finance for growth - presentation by jonathan gold

8/7/2019 Finance for Growth - Presentation by Jonathan Gold

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Finance Tree ltd, 2010

Finance for Growth(venture capital)

16th March 2010

NETpark Incubator

Jonathan Gold [email protected]


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Who are we ?

Finance Tree works with businesses to help them

understand the needs of investors and find the right

investor.

2005 NStar Corporate Finance established

2006 Finance and Business launched

2008 (April) Management Buyout and creation ofFinance Tree

2009 (April) created Rivers Capital Partners

www.riverscap.com


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Venture Capital / Private Equity

Private Equity is medium to long-term finance

provided in return for an equity stake in potentially

high growth unquoted companies.

Source: British Venture Capital Association (BVCA) 2005

NB: Almost all are FSA regulated collective investment schemes


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Sources ofcapitalofcapital

ResearchGrant

Con

cept Finance

~ 100,000


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Finance for Business

North EastF

unds

25m

15m

7.5m

20m

20m

20m


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The investment model

Time since investment

Investment in

Generating cash

Sale of company

or exit

Development &

early sales

(losses)10x return in 5 yrs


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Statistics ofVC portfolios

10 Investments

4Fail

4 Living dead

2 Stars


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Why bother?

VC should add real value to your business

Recruitment of the senior team and suitable NXDs

Extending yourcontact base of customers/partners

Assisting the business to enternew markets

Providing support on complex deals (eg: acquisitions)

Acting as a friendly outsider in strategy debates

Securing additional funding & negotiation of exits


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So is there a downside?

Lose some control

there will be another owner of your business

VC will normally want a seat on your Board

Full transparency in terms of information & business

Typically look to agree a growth and exit strategy up front.


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1 2 3 4 5 6 7

1x 0 0 0 0 0 0 0

2x 100 41 26 18 14 12 10

3x 200 73 44 31 24 20 17

4x 300 100 58 41 32 26 21

5x 400 123 71 49 38 30 25

6x 500 144 81 58 43 34 29

7x 600 164 91 62 47 38 32

8x 700 182 100 68 51 41 34

9x 800 200 108 73 55 44 36

10x 900 216 115 77 58 46 38

Value & IRR

Ultimately its what an investor will pay !

Investment required

Time to a given return

Return the investor needs

RISK

Valuation

Pre-investment

Post-investment

% ownership to give return


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Indicative timelineendgame

Ta Ti eline

( nt )

1 2 3

Initi l l nning tings

Pl n/ ff r l nt

M ling l ti n

Inf r ti n r ndum

Tax lanning

Invest r identified

Presentati ns t invest rs

nsiderati n f ffers

Preparati n f rduediligence

Negotiations it investors

Internal duediligence

Legal document prep.

Final offers

Investorduediligence

Exclusivit period

ompletion

BLUE internal RED externally driven


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Last but not leastEXITS

PLANNED from day one

Fund Managerwill want a well defined EXIT

Investment Return to the fund from growth of company

Common exits

Further investment round (someone else buys out fund)

Listing on a stock exchange (IPO)

Trade sale, sold to another corporation.


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Lessons from Venture capital

What are investors looking for

1 Leaders ippotential of leadentrepreneurLeaders ippotential ofmanagement team

3 Industr expertise inmanagement team4 Track recordof leadentrepreneur

Track recordofmanagement team6 Sustained s areposition7 Marketingand sales expertiseof team

8 Organisational abilities of team9 bilit toget cas out of t e investment10 egreeofproduct-market understanding11 Expected rateof returnon investment12 Time tobreakeven13 Financeandaccountingexpertiseof team14 bilit to createpost-entr barriers15

usinessmeets fundingconstraints

16 Process/production capabilities of team17 Uni ueness ofproduct/tec nology18 Market growt andattractiveness19 egreeofmarket alreadyestablis ed20 Time required topayback investment21 bility to influencenatureof t ebusiness22 Importanceofunclearassumptions23 Stageof investment required24 Easeofmarket entry25 Strengt of suppliers anddistributors26 Natureanddegreeof competition27 Locationofbusiness28 usiness andproduct fit wit portfolio29 Projectedmarket size30 Sensitivity toeconomic cycles31 bility to syndicate32 Seasonallyofproductmarket33 Scaleand c anceof later financing rounds34 Locationofbusiness relative to fund.

Source:Tradeoffs in t e investment decisions ofEuropean enture apitalists. ( ut ors: aniel F. Muzykaand Su

irley) Journal of usiness enturing ol 11No.4 July2000


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Thank you

Jonathan Gold

[email protected]

Follow us on TWITTER www.twitter.com/financetree

finance for growth - presentation by jonathan gold

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