The rise of Alternative Funding * LBAcademy UK

Posted on December 12, 2019 by admin Posted in FundingTagged Funding

The early stage funding landscape in London

The event was organised by Capital Enterprise and held at Geovation on Friday 29th November to take an exploratory look at the future of early stage investment in London and consider the emerging opportunities for funding the next generation of startups. Alternative funding has become an increasingly popular avenue of assistance, for those struggling to access working capital.

John Spindler CEO, Capital Enterprise opened up the event, as the Moderator, and subsequently introduced the Panel after two keynotes.

Panelists (L to R)
William Adoasi Founder, Vitae London
Andy Ayim Entrepreneur In Residence, OneTech Capital enterprise
Yvonne Bajela Principal, Impact X Capital Partners LLP
Maggie Rodriguez-Piza CEO, Funding London

Keynote 1: Andy Ayim on Emerging Tech funding
Andy started by introducing his background and journey from North London as a teenager and avid reader of the ‘Financial Times’. He gave his background in tech, which he ascribed to being fuelled by reviews in TechCrunch of the nascent rise of VCs and Entrepreneurs as ‘Rock stars’!

OneTech has raised £10Million this year, with 200 jobs created and have raised targets for 2020. He explained that main business growth funding for startups, aside from boot strapping, was through debt financing which was not always put in the spot light. He cited his portfolio from Backstage Capital, which funded 25 founders on £2.5 Million. However Gal-Dem, an online diverse & creative platform with £1m turnover was not suitable for venture funding.

Revenue-Share Investments He explained that this Investment model had taken off in the USA, and suggested that this could be used in the UK. he pointed out a representative from ‘Just.capital’ in the room, which was a US outfit setting up in the Uk with this model. the Rep said that “startups could get up to £250k for their online business, in under 48 hours”!!

Keynote 2: Maggie Rodriguez-Piza on Funding landscape

Keynote 2: Maggie Rodriguez-Piza on Alternative Funding landscape
Maggie started with an introduction of her background and journey in corporate finance, providing information about the London Co-Investment Fund (LCIF) which was a joint venture between Funding London and Capital Enterprise. The fund was established 2014 and has now closed (2018). However it was successful in channelling funds to high-growth startups and SMEs, with deployment of £66Million; i.e. £25M for early stage- Seed /Superseed.

Greater London Investment Fund: Maggie gave a quick intro to the new £100m Greater London Investment Fund (GLIF) which was launched at City Hall by the Mayor of London in May. The GLIF has been developed specifically to target businesses which have had difficulties in securing crucial investment. As well as investing in 170 companies, the new fund will secure at least another £103m in private sector investment and create 3,500 new jobs in the capital.

Funding London: Key takeaways
She gave her key points that there was an Investment peak in 2018, then slowdown due to Brexit issues, which has also affected Exits.

Focus on later stage as cohorts of more mature ventures are emerging. Angel investors may be taking a break, so more institutional players will seek to deploy larger amounts.
Larger deal size and feweer deals (is the gap between pre-seed/seed and series widening?)
Implications for seed/early stage
Understand investors and their appetite
Match your value proposition with the Investment type
Advantages/disadvantages of seeking larger round

John had the panelists introduce themselves and handled questions from the audience:

Topic: Alternative Funding Issues
a1. The Greater London Investment Fund (GLIF) is aimed at growing SMEs with a viable business expansion proposal unable to obtain part or all of their debt funding requirement from the private sector, due to lack of collateral or track record.
a2. MMC Ventures launched the £52 million Fund in May 2019, in partnership with the Mayor of London. MMC manages the GLIF sub-fund, which has an equity pot for Series A funding. The FSE Group manage the two other GLIF loan sub-funds.
a3. Look at Grant funding which can be very successful as there is no equity dilution, Innovate UK is a good source amongst others.

Topic: How to address Funding challenges?
a1. Crowd funding is applicable and can be used for both debt or equity on the relevant platforms. owver there is a time and effort involved and this channel is more for Business to Consumer (B2C) models.
a2. Startups need to do more due diligence on the value propositions to see how these align with the venture Capital portfolio.
a3. An important and overlooked area is that funding prospects are affected by the risk modelling on the investment sector, hence at the moment funding for FinTech sector is easier.

Topic: How to address Funding Arrangements?
a1. There is an urgent need to increase alternative funding with the SEIS investment per firm allowance from £150K to £300K, which would help encourage investors.
a2. Impact X VC has a portfolio focused on diverse founders and are exploring new business models on funding.
a3. The Venture Capital firms have had support from the British Business Bank, however there is a need for improvement due to constraints in the current arrangements.

Topic: How do you get introductions to venture Capital firms
a1. Use social network channels to target the firms and individuals to connect and also look out for Startups they have supported, to get warm introductions
a2. There is a need for statups to also the niche focus of venture capital firms and also understand thet they move with trends, notably that the financiers also have closed network and are just as fallible as others.

Panel advice to audience: