m –minimum turnover threshold

Day 1 investment of
£2m-£10m
Cash-in: to support long term growth
Cash-out: for existing shareholders
Equity stake of up to
40%
Always a minority partner – you retain
control
What we can offer.
Workingalongsidethe
banks,BGFprovides
growthcapitalinawaythat
meets companies’needs.
No closed fund
pressures
Patient capital. No drag rights, no forced
exit

Fast and focused
investment process
Minimises disruption and fees
What we can offer.
Workingalongsidethe
banks,BGFprovides
growthcapitalinawaythat
meets companies’needs.
Flexible structures –
equity / loan notes
Meets the needs of the company and
shareholders
Fair legal approach Less onerous investor legal protections
More than money Access to impressive network
and support

May 2012
£4.0m
Online garden products
retailer
Reading
December 2012
£3.5m
Niche developer of mobile
phones for major brands
Reading
South West Portfolio.
December 2012
£7.0m
Design & manufacture of
high composite pipes for oil
& gas
Portsmouth
April 2013
£3.9m
Design, manufacture &
distribution of branded
travel products for kids
Bristol
April 2014
£4.0m
Cloud based IT services to
the public sector
Corsham
August 2014
£8.0m
Manufacturer & retailer of
luxury kitchens
Devizes
August 2014
£3.6m
Sustainable energy
business that designs &
installs systems
Tetbury
August 2014
£6.0m
Furniture retailer with 40
stores across the UK
Slough

April 2016
£9.0m
Production of high quality,
bespoke technical fabrics
Bridgwater
August 2016
£2.0m
Liquid waste removal and
drainage services
Cardiff
August 2016
£2.0m
Data analytics
Corsham
South West Portfolio.
October 2016
£3.0m
Retailer of solid wood
kitchen worktops
Gloucester
October 2014
£7.0m
IT managed services and
cloud hosting
Cirencester
March 2015
£4.0m
Communications
infrastructure and
outsourced IT services
Chippenham
July 2015
£10.0m
Multi-channel retailer of
clothing, footwear,
household and fishing
tackle products
Brecon
January 2016
£4.4m
Web-based email
marketing solution
Oxford

70
BGF South West and
South Wales Team
James Austin
Investor
07872 819093
Greg Norman
Investor
07557 747302
Edwin Davies
Investor
07880 384983
Paul Oldham
Regional Director
07887 657697
Dan Tapson
Investor
07964 904443
Ned Dorbin
Investor
07800 682195
Alex Garfitt
Investor
07770 582021
Alex Snodgrass
Investor
07766 781923
James Skade
Investor
07967 816583

Private Equity, Mobeus and the South West
Richard Babington, Partner, Mobeus Equity Partners

Private, Mobeus and South West
72
• What private equity is not
• Private equity – what it is and what it all means
• Where does the money come from and how does it all work?
• How does the private equity market segment itself?
• How does the investment process work?
• What should you look out for in an adviser and a private equity partner?
• Mobeus and the South West

73

It’s somewhere between Dragon’s Den and the
Apprentice right?
74

Private Equity and Mobeus
75

What is private equity?
76
Long term capital investment in
unquoted companies in return
for an equity stake
Average investment
period > 5 years
Growth is key
Companies are
privately held
PE house and
management are both
shareholders

77

Where does the money come from?
78
Borrow 10-year money from financial institutions
(Limited Partners “LPs”)
Form an investment vehicle to invest the money in a series
of privately owned businesses (General Partner “GP”)
First 5-6 years investing in businesses alongside
management teams and growing them
Last 5-6 years growing the businesses and
exiting the shareholdings
Proceeds distributed back to the LPs,
management teams and the GP

Where does Mobeus’s money come from
79
Fund IV still in the investment phase
£150m raised from pension funds, insurers, Mobeus partners
Mobeus IV formed June 2016
Kinneir Dufort MBO (October 2016), Factor 21 MBO (November 2016)
Investments from earlier funds in the process of
being developed and exited

Private Equity and Mobeus
80

How does the private equity market segment itself
81
Stage of development
Investment mindset
Scale of investment
Investment horizon
Sector specialty
Start up Development capital Established Turnaround
Passive ActivistActive
£500k-£2m £2m-£20m £20m-£100m £100m-£1bn £1bn+
2 years 10 years5 years
Specialist Generalist

82

How does the investment process work?
83
Direct approachesIntroductions from
advisors
Inbound enquiries
Meetings with management, site visits,
exchange of information and expectations
Heads of terms and a period of exclusivity agreed
Due diligence (financial, commercial, legal, management plus
specialist), negotiation of legal agreements and building out of
5-year strategic plan
Legal completion and execution of the strategic plan
4 weeks
4 weeks
8 weeks

84

Questions for yourself and your adviser
85
• Is your company prepared for the process?
• Corporate and financial records all complete and up to date
• Strategy for advancing the company in place
• “Transaction blockers” removed or capable of being contained
(outstanding legal actions, rogue shareholders, short leases)
• How should you go about choosing an adviser
• Match their capabilities (horsepower, network) with your needs
• Meet the entire team who will work on your transaction
• Examine the company’s track record in what you are trying to achieve
• Reference the firm, reference the individuals
• No question is a stupid question
• Consider talking to an advisor if the above is not the case

Questions for your private equity partner
86
• What experience does the PE firm have with what you are trying to do
with your business now and in the future
• Does the PE firm’s approach match what you want from a business
partners
• Are the people you are dealing with the decision makers at the firm
• How established is the firm and does it have committed funding lines
• Reference the firm. Reference the individuals you are dealing with. Do
the references on your terms, and talk to investments that haven’t
gone so well in addition to the stars
• Reference them again

87

Mobeus and the South West
• Founded 1998, doing mid-market transactions ever since and active in
the South West from day 1
• One of the most stable and successful teams in UK private equity
• £400m under management, £150m currently being invested from
Mobeus IV
• Investing £2m to £20m in MBOs, equity releases and development capital

Private Equity, Mobeus and the South West
Richard Babington
richard.babington@mobeusequity.co.uk
+44 7909 994 665
https://www.linkedin.com/in/richard-babington-343ab63

Investment Ready
Andrew Killick

.
Funding options

.
Business Strategy Business Plan
• What are you trying to achieve?
• Allow for thinking and evaluation time
• Document the assumptions
• Financials should follow the narrative

.
Management
• Roles and responsibilities
• Any changes or additional requirements?
• Track record
• Personal investment/commitment

The
Business
Case

.
The numbers
• Match funding to cash requirements and business
model
• Monthly profit and loss, cash flow and balance
sheet projections
• Review
• Cash headroom and sensitivities

.
Investment ready - housekeeping
 Licences / contracts / IPR
 Books and records in order and up to date?
 VAT, PAYE/NI, Corporation tax
 Statutory Accounts/management accounts
 Website

.
Requirements: Equity
• Equity funder requirements » growth
• Exit route and returns to the investor
• Investors expertise vs. loss of independence?
• Be prepared to discuss valuation

.
Requirements: Grants
• “Project” eligibility – sector, size, location…
• Timescale – prescriptive, process and panels
• Match funding
• ‘need for grant’ versus viable proposition
• On going requirements

.
Requirements: Debt
• Serviceability & Headroom
• Security / Personal Guarantees
• Conduits for government initiatives
• Covenants – achievable / appropriate?

.
Investment ready - Conclusions
 Suitable funding
 Robust Business case and appropriate
Management
 Detailed financial projections and
documented assumptions
 Resolve the ‘deal breakers’
 Allow sufficient time

In-Chip Sensors
Market leading embedded monitoring IP
solutions for today’s technologies
GLOBAL IN-CHIP MONITORING
Finance in the South West 2017
22nd February 2017
V2, 15mins
Stephen Crosher
Managing Director

102
The Challenges Posed …
 Advanced Technologies:
Mobile Communications
Data centres
Automotive
IOT
 Challenges to advanced product design:
Increased integration
Physical conditions
Continued advancement and complexity:
• Artificial intelligence
• Self driving vehicles
 Solution: Monitoring ……

103
Moortec Semiconductor
 Semiconductor Design Company (‘IP Vendor’)
 Licensing of circuits & sub-system solutions
 Mission: To become world #1 for in-chip monitoring solutions
 Located in the Plymouth Science Park
 Global customer base
Silicon Valley China
S.Korea
IsraelUK/EU
Taiwan
Japan

2005 - Founded in 2005
2005 to 2010 - Chip Design Services
2010 - IP Product Development
2014 - Innovate UK (TSB) Grants
Project#1 July 2014
Project#2 Oct 2014
2015 - Turning point
Pure-Play IP Product Model
Market Traction
TSMC IP Alliance Membership
Sought investment
2016 - A Big Year!
Received Investment for Growth
TSMC Open Innovation Platform® Partner of the Year New IP Award
Largest customer order
2017 - Growth
104
Timeline
2005
2010
2020
2015
Industry Awards
Industry Alliances
Foundry Alliances
Investment - Altitude Partners

105
Lessons
 The ‘Right’ Team:
 Board structure
 Define roles and employ the best
 Culture (‘can do’ attitude, quality, personal learning & development)
 A Ruthless Focus
 Marketing
 Sales
 Product Roadmap (standing still is not an option)
 Mentoring
 Seek from various sources
 Learn to prioritise
 Burn-out v Delegate
 Especially within a start-up culture
 Recognise your successes!

106
Next Stage of Journey
 Focus on Revenue
 IP Sales doubling each year
 Increasing headcount
 High-tech work force
 Increased by 50% in the last year
 Customer Reach
 Account management
 New Global Offices
 Mission: To become world #1 for in-chip monitoring solutions
Silicon Valley
Hong Kong
UK/EU

107
Global In-Chip Monitoring
Thank You

Finance in the South West – wrap up
Nick Farrant, Partner

.
Summary
• The South West is a great place to do
business and has great businesses
• The South West full of entrepreneurial spirit
(businesses and funding options)
• Funding and business support here…
• http://www.francisclark.co.uk/news-views/blog
• Thank you

Presentations
And more… (24 presentations in total, covering “full range” of funding and business support options)

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Finance in the South West 2017 - Established (>2 Years) Session

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