Ten Things You Should Know About Funding Leo Dunne December 2013

Who Am I? What Might I Know Career 13 years retail/commercial banking 9 years VC fund management 2 years Family Office 5 years Business Angel Network manager 5 years funding and value creation coach/advisor Developed grant scheme Sat on grant awarding panel The Numbers 6,000+ business propositions reviewed and analysed 1,000+ management teams assessed/advised 120+ transactions completed 50+ businesses invested in £13.5m in direct funding £30m+ funding leveraged

Why ten things? Good question That always seems to be the magic number Everyone seems to produce “10” lists Are there really 10 golden rules? Probably not and not all might be appropriate to you….. ……..BUT some will, take note of them

- one - Most people won’t get the magic

You need to convince them They won’t automatically see what you see They probably won’t share your passion You need to convince them Talk about market opportunity and need rather than product Talk about benefits rather than features Give them something to get excited about It’s your job to convince them

- two - Your business must be viable.

Viability At some point, in the not too distant future, your business needs to be self-sustaining It should be able to meet its expenses without having to seek further funding Or it needs a way to stop having to spend more money (e.g. sell itself) This is the viability test – can your business stand on its own And can it make a profit

- three - The type of funding is as important as the amount

Type of funding Different types of funding have different servicing needs Debt needs to be repaid with interest, grant terms need to be adhered to and investors want a return on their capital What funders seek is based on their assessment of risk and the reward they need to justify taking that risk Low Risk – Low Reward, High Risk – High Reward Remember, it’s what they think the risk is not what you think the risk is Rarely do different types of funding seek the same reward

- four - Knowing the right amount is not as simple as it may seem.

Amount It may seem simple to work out how much you need to spend but is it? You may be forecasting what you need based on assumptions you’ve made What if those assumptions are incorrect? And have you allowed for the cost of the funding itself? Are there any costs that you haven’t thought about?

- five - It’s assumed you’ll under estimate costs, over estimate sales and will need more than you are asking for

Optimists v Pessimists Funders must assess the risk of things not going quite as you planned – their moneys at stake They will take your enthusiasm with a pinch of salt and assume you’ve erred on the ambitious side They will look at your figures and apply some sensitivity to it They assume that you won’t sell as much or as fast as you think and that costs will rise quicker than planned There is nothing wrong with this but they will look at your ability to raise further money as a risk they need to understand

- six - Funders are not out there to help you, they are out to help themselves

Their objective Think about why someone might give you their money? What is it they will want? Is it likely that they will do it out of the goodness of their hearts? No, they are looking for something in return. Do you look as though you can give them this? Win – win is the only way

- seven - If you don’t raise the funding you need, it’s not their problem, it’s yours.

Sleepless nights There are more businesses looking for money than get it – it’s a fact The funder is spoiled for choice and can pick those propositions most suitable And lose no sleep at night in saying “no” They’re not here to help you out If you cannot convince them to give you what you need, that’s your responsibility Go back and see if you can rethink your plans to be more acceptable to them

- eight - You have to have the magic, something a little bit special, something you are better at.

Being different This is especially true if you are looking for investment You need to have something special, something that you have an edge in And you need to convince the funders that this is the case But be careful – there is a fine line between being different and being weird!

- nine - Just because you are ready for funding doesn’t mean that funding is ready for you.

Funding readiness Just because you need funding doesn’t mean you’ll get it You need to get ready for funding Have you produced a business plan? Budgets? Forecasts? Is your “house in order”? Have you any serious structural issues within the business that need to be resolved? Have you done everything you can to be attractive to investors? Are you giving them any easy reason to say “no”?

- ten - When you get it, be careful with it, it is the most precious resource.

Cash in the bank But remember how hard it was to get it Every £1 you spend is a £1 you need to make or fund funding for Control costs, maximise revenue Be sensible and look after the money well Produce accounts, budgets and forecasts And keep them up to date Cash management is extremely important – many profitable companies have failed because they run out of cash!

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