hpsu presentation 14 march 2011
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Enterprise IrelandHigh Potential Start Ups (HPSU)
PRESENTATION TO INDONESIAN DELEGATION
John ConverySenior Development Advisor
HPSU
Monday 14th March 2011
AGENDA Enterprise Ireland Mission
Our Client Base
High Potential Start Ups – Background
High Potential Start Ups – How we operate
High Potential Start Ups – Assistance
Measurement of Progress
Start Ups – Common Mistakes and lessons learned
Enterprise Ireland Mission
To accelerate the development of world-class Irish companies to achieve strong positions in global markets, resulting in increased national and regional prosperity.
E.I. Client Base Segmented by Stage of Development
High PotentialStart-Ups
Entrepreneursstarting companieswith the ability to
compete in world markets
Scaling
Ambitious companieswith the ability togrow to scale and
achieve significant global success
Manufacturing and international-traded services companies
employing ten or more
Established SMEs
Irish-basedfood and natural
resource companiesthat are overseas
owned orControlled
MNC’s
Total E.I. Client base ~ 3,500 companies – 148,000 employees
A company must be :
1. Recently established (between 0-4 years from first employee)
2. Innovative (operating in a growth sector).
3. Capable of generating at least :
10 full time jobs (in Ireland) - by end of year 3
Annual revenues of €1.M - by end of year 3
4. Export focused.
5. Irish Owned and located in Ireland.
What is a “HPSU” ?
Who we work with ….Typically …
• Key functional managers within existing businesses with new business ideas.
• Experienced Managers looking at MBO’s.• Irish ex-Pats, returning to Ireland with new business ideas.• Individuals involved in 3rd level research, with an interest in
commercialisation.• ‘Serial’ or repeat entrepreneurs.• Promoters who identify an opportunity and want to start an
export business.
- The majority of original promoters of start up companies EI supports have strong technical background / qualifications.
E.I. HPSU Activity
1,200 start-up enquiries received p.a.
Of those ~ 400 can be classified as
eligible as E.I. clients
E.I. approves equity funding packages for ~70 HPSU’s p.a.
Where do entrepreneurs come from?Sourcing people with new ideas.
0%
5%
10%
15%
20%
25%
30%
35%
40%
1999 - 2008
Indigenous
MNC
3rd Level
Serial Ent
Other
How we operate• One division responsible for all start up’s.• Organised along sectoral lines.• Each new prospective client is assigned a
“Development Advisor” or account executive.
• The full range of EI resources for an individual / company is accessed through that advisor.
• All clients are handled both on a one to one basis AND are involved in relevant sectoral initiatives.
E.I. approach to start-ups• What Does the HPSU Dept. Provide?
• - A Dedicated Start-up Team.- Technology- Finance- HRD- Sales - Marketing
• Start-Up Business Consultancy for New High Potential Client, followed by
• Assessment of and Investment in New High Potential Business
Some detail on assistance from EI
1. Advice and mentoring
2. Funding – from EI
3. Identifying customers and securing export sales
4. Infrastructure – Incubation space - Business Innovation Centres
1. Advice and mentoring – Getting started
• Enterprise Start Programmes (over 6 weeks) and Enterprise Platform Programmes (over 12 months with part salary support).
• Initial idea / project evaluation – Feasibility study grant (50%).
• Advice and help in development of a business plan;
• Assistance with product / market validation;
• Challenging of assumptions, projections etc – help fill the gaps.
• Advice and help in building a balanced, management team;
1. Advice and mentoring – Getting started
• Mentor panels
• ‘Fit for market’ seminars
• ‘Investor readiness’ seminars
• Information on potential investors
• Networking receptions (clients, advisers, investors)
• Introductions (investors, business partners, consultants)
2. FUNDING
How E.I. Funds High Potential Start Ups
• 1. Funding the Concept (Category One Funding)
• 2. Funding the Business Plan (Innovative Funding)
1. Funding the Concept (Category One)
Mentor, Bus. Accelerator
Strategic Consultancy
Feasibility
Recruiting Key Person
Max E.I. Funding is €110K (over 2 years)Based on 50% grant
Innovation Vouchers (max. €5,000)
Overall Objective : Move the project toward a full Business Plan
2. Funding the Business Plan – Innovative Funding
Evaluation of the Business Plan (which includes Cash Flows)
E.I. will invest by way of Equity(usually Cum, Conv Pref. Shares
E.I. will invest based on identified cash need per the Business Plan
Typical first investment is - €300,000 with additional sums based on achieving agreed milestones.
E.I. will always look for co-investors (BES, VC’s, Promoters)
How is E.I.’s Investment Structured?
100 % equity package
• Max 10 % of total Ordinary Share Capital• Remainder in Redeemable Preference Shares
External Valuation Available
Cumulative Convertible Redeemable Preference Shares
No External Valuation Available
Other Common Funding Sources: BES/Seed Capital Scheme
BES• Max investment in any one
company is €2M (or €1.5M in any 12 month period).
• Relief of €150,000 per investor per annum at marginal rate of tax.
• Scheme expires December 2013.
• Commutation Rules could reduce other State Aids by 20%.
Seed Capital Scheme• Provides refund (under certain
conditions) for PAYE paid over previous 6 years.
• Relief of €100,000 per investor.
• Refund is limited to PAYE paid subject to a max income of €100K pa
• Investment must be in shares in the company and is claimed as a refund of that investment
3. Identifying Customers and securing export sales
• Access to an international network of overseas offices
• Overseas incubation space• Assistance in identification and securing
overseas key reference customers• Financial assistance towards costs associated
with attending international trade fairs, fact finding missions etc
• Access to overseas market intelligence and research
• Introductions to overseas industry experts
0
10
20
30
40
50
60
70
80
90
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
HPSU's
Volume and Impact
EI assisted HPSUs since 1999
HPSU review 1989 - 2008:
Status of EI client companies in 2008
0
100
200
300
400
500
600
1989 - 2008
Started
Still Trading
Closed
Taken over
Trading Performance Trading Performance
E.I. assisted HPSU’s since 1998.
For these firms trading in 2008:Total annual sales : €1.3 billionTotal employment : 10,500
Some common start up mistakes …
Value proposition is not clearly defined. Technically brilliant product but does it deliver VALUE to the customer?
Inability to identify and qualify the customer.
“Our product has no competitors” !
Unbelievable numbers (revenue projections and costs).
Unrealistic expectations on raising cash (time needed and valuations). It will take 3-6 months. Plan conservatively.
Inability to manage cash – high burn rate.
Some common start up mistakes (cont’d)
Inability to identify clear – and achievable – milestones.
‘Unbalanced’ Management team – dominant CEO with little commercial experience. Recruiting a good CEO costs money - and equity.
Weak (non commercial) Board. Securing a hard-nosed, no nonsense, commercial Chairman is invaluable.
Inability to plan for contingencies (they will happen !!).
No exit strategy (an absolute must for VC funding).