enterprise capital funds seminar for prospective fund ... · 2. iq capital fund 1 3. sustainable...

www.british-business-bank.co.uk

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Enterprise Capital Funds

Seminar for Prospective Fund Managers and Investors

May 2019

#BBBECF


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Welcome and Overview

Ken Cooper

Managing Director

Venture Solutions


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British Business Bank, ECF Team

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Ken Cooper –Managing Director, Venture Solutions

Olivia Cooper - PA Mark Sims –Director, Funds

Michael Laycock –Senior Investment

Manager

Sam Ettelaie –Investment Manager

Matthew Maddison –Director, Portfolio &

Reporting

Simon Cunnington –Senior Investment

Manager

Liz Bailey –Senior Investment

Manager

James Campbell –Investment Manager

Sean Casey –Analyst


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The British Business Bank


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International Economic Development Banks

Business Development Bank of Canada Est. 1944

KfW Bankengruppe Est. 1948

Banca del Mezzogiorno Est. 1952

Small Business Administration (SBA) Est. 1953

BPI France Est. 2005

Japan Finance Corporation Est. 2008

British Business Bank Est. 2014


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How we operate

Start-up

funding

providers

Business

angels

Asset

finance

providers

High street

banks

Venture

capital

providers

Debt

funds

Challenger

banks

Supply-chain

finance

providers

Peer-to-peer

lenders

Privatesectormoney

Expertise

Designing solutions to make finance markets for small businesses work better

Money

£6.2bn of public funding commitments

Invoice

finance /

factoring

Privatesectormoney


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Our regional funds

£400m+ Northern Powerhouse Investment Fund

£250m+ Midlands Engine Investment Fund

£40m+Cornwall & IOS Investment Fund


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Our objectives

INCREASE SUPPLYOF FINANCEto smaller businesses where markets do not work effectively

CREATE A MORE DIVERSE MARKETfor smaller businesses’ finance with greater choice of options and providers

ENCOURAGE AND ENABLESMEs

to seek the financebest suited to their needs

MANAGEtaxpayers’ resources efficiently withina robust risk management framework

IDENTIFY AND HELP REDUCE REGIONAL IMBALANCES IN ACCESS TO FINANCE for smaller businesses across the UK

BE THE CENTRE OF EXPERTISE on smaller business finance in the UK, providing advice and support to government

2 new objectives from April 2018


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Our success – the last 4 years


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Why support smaller businesses? (SMEs)

99.9%of UK

businesses

5.7mUK SMEs

16.1mEmployees in UK SMEs

of UK private sector employment

of UK private sector turnover

13th out of 14 countries for start-up's that

grow to 20 + employees in 3yrs

60%

51%


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The Story So Far

Mark Sims

Director, Funds

Venture Solutions


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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 have become household names on the UK and European Venture

stage.

BBB was one of the most active UK Venture LP last year

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We have backed a high proportion of fund managers in a second and in some instances third fund


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Managers Supported By The ECF

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Key Stats

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Since inception in 2006, 28 ECFs have been launched, supporting 545 innovative SMEs across a range of sectors.

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0

200

400

600

800

1,000

1,200

1,400

Q3

200

6Q

4 2

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Q1

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7Q

2 2

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Q3

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7Q

4 2

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Q1

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2 2

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Q1

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Q3

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2Q

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Q1

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3Q

2 2

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Q3

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3Q

4 2

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Q1

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4Q

2 2

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4Q

4 2

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Q1

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5Q

2 2

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5Q

4 2

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Q1

201

6Q

2 2

016

Q3

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6Q

4 2

016

Q1

201

7Q

2 2

017

Q3

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Q1

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018

1. Seraphim Capital2. IQ Capital Fund 1

3. Sustainable Technology4. Amadeus & Angels Fund5. Catapult Growth Fund6. Dawn ECF

7. Oxford Technology

8. MMC9. Panoramic

10. Passion Capital

11. Notion Capital II

12. Longwall

13. Foresight Nottingham14. Episode 115. Amadeus IV

16. Sussex Place

17. IQ Capital II

18. Passion Capital II

19. Edge20. Active

21. Entrepreneur First22. Seraphim Space Fund23. ADV

24. Pentech

25. Longwall II26. Episode 1 II

27. IMBIBA

28.. VGC


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Sector Breakdown Of Portfolio Companies

The programme does not have a focus on one industry it is sector agnostic.

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Industrials6% Media & Marketing

3%

Leisure & Retail14%

Science12%

Business & Professional Services

16%

Tech/ IP based businesses

46%

Finance3%


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Changes In Fund Sizes

Average size increase from £20M funds closer to £60M over the programmes lifetime. Fund size has to be relevant for the market gap and strategy.

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£0

£10,000,000

£20,000,000

£30,000,000

£40,000,000

£50,000,000

£60,000,000

£70,000,000

£80,000,000

£90,000,000

£100,000,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Fun

d S

ize

Fund Number


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Summary

We will continue to support high quality emerging fund managers.

The ECF programme is well funded after securing an additional £1bn of funding to be deployed over the next ten years.

The quality of ECF managers shows that the programme is competitive.

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ECF Guidance & Selection Process

Michael Laycock

Senior Investment Manager

Venture Solutions


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• A “geared” return structure designed to be competitive with other investment opportunities for the private investors.

• A significant commitment from British Business Finance Limited “BBFL” of up to £50m and 60% to 66% of the fund.

Key Features Of ECFs

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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 incentivised into the market by

the ECF structure


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➢ 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’.

The Strings - ECF Restrictions

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Full details of the restrictions are in our Guidance for Prospective Fund Managers


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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


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2-4 funds per annum

• Call, email and meetings 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.

• ‘Full’ due diligence, includes access to a data room and a complete due diligence questionnaire as well as multiple onsite meetings.

• Formal ‘5-pager’ comes later

• Length of the process varies

The Application Process

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ss


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The Application Process – Common Sticking Points

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Team

Track Record

Terms

A new team demonstrating they can work together effectively togetherExisting team finding it difficult to demonstrate they have the bandwidth to deliver a new fund

Portfolios that are largely unrealisedWhose 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 skillsConflicts of interest


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The Application Process – Common sticking points

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• 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.

Is An ECF Right For You?

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Strength of proposition remains paramount

Looking for ‘stand out ‘ proposals

Further details at: http://british-business-bank.co.uk/ourpartners/enterprise-capital-funds/


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Read the Guidance and if you still think an ECF is for you get in touch!

Still Interested??

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Current Fund Manager Presentation / Q&A

Parminder Basran

VGC Partners


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Technical Q&A

Venture Solutions Team


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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 decision based on the information contained herein.

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 a public limited company registered in England and Wales registration number 08616013, registered office at Steel City House, West Street, Sheffield, S1 2GQ. As 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).

It operates under its own trading name through a number of subsidiaries, one of which is authorised and regulated by the 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.

http://www.british-business-bank.co.uk

enterprise capital funds seminar for prospective fund ... · 2. iq capital fund 1 3. sustainable...

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