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Warwickshire Rural Growth Network
Project
• Pilot Project The Rural Economy Grant – Micro
Enterprise Support is part of the Warwickshire
Rural Growth Network (RGN).
• Rural high growth/ high value micro-
enterprises in the LEP priority sectors:
manufacturing/ advanced engineering, digital
media, and low carbon technologies.
• Overview of Interactions with 100 businesses
6. Copyright ©UWSPLtd2013
Sources of Finance
Concept/ Seed
/Micro Existing
Start-ups/Existing
Early Stage/Growing Later Stage/Mature
£0k
£50k
£100k
£500k
£1m
£2m
£5m
£10m
£100m
Publically
Backed Venture
Capital
Private Venture
Capital
Novel Debt
(CDFIs)
Banks
Business Angels, Alternative Crowd
Funding
Gov’t & Public backed Venture
Capital/ LEP Initiatives/ERDF schemes
& TSB & other grants
CDFIs
Bank
Public
Equity
MarketsPrivate
Venture
Capital
Banks
4F
TSB/ other
Grants.
Alternative
Crowd
Funding
Angels
The SME Funding Escalator
Sources of
Capital
HIGH
RISK
LOW
RISK
Idea
Generation Product Development Commercialisation Expansion
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Four ‘Fs’
• Founders, Friends, Family and Fools;
• Relatively ‘cheap’ money (soft
loans, gifts, cheap and unstructured
equity sales);
• Usually quite limited (how big is your
credit card limit?);
• Often uncritical – reinforces your own
ideas without challenging them;
• To raise it, you often just need an idea and
an outline business plan.
• Usually done without any agreement on
what happens in the future and that can
be a problem later
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Grants
• Grants usually provided by government, EU and public bodies;
• Range from £500>£5m+;
• Often require a contribution and or match funding;
• Funding is often used to drive specific policy agenda (e.g. defence
technologies, nuclear technologies, young entrepreneurs);
• Clear limits on what you can spend money on;
• Often require fairly detailed applications and a business plan;
• Grant schemes tend to be very competitive (in UK 10%>20% success rate
is typical);
• Sources: Technology Strategy Board, local council, Local Enterprise
Partnerships, Universities
• There are many different grant schemes – and they change regularly
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Debt
• The lending of money, often secured against an asset, with a fixed repayment
schedule;
• Usually only available to firms with a strong track record and/or valuable assets
(very rarely IP);
• Often requires personal guarantees from directors (e.g. charges over their homes);
• CDFIs ( CWRT), asset
finance, factoring; Crowd Funding
(THIN Cats )
• Can have inflexible payment
schedules with fixed interest but no
equity ownership dilution issues
• Banks – have a number of different
options and all debt can be quite
quick to obtain
• Local Councils –administer a lot of
schemes for their area
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Equity
• Stranger or External Equity is suitable to very few businesses
• Three main types of investor; Business Angels (private individuals- Networks and
Crowd Funding) ; Venture Capital Funds (investment firms); and Corporate Venturers
and some public backed funds.
• All invest in high-risk businesses but usually BAs at the risky start-up stage, VCs once
the tech/model is proven and CVs once the market is proven;
• Investments of £25k>£10m+;
• Very competitive market (fewer than 20% of firms who approach Minerva get in
front of investors, fewer than 10% raise money);
• Requires very detailed business plan and probably many meetings/presentations;
• Equity investors want a capital
exit and need to be convinced
that a business can deliver
them high multiple of their
initial investment;
• Sources: UKBAA/BVCA/