The recent Business Funding Show Investment Conference saw key personnel from the world of raising funds come together to discuss key issues experienced by entrepreneurs.
On what the future holds for investment, Jenny Tooth of the UK Business Angels Association, Mark Brownridge of the Enterprise Investment Scheme Association, Marilena Loannidou of British Businesses Investments and Nigel Walker of Innovate UK came together to discuss the future of investment.
What are your thoughts to entrepreneurs taking on equity?
Jenny Tooth: Taking on equity really is the great turning point in your business in terms of being able to accelerate growth much more rapidly. Sometimes people worry about giving away too much equity too early. But there’s massive benefits to this and the reason is because you actually get investment to help you do the things you really need to do. Such as hire more staff, expanding customer base and then businesses can actually start to produce to scale.
The biggest and most important thing to bear in mind is that all equity isn’t the same. What you will get from angels and angel investors will be different to what you get when you reach the next stage of funding. It’s all about having a strategic plan of how much equity is needed, what you want from equity and how much of the business is to be given away.
Mark Brownridge: Over the last few years we’ve seen the significant contribution that venture capital funding has made to SMEs, it’s given a big injection of capital that banks don’t necessarily like lending. Equity funding gives you money but with EIS and VC money you also gain mentoring as well, which could be invaluable and open doors.
Nigel Walker: Risk is a key thing when you’re starting a business, so you need equity capital to take that risk with a view to when it’s successful, and the money is there, you will see a significant upside. Risk capital is essential. I see too many companies that are under capitalised, that don’t have enough equity, that haven’t got the financial resources, to take the sort of risks that are being taken. I would advise not to be equity adverse.
What have been the key changes you’ve seen in regards to alternative funding options?
Jenny Tooth: There has been some interesting trends which have emerged, not least the EIS, which has had a massive impact on the market because angels have been able to get 50% tax credit by backing early stage businesses. This encouraged angels to go in earlier into those businesses because they have to be less than two years old.
In parallel with that, crowdfunding platforms have been launched, which saw a massive democratisation of investment for many people, with engagement increasing as people invested small funds of money into businesses. Since 2012 there has been a steady increase of people using the EIS and SEIS tax schemes which means more and more money has come into the market.
Which sectors are you seeing most investment in?
Nigel Walker: We’re seeing a lot of collaboration with whole industries being transformed or new industries being created through things like digital manufacturing, the factory of the future, lightweight materials and others are key sectors and often capital intensive. Businesses in these sectors usually find it harder to attract equity investment because the time to market can be longer.
Marilena Loannidou: Innovation and technology are really pushing forward with sectors such as life sciences and artificial intelligence of particular focus. If you’re fundraising think about the whole journey, some companies in the UK fundraise in smaller chunks, but when companies in the US fundraise they go for larger chunks. This makes them focus on other aspects, meaning they can take their business to the next level quicker without having to organise more funding rounds. There is less availability of capital in the UK against the size of VC funds you see in the US.
Missed this event? Why not fulfil your funding wishes this Christmas and join the Business Funding Show at its Christmas Networking Soiree with Funders (happening on Dec 11th at WeWork Paddington) where you can meet top investors and lenders and chat your way to business growth!
Alternatively, check out its annual flagship show BFS ’19 (happening on Feb 21stat East Wintergarden, Canary Wharf) – the only funding exhibition in the UK & EU – for your one-stop-shop to alternative business funding, no matter your stage or sector.