northstar equity investors ltd, 2006 - northumbria.ac.uk · northstar equity investors ltd is...

NorthStar Equity Investors ltd, 2006

NorthStar Equity Investors Ltd is authorised and regulated by the Financial Services Authority

How do you get funds?

Northumbria University, 3 May 2006

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Contents

� Introduction

� Funding Path

� Funds

� NSEI Activity to Date

� The NSEI Team

� Contact Details

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Who are we?

Experienced professionals with £33m to invest in North East based technology propositions

� 6 technology investors

� investing in technology companies at all stages - from concept to growth

� over £5m invested in 76 companies to date

� leveraging significant private sector investment

� FSA regulated and independent

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Two dedicated technology funds for the North East:

£10m North East Proof of Concept Fund (“POC”)

To finance the development of early stage technologies into attractive prospects for further investment.

£23m North East Co-Investment Fund (“CoIF”)

To promote the development of high growth technology businesses in the region and to encourage co-investment from other public and private sector investors.

NSEI Funds

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Funding

Initial

idea

Proof of

Concept SeedGrowth

Exit

Grant Funding

Tax Credits

Industry– HEI

collaborative

schemes

EC Framework

< £2m £5-100k £100 – 500k £500k - £ millions £ 10millions

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Funding

Initial

idea

Proof of

Concept SeedGrowth

Exit

Grant Funding

Tax Credits

Industry– HEI

collaborative

schemes

EC Framework

POC loan

R&D grant

Business Link

Personal funds

Family and friends

Seed fund

Angels

SFLG

R&D Grant

< £2m £5-100k £100 – 500k £500k - £ millions £ 10millions

DANGER

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Funding

Initial

idea

Proof of

Concept SeedGrowth

Exit

Grant Funding

Tax Credits

Industry– HEI

collaborative

schemes

EC Framework

VC

Bank Finance

Selective Finance Initiative

Angels

Capital markets

Private equity

Bank finance

Trade buyer

POC loan

R&D grant

Business Link

Personal funds

Family and friends

Seed fund

Angels

SFLG

R&D Grant

< £2k £5-100k £100 – 500k £500k - £ millions £ 10millions

DANGER

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Funding

Initial

idea

Proof of

Concept SeedGrowth

Exit

Grant Funding

Tax Credits

Industry– HEI

collaborative

schemes

EC Framework

VC

Bank Finance


Angels

Capital markets

Private equity

Bank finance

Trade buyer

POC loan

R&D grant

Business Link

Personal funds

Family and friends

Seed fund

Angels

SFLG

R&D Grant

< £2k £5-100k £100 – 500k £500k - £ millions £ 10 millions

NSEI

PoC NSEI

CoIF

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Early Seed Stage

Business needs working capital to…..

� Staff up

� Finalise product / service

� Develop marketing campaign

� Develop routes to market

LAUNCH PRODUCT AND MAKE FIRST SALES

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Growth Stage

Company has revenues but still needs capital to fund growth….

� Provide liquidity

� Invest in plant and equipment

� Employ more staff

� Fund new developments

� Open up new markets

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Getting Rich

Business is profitable and growing, now you want to crystallise your gains and your investors want an exit.

� Float

� Sell to the trade

� Sell to a private equity house

� Buy out your investors and continue trading yourself

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Types of finance

� Customers- order is best form of finance!- leverages other forms of finance

� Grants

� Debt

� Equity

� Others – joint ventures, licensing

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� Pros:

� free money

� availability for ground-breaking ideas

� no comeback for “failure”

� Cons:

� administrative burden

� can take work in wrong direction

� no commercial discipline

� confused intellectual property position

DON’T SPIN OUT TOO EARLY

Grants

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Debt

� Pros:

� does not dilute shareholding

� when business is good debt multiplies value

� may be best route for an existing business if not too highly geared

� Cons:

� have to pay interest

� bank debt not available without revenue and security

� when business is bad multiplies the pain

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Equity

� Pros:

� does not need to be repaid only positive for cash flow

� improves balance sheet

� comes with management and strategic assistance

� Cons:

� dilution of your ownership

� investors must have an exit

� looking for big returns so business model must be scaleable

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North East Funding

� seed capital – NEL Seed Fund (expected Q1/ 06) up to £250K

� angels – high net worth individuals looking to invest in early stage businesses

� BIG group - up to £250k

� Entrust Investor Forum

� angel matching fund (NEEMF) – matches angel investment (Entrust)

� SFLG – DTI backed loans up to £250k (RBS and HSBC)

� ONE R&D Grant

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North East Funding

� limited number of specialist early stage VCs

�NSEI Co-Investment Fund

�NEL Capital NE and NEIF 3

�Others outside region usually sector specific

� standard bank finance should be available if there are demonstrable revenues and, even better, assets.

� other debt finance available e.g. NEL Insight Capital

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Funding

Initial

idea

Proof of

Concept SeedGrowth

Exit

Grant Funding

Tax Credits

Industry– HEI

collaborative

schemes

EC Framework

VC

Bank Finance


Angels

Capital markets

Private equity

Bank finance

Trade buyer

POC loan

R&D grant

Business Link

Personal funds

Family and friends

Seed fund

Angels

SFLG

R&D Grant

< £2k £5-100k £100 – 500k £500k - £ millions £ 10millions

DANGER

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Becoming “Investor Ready”

� technology works

� credible definition of market opportunity and some market

traction

� IP position is clean and defendable

� management team identified to build the business

� strategy to take company to profitability

� credible projected returns to justify the investment

To attract further finance you must be able to demonstrate:

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The Proof of Concept Fund

£10m commercial finance for the earliest stages of

business creation

� focused on science and technology businesses

� investments up to £60,000� maximum £90,000 for university pre-start projects

� invests via a convertible loan to provide flexibility

� exit via conversion of loan into equity or repayment of debt when a cash generating business is formed.

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The Proof of Concept Fund

Facilitating…

� technology verification

� prototype and scale-up studies

� IP development

� market assessment

� product / service offering costing

� business case development

� proceed to incorporation and/or trading, and

� attract follow-on investment

Successful POC investments will…

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People – most important

� a burning belief that your idea is going to take the market by storm

� passionate commitment to building a viable business

� understanding that it takes more than a good idea to create a profitable enterprise

� acknowledgement that one person (you) is unlikely to possess all the skills necessary for the business

� at later stages – track record.

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Application Procedure

Proof of Concept Fund

� submit electronically via university

� down-loadable application form

� answer the questions – shortened version of business plan:

•Who are you selling to?

•What do they want/need?

•What are you selling them?

•How are you going to sell it to them?

•How much money are you going to make?

� follow the guidance notes on additional information

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Assessment Process

� face to face meeting(s) critical

� standard terms (1 deal a week!)

� conversion terms standard/flexible

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The Sponsor’s Role

� ensuring project is a potential investment candidate

� helping with preparation of application

� guiding through application and investment process

� providing assistance through the project

� helping raise further finance

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POC Unique features

� will invest pre-start

� will fund both commercial and/or technical POC

� high risk acceptance

� timescale - months not years

� write off unsuccessful projects

� convertible� encourages fast growth equity culture

� debt finance bad for newcos

� strengthens balance sheet, adds credibility

� state aid compliant

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The Co-Investment Fund

£23m equity fund for technology based SMEs

� can invest up to £1m in any business

� attractive co-investor for VCs, angels and corporates

� flexible to lead or “follow” investor syndicates� minimum 30% private sector investment in any round

� target 45% COIF commitment to any investment

� all investments made on a pari passu basis

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Activity to date…

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Over £6m invested in 70+ technology based propositions

Activity to date


� received over 150 applications

� invested in 73 deals worth over £4m

� leveraged over £5m of private follow –on funding

Co-Investment Fund

� received over 100 proposals for investment

� completed first 5 venture capital investments

� 3 further investments close to completion

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Activity to date

Wide range of technology activities covered:

Data

Biotech / Healthcare

Energy

Engineering

Environment

Process

Chemical

Nanotechnology

Materials

Hygiene

Digital

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Case Study – Virtual Sea

� What is the market for motion modelling

� Who uses it?

� What do they need that is not currently available?

� What are the routes to market

£18K POC project to address these initial questions

Results from this project informing the development of both the business and technical case.

Computer modelling of vessel motion in response to changing conditions – Teesside University

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Case Study – ROAR Particles

� Increased sensitivity means that more info can be gained from partial prints

� £90K Investment (in pre-start)

� Single step powder production – further IP

� Development of range of particles/powders

� Market research

� Validation of technology by police forces

Company now raising investment and entering market.

Tagged nano-particles for fingerprint detection

Professor Fred Rowell - Sunderland University

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Caspian Learning has developed unique eLearning

applications for computer-based tuition.

Our POC fund invested £60,000 in Caspian Learning.

The company secured a total of £800,000 in a follow-on investment round.

InRotis Technologies has created new technology in drug

development research.

Our POC fund invested £90,000 in InRotis Technologies Ltd.

The firm secured £2m from RAB Capital in London.

Other Examples - POC

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Other Examples - COIF

Comesys – has developed technology for acceleration pedals in

commercial vehicles incorporating an innovative non-contact sensor technology.

Our Co-Investment Fund has invested £237,000 in an overall funding

round worth £800,000.

Durham Pipeline Technology – advanced pipeline inspection equipment.

Our Co-Investment Fund has invested £250,00 in an overall funding

round worth £839,000.

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The Team…

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Dr Richard Exley - Richard spent nine years with VG

Instruments/Fisons Plc and then six years at the University of Sheffield

as IP Manager before joining a venture management company as

Technology Transfer Manager.

Dr Alex Buchan - after completing a PhD in Microbiology, Alex spent 3

years in the City of London as a stockbroker before moving into a series

of commercial roles in Biotech companies.

Dr Michelle Cooper - Michelle spent five years on spin out and

licensing initiatives from the University of Manchester before joining

Codeworks where she helped companies develop their digital media and

IT business proposals.

Jennifer Temple - Jennifer has 6 years experience in the private and

voluntary sector and provides PA and administrative support to POC.

The Team - POC

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Marion Bernard - Marion has 12 years debt and equity finance

experience including 6 years with 3i (Newcastle/Technology) and 2 years

managing an early stage equity fund.

Gerry White - Gerry has worked in early stage technology venture

capital for the last 24 years and has experience in all phases of fund

management, including management of a £9 million seed corn fund for

nearly 6 years.

Alasdair Greig - Alasdair spent 9 years in risk management before

joining Cambridge Gateway, a £35m early stage technology fund where

he was responsible for the Fund’s technology investments.

Clare Lawson - Clare has 8 years experience in the private

consultancy sector and provides PA and administrative support to CoIF.

Sarah Richards - Sarah has held a variety of PA and marketing roles and

provides marketing support to the NorthStar Equity Investors team.

The Team - CoIF

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Contact Details

www.northstarei.com

0191 211 2326

1 St James Gate

Newcastle upon Tyne

NE1 4AD

northstar equity investors ltd, 2006 - northumbria.ac.uk · northstar equity investors ltd is...

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