The recent Young Company Finance Conference highlighted some key trends in the start-up scene in the UK and some great tips for companies looking for investment.
Here Are Some Of The Observations From The Technology Innovation Team At ICS From The Conference:
Nesta gave a really interesting talk on the small business sector in the UK. They said that small businesses account for 47 per cent of private sector employment and 34 per cent of turnover, however the market should be aware that only 5% of UK start-ups employ 5 or more people after 10 years. They also highlighted that the high-tech sector is buoyant with job creation growing at nearly four times faster than other sectors.
A great case study from Joe Tree from Blipfoto, a Scottish based Entrepreneur gave some good tips to companies looking to grow an innovative business;
- Innovation does not equal invention. Innovation is invention intermingled with strong commercialization
- Be clear what you want out of your business with yourself, your co-founders and your investors
- Identify your weaknesses then find people who have the strengths to overcome those weaknesses
We also heard from Dr James Browning, the CEO of Mpathy Medical who spoke about engaging with investors and developing an exit strategy. James gave a strong warning that you should choose your investors carefully, don’t just engage with them if they are offering money, they’ve got to fit with the ethos and culture within your business. Entrepreneurs wanting to exit their business need to realise it will take twice as long as they think it will and that your investors who are savvy will support you on this long journey.To ensure you can secure the best deal when exiting the company, it is wise to use a 3rd party to act on your behalf .This will help bring gravitas to the sale and can help you get to decision makers whom you don’t know and it also takes the emotional issues out of the situation. And finally from the VC angle, Enrico D’Andelo from Parkwalk Advisors explained to the audience that in today’s market, there are increased financing requirements for investors along with decreasing exit valuations and VC’s are struggling to raise new funds.
He said that the most successful companies have VC’s involved and most VC backed entrepreneurs will go back to VC’s in their next endeavours. VC deals are getting done and the Enterprise Investment Scheme Funds are increasingly plugging the Equity Gap. Enrico also advised that an investor taking advantage of both Income Tax relief at 30% and Capital Gains Tax deferral at 28% can effectively reduce the initial cost of a £100,000 EIS investment by £58,000 to £42,000. Overall, the message from the day was if raising investment, know your numbers! How much do you want, when do you want it – now, in 12 months time and 24 months time. Once you know all this decide how much equity you are willing to sell to secure the investment, that way you will get the deal you want!