NottTuesday: Get Funded!

(c) Tracy O

On June 2nd I went up to Nottingham for NottTuesday. The topic was “Get Funded!” and there were 3 speakers: Mark Chandler (Relationship Manager at Lloyds TSB) discussing bank finance, Chris Scarth (co-founder and commercial director of Prime Principle) sharing his experiences of angel investment, and Robert Cawdron (Fund Manager at E-Synergy) talking about venture capital.

Mark kicked off by discussion by explaining bank’s place in start up funding. He put in it wonderfully simple terms: banks exist to lend money, move money around, and make money doing it. The bank’s focus is when will repayment occur, as this is when they make money, and they are looking for reassurance that repayment will be made. This means the bank isn’t looking to make risky long-term investments in the business, which means they won’t buy equity in the business, but they will grant loans for relatively low-risk purposes where they can feel sure they will be repaid.

They will grant loans for business expansion where the money is being invested in assets or will grant a loan to fund the fulfilment of sales. In both cases, what the bank wants to know is, if they give you some money, when will they get their money back? If the loan is for an asset, then they expect to be repaid within the lifetime of that asset, and similarly if the loan is to help fulfil an order, the bank would expect to be repaid when the order is complete.

This approach contrasts with angel investors and venture capitalists, because angels and VCs are looking to make investments to fuel growth and make a bigger profit which entails a larger risk.

Chris Scarth, talking about angel investors, gave us an overview of his company, Prime Principle, and recollected how Tony Hillary (founder of Hillarys Blinds) came to invest in the business. They had already met through networking events and so when Prime Principle approached Tony they had some common ground to start a conversation. What I found particularly interesting was hearing about how Prime Principle grew from a dissertation project into a business, started by two graduates. It’s quite an inspiring story for me, as I find myself in a similar situation considering how to start my own business. If I can emulate the success of Prime Principle, then I’ll be very pleased!

Lastly, but by no means least, Robert Cawdron discussed his role with E-Synergy and talked about venture capital. Unlike banks, VCs are looking to make an investment in a growing business in order to sell their share a few years later for a profit. Additionally, VCs will often provide expertise as well as money, which banks do not do. These investments are riskier and as a result VCs maintain a portfolio of investments to spread the risk. Discussing how businesses get VC funding, Robert said that out of 100 applications, a VC would end up making less than 5 investments, and for every 10 investments only 2 would provide the big returns that VCs are looking for.