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www.british-business-bank.co.uk
@britishbbank
Enterprise Capital Funds
Seminar for Prospective Fund Managers and Investors
February 2016
www.british-business-bank.co.uk
@britishbbank
Overview
Ken Cooper
Managing Director Venture Solutions
www.british-business-bank.co.uk
@britishbbank
British Business Bank - What we do
• Aim to change the structure of the finance markets for smaller businesses, so they work more effectively and dynamically
• In turn, this will help businesses prosper and build economic activity in the UK
• PLC since 1st November 2014.
An Economic Development
Bank A plc – 100% owned by UK Government
Working with 80 partners
3
www.british-business-bank.co.uk
@britishbbank
Enable
Help to Grow Programme
British Business Bank – where ECFs fit
Scale up Stay ahead
Mentoring and funds to ‘be your own boss’
Funds for high growth potential businesses
More funding options and choice of provider
Investment Programme
Providing loans and mentoring support to help entrepreneurs to start a business.
Supporting a vibrant and diverse venture capital market for early stage and high growth businesses.
Venture Capital Solutions
Allowing fast-growing firms to reach their potential. It will include debt finance with equity elements - junior debt.
Supporting a greater range of funding for smaller businesses
Funding and capital products to help increase the flow of finance
Enterprise Finance Guarantee
Encourages financial institutions to lend to viable smaller businesses lacking collateral or track record.
4
Angel Co Fund
Matching equity investment in smaller businesses from business angels.
Start up
www.british-business-bank.co.uk
@britishbbank
ECF Portfolio - Key facts
2006 2015
19 Enterprise Capital Funds Range of fund sizes - from £10m to £75m Range of strategies - from SaaS and creative industries to more general portfolios Range of stages - seed to later stage venture
www.british-business-bank.co.uk
@britishbbank
ECF performance is good
ECF fund of funds is TVPI positive
Providing £660M+ of investment potential to UK high growth businesses
Good exits & first NASDAQ listing of a portfolio company
ECF companies have attracted top tier investors in follow on rounds
6
Over £295M invested across more than 225 companies
www.british-business-bank.co.uk
@britishbbank
The ECF Franchise
British Business Bank is a long term participant in the venture market and a professional LP
We have backed emerging managers who are/will be household names on the UK and European Venture stage
ECF Fund managers are building fund management businesses using a multiple fund model
7
We have backed 7 of the 15 ECF Managers in a second fund with more expected
www.british-business-bank.co.uk
@britishbbank
Next steps
We will continue to support good emergent fund managers
ECF programme is well funded in the coming years
Panoramic and the Funds team are here today to answer any questions informally
If you are interested read the Guidelines and get in touch
8
www.british-business-bank.co.uk
@britishbbank
Legal Notice
No representation, express or implied, is made by British Business Bank plc and its subsidiaries as to the completeness or accuracy of any facts or opinions contained in this presentation and recipients should seek their own independent legal, financial, tax, accounting or regulatory advice before making any investment decision.
No part of this presentation should be published, reproduced, distributed or otherwise made available in whole or in part in any jurisdiction where to do so would be unlawful.
British Business Bank plc is the holding company of the group operating under the trading name of British Business Bank. It is a development bank wholly owned by HM Government which is not authorised or regulated by the Prudential Regulation Authority (“PRA”) or the Financial Conduct Authority (“FCA”). British Business Bank plc operates under its trading name through a number of subsidiaries. Neither British Business Bank plc, British Business Finance Ltd nor British Business Financial Services Ltd is authorised or regulated by the PRA or FCA. British Business Bank plc and its subsidiary entities are not banking institutions and do not operate as such.
A complete legal structure chart for British Business Bank plc and its subsidiaries can be found at www.british-business-bank.co.uk.
Please note that British Business Finance Ltd is acting as an investor for the purposes of the ECF Programme and therefore this presentation does not require approval under financial promotion legislation or corresponding rules.
© British Business Bank plc February 2016
www.british-business-bank.co.uk
@britishbbank
Enterprise Capital Funds: Selection and Process
Christine Hockley
Senior Investment Manager
Venture Solutions
February 2016
www.british-business-bank.co.uk
@britishbbank
• A “geared” return structure designed to be competitive with other investment opportunities for the private investors
• A significant commitment from British Finance Limited “BBFL” of up to £50m and 60% to 66% of the fund.
Key features of ECFs
11
Waterfall
Private Investment
• 3% prioritised return to BBFL • Repayment of capital to BBFL and private investors • Distribution of a fixed share of profit to BBFL – remainder
shared between private investors and the fund manager
• Investors must invest on a commercial basis • Private investment must be new money in to the equity
gap
www.british-business-bank.co.uk
@britishbbank
• Initial round size and total investment limits focused on “equity gap”
• Equity component with a significant prospect of a material capital gain
• Unlisted SME either pre-commercial sale or within 7 years of first commercial sale or is launching a new product or into a new geography requiring investment > 50% of preceding 5yrs average annual turnover.
• Investment must be for the benefit of the UK economy
• Investment must be a ‘qualifying trade’
• Fresh capital only except in specific and limited situations
The Strings - ECF restrictions
12
Full details of the restrictions are in our Guidance for Prospective Fund Managers
www.british-business-bank.co.uk
@britishbbank
Four broad areas of assessment:
The programme is competitive with only the strongest proposals being taken forward.
Successful proposals must also offer the best overall value for money in meeting BBFL’s objectives.
Assessment Criteria
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Strength of investment team, relevant experience and expertise
Investment strategy
Sources of private capital
Financial terms
www.british-business-bank.co.uk
@britishbbank
2-4 funds per annum
• Call, email or come and see us for initial feedback
• Iterative process, keeping contact until ‘investment ready’
• We may start ‘light’ due diligence, including referencing and consideration of track record, experience of team etc.
• Formal ‘5-pager’ comes later
The Application Process
14
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ts
www.british-business-bank.co.uk
@britishbbank
The Application Process – Common sticking points
15
Team
Track Record
Terms
New team demonstrating they can work together effectively Existing team demonstrating they have the bandwidth to deliver a new fund
Portfolios that are largely unrealised Whose deal was it?
“We’d like some feedback on our commercial terms.”
Private Investors “We don’t want to fund raise until we know you are in.” Private investors with motives other than commercial return.
Strategy “Me too”, no differentiation or obvious links to team’s skills Conflict of interest
www.british-business-bank.co.uk
@britishbbank
The Application Process – Common sticking points
16
NO SURPRISES !
www.british-business-bank.co.uk
@britishbbank
• Quality of WIP is excellent which reflects increased venture returns
• Much longer tail of quality proposals for everyone we invest in
• Limited number of teams we can work with and invest in
Current Appetite
17
Strength of proposition remains paramount
Looking for ‘stand out ‘ proposals
www.british-business-bank.co.uk
@britishbbank
• ECF’s structural requirements and restrictions must fit with your investment strategy
• No minimum or maximum fund size – managers need to demonstrate that the proposed fund size is appropriate to the investment strategy
• Maximum ratio of BBFL participation set by type of company that the fund will focus on
Further details at:
http://british-business-bank.co.uk/ourpartners/enterprise-capital-funds/
Is an ECF right for you?
18
www.british-business-bank.co.uk
@britishbbank
Read the Guidance and if you still think an ECF is for you get in touch!
Still interested??
19
www.british-business-bank.co.uk
@britishbbank
Legal Notice
No representation, express or implied, is made by British Business Bank plc and its subsidiaries as to the completeness or accuracy of any facts or opinions contained in this presentation and recipients should seek their own independent legal, financial, tax, accounting or regulatory advice before making any investment decision.
No part of this presentation should be published, reproduced, distributed or otherwise made available in whole or in part in any jurisdiction where to do so would be unlawful.
British Business Bank plc is the holding company of the group operating under the trading name of British Business Bank. It is a development bank wholly owned by HM Government which is not authorised or regulated by the Prudential Regulation Authority (“PRA”) or the Financial Conduct Authority (“FCA”). British Business Bank plc operates under its trading name through a number of subsidiaries. Neither British Business Bank plc, British Business Finance Ltd nor British Business Financial Services Ltd is authorised or regulated by the PRA or FCA. British Business Bank plc and its subsidiary entities are not banking institutions and do not operate as such.
A complete legal structure chart for British Business Bank plc and its subsidiaries can be found at www.british-business-bank.co.uk.
Please note that British Business Finance Ltd is acting as an investor for the purposes of the ECF Programme and therefore this presentation does not require approval under financial promotion legislation or corresponding rules.
© British Business Bank plc February 2016