Business funding in tough times The Business Angel AngleBristol Enterprise Network

9th February 2010Philip Tellwright

Managing Director SWAIN

Why SWAIN?

Philip Tellwright MA FCCA3i plcHazlewoods Director Corporate FinanceInch’s Cider FDBrissco Equipment FD

Background

Commenced May 2004Operating 5.5 yearsSupport from SWRDA (majority of costs)About to finalize 2nd SWRDA extension

Geography

Facts & Stats

Facts & stats

Current trends – equal and opposite?

Investors

•21 months on from April 2008•Poor returns elsewhere•Entry prices relatively low•Maturity of opportunities•EIS relief remains attractive

Companies•Banks not lending•SW VCs no cash for new deals•Other VCs portfolio issues

Investors

•Portfolio balance skewed•Longer Due Diligence•Serial investors illiquid

Companies•Poor market conditions for growth

Deal profile

80 deals (15 deals per year);58 businesses (66% first round);£5.9m from SWAIN investors;£23m total finance;Ave. Stake 18.5%Typical post money valuation £850k13 failures (21%)

Nesta report (1) Profile

53 years old13 years with large companyEIS 57%10% of wealth is in angel investments83% made with co-investors

Nesta report (2) Investment

£ size per investor £42,000Pre-money £875,00015% seed36% start up

Nesta report (3) Returns

Ave hold 3.6 yearsExits (incl failures) 406Overall multiple 2.2xApprox IRR 22%9% of exits gave 80% of cash returnedIn US 10% gave 90% of cash returned

Win – win How does it work?

5 year Multiplier / IRR%

3F’s

Angels 10/58%

Regional/

University Funds

VCT VC

5/38%

PE

Plus AIM LSE 10%

£ks £10k’s £100k’s £mn’s -> £bn’s

Equity Returns

Attrition rates, conversion ratios

Our processRule of five

Three step message

Explain your idea;Explain how you will make money out of your idea;Explain how the investor will make money out of the idea.

Pitch preparation

Is it necessary?Rough is sometimes better than polishedOne chance to make a first impressionNo compelling reason to invest

Deal phases

Prepare Bus Plan

Introduction

Read plan / Evaluation / Visit / Syndicate

Initial Negotiations

Heads of terms

Due Diligence

Legal & final neg

Understand offering

Prepare investment case

Prepare pitch

Rehearsal

Am I what I seem?