30
Jun

Guide to the Catalyst Investor Director Programme

Posted by RB   Categories: News,Publications,Richard Turner   2,936 Comments »

Richard Turner

There are a number of options available when seeking venture capital finance and we make it our mission to find the solution that fits. One of the options for finance is our Investor Director Programme – set up to provide a framework for companies to raise the finance that they need as well as strengthening their management teams with the expertise and experience of the Investors themselves.

Catalyst provides Investor Directors (ID’s) to early stage companies. Currently the Catalyst database has over 3000 individuals with industry experience ranging from medical devices to the Oil industry.  These ID’s are highly qualified and willing to invest in fast growth early stage companies. Typically ID’s are successful business people who want to diversify their own investment portfolio and are seeking opportunities to work with early stage companies where they can use their expertise, have some influence on the strategy and operation of the company and generally make a difference.

The origins of the programme lie in Catalyst’s experience of building early stage companies. We recognised that the right Chairman/Non Executive Directors can have a transformative effect on early stage companies: they can open up opportunities, prevent obvious strategic and operational errors, and catalyse change. The programme can also provide considerable benefit to financial investors.

 

Benefits to the Company:

• Provides highly qualified and sector experienced individuals who are able to help steer and develop companies

• Can be a key enabler to realise the company/founder ambitions

• Provides a mentor and sounding board for the CEO

• Unlike with “Angel Investors” Candidates/Investor selection is under the control of the company

• ID’s are frequently well connected in the funding community and can facilitate further fund raising

• Will typically have the experience to prepare the business for eventual exit

 

Benefits to financial Investors:

• Provides comfort that highly experienced/knowledgeable individuals are willing to invest so supporting the due diligence process

• Adds to the Investor’s knowledge of the industry sector

• Supplements scarce investable funds

• Strengthens corporate governance

• Strengthens management

• Can be used in a turnaround situation to protect investment

 

Which companies qualify for the Programme?

The ID programme currently has a 100% success rate in providing ID’s because only qualifying companies are accepted.  To qualify companies must have:

• an addressable worldwide market in excess of $1billion per annum and/or an addressable UK market in excess of £100 million per annum

• a scalable business model

• a core management team with an entrepreneurial driver

• a defensible competitive advantage

• ambitions to achieve revenues in excess of £5 million per annum at the end of a four year plan

• proof of customer acceptance

• willingness to accept change

 

Getting an ID – The Process

We have a three step process:

Step 1 – We review the company’s business plan and work with them to ensure that they meet the qualifications and are communicating the message appropriately. With the management team we identify the ideal profile of individuals required. This may be a Chairman with a good industry contact list, sales and marketing specialist, technical/operational expert; or a financial director.

Step 2 – We solicit interest from members of the programme by circulating an anonymous profile of the company. Interested members are then contacted to ensure that they meet the profile and then an executive summary is sent to them to allow them to better gauge their interest. Selected individuals are then sent a copy of the business plan under an NDA. Meetings are then arranged with the company and offers are invited from both sides to establish an agreement in principle.

Step 3 – Having established a heads of agreement we then help to close the deal. This can involve a  range of tasks from providing guidance on suitable tax and legal advisers to appropriate service agreements.

If you would like to know more about the programme please contact us.

You can download this overview with additional case studies from our resources section.

22
Jun

Growing digital media and technology companies

Posted by RB   Categories: News,Richard Turner   488 Comments »

Richard TurnerI attended an interesting two day workshop sponsored by SouthWest Screen at the end of May. Speakers included Luke Johnson and Will Hutton. There were a lot of interesting folk from the industry  and those charged with helping the industry develop.

The objective was to identify barriers to developing  growth businesses in the creative industries. We spent a bit of time agonising over the meaning of the term creative industries before agreeing that what we were really talking about is creative digital media companies.  In practice this covers amongst others computer games, internet apps, smart phone apps and broadcast media across multiple platforms.  The general view was that it was very difficult to attract investment.  Many companies seemed to either lack ambition, the management,  or the business model to attract investment.

We have formed a group to look at the key issues companies face. I would like the group to get a really detailed understanding amongst other areas of :

  • Which sectors attract investment and why?
  • Which business models attract investment and why?
  • What are the returns an investor is seeking and over what time frame?
  • What cultural issues need to be addressed?

My suspicion having looked at many businesses in this space is that investors think that many companies have a “binary” business model i.e. if it works then you make a lot of money and if it fails then you lose everything.

In addition the intellectual property embedded in these businesses does not have multiple routes to market so cannot benefit from a portfolio approach. Plus the return early stage investors expect i.e. 10 times money over five years either cannot be achieved or that the culture of the company is not focussed around achieving exit but rather fulfilling creative ambitions.

 

14
Jun

Can’t pay the taxman? Can Single Invoice Factoring help?

Posted by RB   Categories: News   6,141 Comments »

Jeremy LawrenceIf a taxpayer is unable to pay their tax on time, HMRC has a Business Support Service that will try to assist in developing a plan for clearing the delayed payment. The Service can help with all sorts of taxes including VAT, PAYE and Corporation Taxes and over recent years Support Service has generally been very helpful to hard-pressed businesses.

However in recent times it has become increasingly common that problems are experienced by taxpayers when it comes to agreements to defer payments. Great care needs to be taken when negotiating with HMRC. Here are couple of examples of danger areas:

  • If a VAT return or payment of VAT due is submitted late, HMRC will usually apply a penalty known as the Default Surcharge which can be applied even after the first late return or payment. The problem is that this penalty can continue even if delayed payment terms have been agreed. The Surcharge is normally 5% of the tax due – a flat charge irrespective of how late the return or payment is made.
  • If an agreement had been made for deferred payment of one tax, say Corporation Tax, and the taxpayer falls behind with another, say VAT, HMRC can allow another deferred payment agreement. However, they can ONLY do this if the terms of the original agreement have been complied with.
  • For persistent late payment or other non-compliance, The Finance Bill 2010 will introduce powers for HMRC to require a financial security from employers.

Clearly, if you are at risk of falling into arrears with tax, getting professional advice is crucial. However, it goes without saying that avoiding getting into this situation in the first place should be the first priority of any business manager. It is a dangerous strategy to rely on the generosity of the Business Support Service of HMRC and once you have reached an agreement with them, failure to stick with it can become very costly indeed.

Before approaching HMRC for help, why not look at the assets in the business and consider what you can do to release cash from them. Your debtors are just as much of an investment as your machinery or your stock but whilst such assets may be hard to turn quickly into cash, debtors can often be converted into cash almost instantly by using single invoice factoring.

Single invoice factoring is a quick and simple way of realising debts before they are actually due from your customers. Because you can do this on a one-off basis (e.g. to meet specific payments like a tax bill) you never have to commit to costly long term contracts which you can’t get out of – you use single invoice factoring when you need it and it costs you nothing when you are not using it.

Single invoice factoring can be a very cost effective solution in many situations. But when set against the potential cost of tax penalties and interest and the long term difficulties which can arise from getting onto the wrong side of the tax authorities, the costs pale into insignificance!

 

9
Jun

Networking at Venturefest and learning how to say No nicely

Posted by RB   Categories: News   494 Comments »

Rosie BennettEarlier this week we attended Venturefest at the Said Business School in Oxford. It was particularly interesting for me as it was my first time since joining Catalyst and crossing the great divide from the world of start-ups to that of the venture capitalists. Apparently it was smaller than it has been before – either a refinement of focus for the event or more likely a reflection of the cautious state of current venture capital investment. Not that there was a lack of motivation or presence on the part of the entrepreneurs. One of the things that I find makes working in VC funding interesting is the broad scope of proposals that you are invited to consider. From early stage consumer tech startups, innovative medical devices and methods, to potentially game-changing environmental technologies – like wireless electricity!

The Funding Stream included a panel discussion chaired by Colin Watts from Oxford Capital Partners about supply and demand for VC funding. Perhaps the point that illustrated the topic best was the general agreement on the panel that part of the learning curve for a good VC is learning how to say ‘no’ to people who do not meet the expected criteria for investment – a ‘no’ with too much explanation can be misread as a challenge to improve the proposal and return for another go, whereas a ‘no’ with too little feedback looks like flippancy. Panel member Matt Mead from Nesta pointed out that as a VC you don’t exactly lack practice seeing as only around 5% of proposals ever get through the first pitch stage -  you say ‘no’ a lot more times than you say ‘yes’. This did raise a question in my mind as to whether there is enough effort put in to giving entrepreneurs a realistic expectation of the criteria -  if there was more awareness raising of what constitutes a viable proposition for the VC’s in the first place they probably wouldn’t have to feel the pain of saying ‘no’ so often.

I was hoping to put the new the Yasmo Live iphone networking app to good use – afterall the idea of being able to look at the profile of delegates and pinpoint their proximity to you at the event, and then message for a meetup is a good one. However, the couple of times that I actually tried to use it during the event it didn’t seem to be working – and despite activating my phone and putting myself open to meeting invitations, no one messaged me. Hopefully Areti Kampyli and her team will improve the experience as the idea is a very good one but this time around it was back to the traditional method of networking by finding a vacant seat and chatting to the people next to you – a tried and tested low-tech method that always seems to deliver.