Everything you need to know about Fundraising for your Manufacturing Business

Fundraising is rarely easy. But the challenges faced vary between industries. The manufacturing sector, in particular, has its own pathways and hurdles to be navigated when it comes to fundraising.

Below, I cover the sources of finance available for manufacturing businesses and offer advice on which to choose for your business.

Why the right finance is so important for manufacturing businesses

Figures reported in January 2018 show that 17,243 UK companies entered insolvency – a 4.2% increase from the year before. It’s no secret that the first few years of a business are a critical time for its survival. The survival rate of business to year 5 is 44.1%.
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“The UK is a great place to start a business, but survival rates are low. The recession has had an unsteadying effect on small and medium enterprises (SMEs) and we need to work hard to rebuild their confidence.”

David Swigciski, Head of Corporate, DAS UK Group

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The reasons that a business fails range from product failure, lack of market understanding and too much competition, through to the complexity of tax systems and too much red tape.

Financial planning is perhaps the biggest reason, especially for companies more than a year or two old. Without a stream of cash to sustain itself, a business will die very quickly. Lack of funding, late payments, increased business rates and maintaining your cash flow all contrive to limit the cash available.

When is the right time for a business to borrow?

The life cycle of a business needs cash injections at many stages, including:

• Expansion into new products or markets
• Fulfilling new orders above usual production demand
• Sourcing new suppliers
• Increasing inventory volumes to reduce costs
• Bridging a late payment from a large customer that is in financial difficulty

A good financial model for cash flow forecasting will highlight when your business may need more cash to continue to operate and understanding your working capital cycle is a vital part of this model.

The Working Capital Cycle Explained

The Working Capital Cycle (WCC) is the length of time it takes to convert net working capital (assets and liabilities) into cash in the bank.

If a business has a short WCC then it quickly releases cash from its production cycle which is then free to either reinvest or to purchase more materials. As a result, the business will require less funding.

If a business has a long WCC, then capital is ‘trapped’ in the working capital process and is not free to use. Businesses in this position are more likely to need funding and finance.

A business will try to reduce its WCC to as few days as possible, usually by increasing the payment terms with their suppliers and reducing the time to collect what it’s owed by its customers. Other ways to reduce the gap include streamlining processes, reducing manufacturing times and decreasing the sales cycle.

Understanding the WCC of a business is essential to plan for stability. As any CEO will tell you, the ability to weather all storms is the key to business success.

Once a business is aware of where the financial ‘gaps’ are to be bridged, it can then implement funding to ensure a healthy cash flow is available at all times in order to continue operating. This can range from organising a working overdraft, invoice financing or a short-term bridging loan for growth periods, for example when completing either a new order or launching a new product.

With this knowledge, a business owner can then look for sources of funding to support the business and to keep a healthy cash flow.

How to Choose a Finance Option

First, look for any government funding and loans that are either a non-repayable grant or a low-cost loan. These are regulated by specific guidelines and are often regionally based.

Failing this, you then need to look at equity or debt options…but which one?

debt vs equity angel investment netowrk manufacturing
Ask yourself the following questions:

1. How much money do you need?
Debt finance is suitable for anything between a few thousand to millions of pounds – dependent on finding a willing lender. Equity finance is usually from tens of thousands up to tens of millions and many VCs will only consider investing large sums.

2. Are you prepared to give away equity and a share of your business?
This is a clear choice between equity and debt. You will also have to consider how much equity you’re prepared to give away if you choose to go down an investment route.

3. What are your growth ambitions?
An equity investor is predominantly motivated by aggressive growth, for a return on their investment. A lender such as a bank is only concerned with their capital being repaid and growth is generally not an issue.

4. How long do you need the money for?
For a short-term cash injection, debt finance is the most suitable. If you have long-term needs, then equity investment could be a better option.

5. Do I need support?
An angel investor will also act as a mentor and can have significant input into helping you start up and grow a business. If you have a great product or a proven business but need help to take things to the next level, then an angel could be the best option for you.

It is worth noting that equity finance is a more expensive way to borrow money, but the investor is taking most of the risk. Debt finance means that you keep control of your business – and at a lesser cost – but most of the risk is yours.
Manufacturing fundraising angel investment network

What do I need to prepare to apply for funding?

1. Evaluate your business to understand what it requires

2. Draw up a business plan to clearly outline your strategy for growth and how you will use the required funding

3. Use research to show that your plan is realistic and achievable. Know your business, the market and your figures inside out.

4. Get advice on the application process, especially if you’re seeking equity investment. Speak to an adviser who can help you prepare your plan and who can give you advice on how to apply and pitch.

Sources of Finance for Manufacturing Businesses

Government Grants and Regional Agencies
The government has a variety of schemes, grants and funding options for businesses at every stage, from startup to innovation and exporting, and every business should review what funding and support is available. This type of funding is focused mainly on small businesses but not exclusively.

Grants and schemes are all subject to strict criteria and some are match-funded, which means the business must either self-fund or find external funding to match the grant on offer.

Funding support is available for businesses around the UK, with a variety of grants and loans on offer, all with specific regional criteria. Grants are constantly changing; therefore, it’s best to review what’s currently available here.

• For business innovation, Innovate UK has a series of competitions to fund between £25k and £10m for a product development project.

UK Export Finance can offer advice and support to businesses who are exporting, usually though underwriting loans and finance.

Business Finance Partnership helps small to medium-sized businesses find finance from private sector investors.

The Prince’s Trust has helped small businesses and entrepreneurs under the age of 30 since 1983. They offer mentoring, grants and loans.

For more info, I wrote a separate post on grants here.

Startup Loans

For a new manufacturing business struggling to get finance, the government-backed Startup Loans can offer a personal and unsecured loan of up to £25k. The benefit of this loan is that you do not need any assets to secure funding but the individual is personally liable for the loan and not the business.

To be eligible to apply you must be:

• Unable to have secured funding from elsewhere
• Your business is less than two years old and is based in the UK
• You are 18 or older and a UK resident, with the right to work in the UK

If there are multiple partners, each person can apply for a loan of £25k up to a maximum of £100k investment in one business. The loan is to be repaid over one to five years at 6 percent.

With the funding, a business also receives one year of mentoring and support to prepare a business plan.

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“Bank Loans and commercial mortgages are the fourth most popular form of external finance among UK SMEs”

British Business Bank Analysis, SME Finance Monitor

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Bank Business Loan

For an established business with a trading history, a bank loan is one of the most popular choices for securing finance.

Your options are based on the credit history of the business (including the business owners’) and whether you have any assets that you can offer as security. Property is usually the bank’s first consideration for security but machinery and equipment may be considered.

The business must prove that it can afford to repay the loan.

The other option, of an unsecured loan, will usually require a personal guarantee from the owner or directors of the business and will be subject to higher interest rates.

The benefit of a business loan is that you retain control of your business and can arrange funds quickly.

For a manufacturing business, a close relationship with their bank is essential to support their financial plans and to facilitate expansion and growth. Business loans are suitable for buying equipment, machinery or to fund the development and launch of a new product.

Bank Overdrafts

Another option for established businesses to support cash flow is a working capital overdraft with the bank. 16% of SMEs use an overdraft.

An overdraft is not a loan but is a means to both facilitate growth and to manage cash flow. An overdraft is expected to be used to bridge gaps on a monthly basis with the account being in credit for part of the month.

Overdrafts tend to have high interest rates but this is only paid on the overdrawn balance and so offers a flexible solution on a short-term basis to bridge gaps. There will also be an arrangement fee to pay.

Venture Capital (VC)

One of the most popular ways to fund a start-up or a business in its early stages, that has aspirations to scale quickly.

A VC is a fund of investors who are motivated to make an above-average return on their investment and in return they’re prepared to take a risk on early-stage, unproven businesses. They do factor that a certain percentage of their investments will fail but the ones that succeed can deliver massive returns.

The VC is focused on investing in a business that has long-term growth potential and will require a significant percentage stake in the business to reflect the risk that they’re taking. They expect to hold an interest in the business for five to seven years before they see a return.

Investment is delivered in a series of ‘rounds’, beginning with the seed round to test a proof of concept and then ‘series A’ onwards will be large cash injections to allow the business to scale.

A VC is not only looking for a strong business plan, they’re also concerned with the founders and the management team, and are investing in their ability to quickly scale and grow their business, as much as the business idea itself.

Venture capital investment can be used by a manufacturing company that has a new product to launch and expand into new territories or on a worldwide scale but in return, they will have to give away an equity stake in the business.

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“VC is an incredible partnership between financial professionals and founders. Many VCs are often ex-entrepreneurs, so their advice can be invaluable.”

David Mott, Chairman, Venture Capital Committee, BVCA

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Private Equity (PE)

Where a VC is focused on early stage investment in a business, PE is a medium to long-term finance option. It’s more relevant for a proven business that wants to grow or move to the next level and which needs help to achieve that.

The PE investment comes from individuals or specific private equity businesses, rather than funds made up of investors looking to speculate.

The PE investor will take a significant share of the business, often taking control. For this reason, this source of finance is relevant for owners who feel they have taken the business as far as they can and who now need help to achieve the next level, and are willing to relinquish control in return for this. Or, they may want to retire or step down from running the business and instead, retain a minority stake.

For a manufacturing business, growth could represent developing new and existing products, reducing costs and streamlining processes for more profitability and expanding into new markets.

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“You build relationships in Private Equity over three or four years. So, if you’re thinking of retiring and there’s no obvious succession plan, Private Equity makes your exit easier.”

Tim Hames, Director General, BVCA

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Angel Investment

Angel investment is finance provided by private, high-net worth individuals.

An angel investor usually has substantial business experience, with the knowledge and contacts to help other businesses succeed. They often take a hands-on approach and have significant input into the business. A strong working relationship is essential between an angel investor and the business owner they invest in.

Our service at Angel Investment Network is to connect entrepreneurs with our network of 180,000 angels investors worldwide.

A manufacturing business that has developed a new product would benefit from angel investment or a startup that needs the expertise of an experienced business owner to mentor them.

Expansion Capital

Once a business is established and has proven its success, it will want to grow. Rather than relinquishing control with private equity funding, expansion capital can be a partner to help the business achieve its goals by having the ability to inject funds at each growth stage with subsequent investments.

Expansion capital tends to be for higher amounts, such as £1-20m and an investor will expect a 10-30% stake of the business in return.

For a manufacturing business, expansion capital can be applied to the production of new products, entering new territories or even the strategic acquisition of another company (for either their manufacturing capability or even the intellectual property of another product).

Asset Finance

For an established business that has a trading history and which can show assets (that have value) on the balance sheet, finance secured on those assets can be an option to raise funding for growth, without giving away equity.

Banks often require a security guarantee for a loan but are restrictive in what they accept as security – usually only property. An asset finance lender will accept a wider range of security such as, the debtor book, machinery, equipment and stock. In some instances, intellectual property rights or patents can be used.

Traditionally, asset finance was considered a ‘last option’ to raise funding but has become more popular for any business that needs to quickly raise cash.

Leasing and Hire Purchase

A form of asset finance that is so popular in the UK with small to medium businesses that it’s second only in use to overdrafts.

The difference is:
Leasing means you pay a ‘rental’ on the item that you require, such as a van or a piece of machinery. At the end of the rental period the item is returned.
Hire purchase is an agreement to buy an asset over an agreed period of instalment payments. This means the business has the equipment it needs immediately without a large upfront investment and keeps the item once it’s paid for.

For a manufacturing business that needs to invest in a new fleet of delivery vehicles or production equipment this is an option to quickly put in place what is needed. Ideal for start-ups and growth periods.

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“It does the job that businesses need it to, allowing them to get the asset on board quickly and simply so they can start using it within their business.”

Sam Dring, Senior Product Manager, Asset Finance, Lloyds Banking Group

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Invoice Financing

Also known as factoring, invoice financing is a way to reduce the working capital cycle by releasing the value of an invoice as soon as it’s issued to the customer.
An established business will need a trading history and payment terms of less than 90 days on their invoices. They will also need to show that their customers are reliable payers.

An invoice financing lender will lend up to 90 percent of the value of the invoice and then manage the payment recovery from the customer. The cost of the financing is a percentage of each invoice.

Especially relevant to manufacturing businesses who want to reduce a long working capital cycle, release finance out of the cycle quickly and manage their cash flow more efficiently.
The business owner has access to cash and retains control of the company without relinquishing equity.

Summary

It’s very rare that a business is so cash positive from the outset that funding is never needed. Even cash positive businesses often need external finance to accelerate growth and scale quickly.

Fundraising is, therefore, a bridge that almost all business owners face. Making the right choice for your business will save you time, stress and money; and could, ultimately, be the difference between success and failure.

Thanks to Sage for allowing us to use and share their original copy and images. You can view the original post here

The Impact of Regulation on the European Tech Sector – Report by Allied For Startups

Policy and regulation have a huge impact on the tech sector. A recent report by Allied For Startups takes a deep dive into how current regulatory systems are affecting the landscape for European startups…

We are in a period of unprecedented innovation and development across a wide range of sectors. Many of the new and impending technologies are so novel that it is unclear how existing regulation systems will manage them.

AI, drones and autonomous vehicles are just some examples of technologies giving regulators pause for thought. All three examples raise difficult moral as well as practical questions; and given the rate of innovation, it now seems like too many questions are coming at once.

The role of regulators is to ensure new technologies can be deployed in safe and meaningful ways. But this often slows the speed with which a new technology can come to market.

Regulators have to balance safe deployment with not hindering the release of exciting new tech. A difficult task – and one about which the investors interviewed in the report are concerned.

Who are Allied For Startups?

Allied For Startups is a worldwide network of startup associations and advocacy organizations focused on improving the policy environment for startups. Their report on ‘The Impact of Regulation in the Tech Sector’ provides insight into the views of technology investors (among others) on reactive regulation and policy decisions that impact the development of the sector.
regulation allied for startups

What’s in the Report?

Tech ecosystems take time to develop, but the benefits to the economy are substantial as new companies are spun out of existing ones, and the sector as a whole creates jobs and wealth. Based on 185 interviews, this report flags areas of opportunity and risk for the European tech ecosystem in the coming years.

The report also highlights that tech investors are highly conscious and aware of the regulatory environment and that this can have a huge impact on their decision to invest or not. Furthermore, there are particular concerns among investors that regulation and taxes are designed to target larger companies but can have unintended consequences for startups, and that regulation is often reactive as opposed to strategic.

Allied For Startups conclude their report by stating that a fairer and more stable regulatory environment is needed to ensure the tech sector continues to flourish.

Read the Report here

For more information on Allied for Startups please see here.

Top 5 Startup Podcasts for Entrepreneurs & Angel Investors

The term ‘podcast’ was coined to describe audio content (other than music) that you could download to your iPod – you know, that Apple product long since ingested by the iPhone. But the term lives on and its popularity is on the rise.

According to Edison Research, 64 per cent of Americans are now familiar with the term “podcast” and over 4 in 10 have listened to at least one podcast. 73 million Americans listen to podcasts every week; their average weekly listening time is an astonishing 6 hours 37 minutes.

There is a number of reasons for this including:

  • A shift in audience entertainment expectations towards on-demand content
  • A desire for long-form content where listeners can, by degrees, come to understand fully the topic under discussion
  • A recent UCL study even showed that emotional responses are stronger from auditory content than visual

But the medium itself shouldn’t take all the credit for the popularity of podcasts. Podcast creators have contributed their time, creativity and expertise to produce compelling and informative audio experiences.

Today, the selection of top-quality podcasts is almost limitless. And that is true of any industry from gaming to politics; from children’s books to investigative journalism.

The startup and business space is no different. There is so much choice – it can be a little bewildering. Especially given that you are probably pressed for time and want to start by listening to the best podcast that is most relevant to you!

We love podcasts. We listen to many of them. And we even host our own podcast (see below).

To help you get started on your journey of discovery, we have compiled our list of the Top 5 Startup and Business Podcasts.

1. This Week in Startups

twist podcast

Tech entrepreneur Jason Calacanis interviews successful entrepreneurs to share their experiences and offer advice to people thinking of starting their own businesses.

2. The Pitch

Josh Muccio presents real entrepreneurs pitching in the hope of securing venture funding from investors. Entertaining and informative!

3. Masters of Scale

Linkedin podcast

LinkedIn founder, Reid Hoffman hosts guests with expertise and insights into scaling a startup. The focus is on growth rather than starting out…

4. How I Built This

Guy Raz presents the journies of some of the most famous companies as told by the entrepreneurs who drove them.

5. The Startup Microdose Podcast

The only UK-based podcast to make our list is our own (hosted by yours truly and my colleague, Ed Stephens!).
startup microdose podcast
Recently tracking at the number 1 in the Apple Business podcasts list, the Startup Microdose has exceeded all our expectations in its first year.

With guests including the founders of Huel, What3Words, Depop and Sweatcoin, we unpack the stories and secrets of companies right in the moment of their success.

Check it out on iTunes, Spotify or new podcasting platform, Entale.

Let me know your favourite (even if it’s not mine)!

Since we published this post, FeedSpot released their list of the ‘Top 30 Startup Podcasts on the Planet’

We are delighted that four of our list (Startup Microdose, Masters of Scale, TWiST and How I Built This) all made the cut.

Check out the full list here

What the UK Chancellor’s Budget 2018 means for Entrepreneurs and SMEs

At a glance, the Autumn Budget 2018 is a win for entrepreneurs and SME’s. If your personal income is less than £100,000 and you’re a ‘genuine’ entrepreneur, taxation rules and entrepreneurs’ relief remain favourable. The more indirect budget effects could also be highly beneficial.

Established entrepreneur and founder and MD of globally-recognised, Absolute Translations, Sergio Afonso summaries the 2018 Budget’s impact on UK entrepreneurs and SMEs.

1. Entrepreneur Relief Timeline Extended

Phillip Hammond decided to meet halfway regarding the contested £10m entrepreneurs’ relief allowance, choosing to revise rather than abolish. The change is an increased minimum holding period from one year to two prior to selling a business.

This is meant to reward ‘genuine’ entrepreneurs who recognise that establishing a successful business ready to sell takes time.

Those who build and sell a business within 24 months will no longer qualify for the tax allowance.

2. Rates slashed for independent businesses

Businesses of all sizes have generally gained.

High-street based small businesses are the biggest winners. Up to £8000 in tax savings are now available for small businesses who have a rateable value under £51,000 for the next 2 years.

The fight to protect independents from corporations like Amazon from running local enterprise out of business is additionally supported through co-funding to local councils, with Hammond committing of £675m to the transformation of streetscapes, infrastructure and transport access.

3. VAT Raid scrapped & allowances raised

Despite reports of a VAT raid on small business lowering the minimum required turnover amount required to pay VAT from £85,000 to £43,000, no such decision was officially made.

In fact, the chancellor raised the personal tax allowance from £12,500 for basic rate taxpayers and £50,000 for higher rate taxpayers in 2019.

Businesses seeking capital expenditure will also be pleased with the “Annual Investment Allowance” being substantially increased from £200,000 to £1m.

4. Digital Services Tax a win for Start-ups

Tech-based startups are likely to benefit indirectly from the digital services tax that will be placed on “established technology giants”.

Public calls for companies such as Facebook and Google to contribute to local tax and “pay their fair share towards support of public services” has encouraged Hammond to show the way to the international community.

The “UK digital services tax” introduces a 2% tax for tech companies with sales over £500m. This strategically avoids the UK startup and SME market and potentially creates an opportunity for them to gain market share.

Critics hope it has been designed in a way that doesn’t prevent home-grown tech innovation or international business investment in the UK.

5. Brexit’s Impact

budget brexit
The Budget 2018 cannot be evaluated without taking into consideration the broader implications of Brexit.

Hammond’s Budget aims to reduce austerity but, in the event of a no-deal Brexit, he concedes that the economic situation will continue for another 5 years.

This is a potential worry for UK-only entrepreneurs and businesses. Opportunities to take a global view is an option for relevant business owners to avoid the expected financial fallout. Others must hope that the unconfirmed but rumoured spending increase of 1.9% will come into fruition.

You can read more detailed takeaways from the Budget 2018 here

Why Female Founders find it harder to get Investors

The gender pay gap has come under intense scrutiny in recent years. Movements like #MeToo and #TimesUp have brought sexism issues to mainstream attention. This is true across a spectrum of industries. But there is a nuance when it comes to the startup investment space. Female founders are still underfunded compared to their male counterparts.

As an industry, it’s time to close this gap. To do so, will require a concerted effort from all parties – founders, funds, networks and investors – to overcome biases and to support merit wherever it is found.

Elite Business Magazine recently did a feature on this to discuss why female founders find it harder to raise funding than males.

The feature includes an interview with our very own, Olivia Sibony. Olivia recently sold her startup to EatWith before joining our team. In the interview, she describes the difficulties she faced when fundraising including discrimination because she was “…of childbearing age”.

She now runs our impact crowdfunding arm, SeedTribe. Her mission encapsulates two main aims. She wants to help anyone fundraise evaluated purely on merit. And she wants to encourage more people to invest. She is confident that SeedTribe will be a great platform to achieve this. (A fact she discussed in an earlier interview for The Guardian).

You can read the full feature and Olivia’s thoughts on the Elite Business Magazine website.

SeedTribe & Angel Investment Network make waves in the Press

The team at Angel Investment Network and SeedTribe have received a lot of positive press coverage recently including the Financial Times, the Guardian and BBC Radio 4.

It’s always rewarding to get public attention for your hard work. But more importantly, it’s great that our message is reaching a wider audience. Especially those people we can potentially help to find funding or great investment opportunities!

The most recent publications build a nice picture of what we are trying to accomplish over the coming months.

The focus falls, in particular, on our mission to drive positive change in the world. We are trying to increase the accessibility of the early-stage investment space, opening it up to a more diverse spectrum of investors (women and younger investors in particular). And we are helping ‘impact’ entrepreneurs get the right sort of investment for their projects.

Raconteur: Angel Investment Network & SeedTribe advocate a change in attitude towards Plastic Use

oliver jones olivia sibony plastic raconteur press
David Attenborough’s Blue Planet and the more recent BBC film “Drowning in Plastic” have brought the plastic epidemic to a global audience.

Universal horror has propelled action and a number of entrepreneurs have come forward with innovative solutions to the problem. One of these, Ahmed Detta, is currently fundraising for his recycling solution on SeedTribe.

In the midst of this backlash against plastic, we felt it important to make the point that plastic is an awesome resource with so many applications –

the real problem is not plastic, but our attitude towards it.

Raconteur picked up and published our argument – you can read it in full here

Financial Times: Angel Investment Network & SeedTribe support Impact Ventures

This September, the FT produced a special report on the ‘Impact Investing’ movement.

Regarding SeedTribe as one of the companies at the forefront of enabling the growth of this promising space, they included an interview with SeedTribe’s Head of Crowdfunding, Olivia Sibony.

olivia sibony seedtribe financial times press
Liv gives her thoughts on the important role companies like SeedTribe have to play in empowering impact entrepreneurs to enact positive and sustainable change in the world.

Read Liv’s interview in the special report here

The Guardian: Angel Investment Network & SeedTribe support Women Investors

Liv gave another interview with the Guardian, this one focused on the importance of encouraging more women investors and how the rise of the impact space could play a key part in bringing about this change.

olivia sibony seedtribe guardian press
Read ‘The Rise of the Female Investor’ interview here

Angel News: Angel Investment Network & SeedTribe support Millennial Investors

I wrote a comment piece for Angel News which ties in with Liv’s argument for women investors and the impact sector.

My thoughts centred on how younger generations of investors are motivated by conscience as well as the desire for wealth generation. I argue that companies like SeedTribe should do everything we can to harness this for the good of impact projects and the future of the planet.

Check out my two cents here

(Or if you don’t want to register on Angel News, I posted the article in a previous blog post.)

The Value of Press Coverage

This press coverage is all very flattering. But what has been most encouraging is its reception throughout the entrepreneurial and investment communities. Inbound LinkedIn requests are resulting in a number of exciting partnerships as people buy into what we are trying to do.

If you’re interested in this space as a potential partner, entrepreneur or investor, please do get in touch:

liv@seedtribe.com or oliver@angelinvestmentnetwork.co.uk

British Business Investments launches new £100m programme to support regional angel investment

This time last year I wrote a piece called 7 Positives for the UK Startup Scene from the Autumn Budget. One of those positives was the promise of support for regional investment programmes. The British Business Bank would establish ‘new investment programmes to support business angel groups outside of London’.

Well, a year on and they’ve come good on this promise. Here’s an extract from their Press Release from earlier today:

British Business Investments, a commercial subsidiary of the British Business Bank, today launches a new £100m Regional Angels Programme designed to help reduce regional imbalances in access to early-stage equity finance for smaller businesses across the UK. Such finance can play an important role in funding businesses with growth ambitions.

You can read the full Press Release here

The programme’s website along with a request for proposals can be found here

Incentivising Millennial Investors is Key for Impact Investment

Impact investing is a hot topic at the moment. And rightly so! We find this so encouraging because it is timely validation for the work we’ve been doing at our impact crowdfunding platform, SeedTribe. But there is more work to do before this industry can deliver the positive outcomes it promises. Part of this work involves incentivising the millennial generation of investors by giving them access to the best impact investments. Last month I wrote a piece on this ‘democratisation’ of impact investments for Angel News.

I wanted to share the message on here too:

Why Millennial Investors are Key for the Impact Space

“If you think you are too small to make a difference, try sleeping with a mosquito.”

This oft-quoted and amusing aphorism attributed to the Dalai Lama captures the spirit of bloody-mindedness (literally) that can drive anyone, irrespective of category, to their desired destination.

But in some industries, one can’t help but feel that size really does matter.

Early-stage investments are top of the list. For a long time, this space was a stomping ground for suits and wallets; a predominantly male sphere where prestige was gained by backing risky and exciting ventures.
investor stereotype millennial
This (slightly) unjustified stereotyping is not to undermine the important role those traditional types of investor have played in driving innovation.

But it’s important that this model evolve to become more inclusive and conscience-driven.

The advent of crowdfunding kicked off this shift: now individuals could invest in projects based on what they could afford and how much they valued the enterprise. Equity crowdfunding then allowed people to get a stake, as if they were a professional investor, in their chosen companies.

This democratisation helped spur an interest in innovation and startups among those previously unable to contribute. Now anyone could make a difference no matter how small.

However, it has become increasingly apparent that the quality of investments available on mainstream crowdfunding is still far below the level of deal flow available to professional investors.

You are never going to find the next AirBnB on a crowdfunding site. The traditional investors still hold a monopoly at the forefront of innovation.

So what? They will keep investing and funding visionary businesses and the merry parade will go on. We all benefit, right?

But the future they are creating is not one they will have to live with, at least not for very long. And that alters the motivation framework for them.

I’m not trying to denounce these investors or ascribe to them intentions which may or may not be there. But the truth is, the motivations for investing in a company inevitably differ between a 25-year old millennial and a 60-year old.

It’s not unreasonable to assume that, in most cases, the 60-year old will be more interested in wealth creation for themselves and their immediate family, while the younger person will have more concern for the future of the world they hope to inhabit for another 60 years or so.

The Rise of Capital with Conscience

The dramatic uplift in public concern over issues surrounding sustainability and the environment supports this. And it is the millennial generation who are driving this. They have come to realise that the effects of inaction will have irreparable consequences for their futures.
millennial impact investors
Sharing articles, protesting and walking to work are some ways individuals are trying to make a difference. We do these things but still feel too small to make a real difference.

Investing in impact businesses is a potential avenue for a new breed of investors to make a quantifiable difference. Impact or ‘profit-with-purpose’ businesses aim to change the world for the better while turning a profit and generating returns for investors. Included in this open attitude to positive change is a willingness to explore more inclusive methods of raising investment.

Young people, who are more environmentally engaged than ever before and willing to invest in ‘good’, neither have the resources nor the network to invest using traditional methods in the companies their conscience demands of them for a better future.

Luke Gavin, a 26-year old Greentech consultant, knows this difficulty: “One of the frustrating things about the low carbon energy sector is its inaccessibility to the average person – so much of the money comes from large institutional investors.”

A report by Barclays also shows the high appetite among younger generations with millennials four times more likely than older generations to put their money in impact funds.

How are we helping millennial investors?

At SeedTribe, we want to encourage this new generation of conscientious investors. We evaluate and vet the most exciting impact investment opportunities using the UN’s Sustainable Development Goals (SDGs) alongside commercial frameworks and allow people to invest online from £100 in exchange for equity.
UN sustainable development goals millennial
Young people want to invest in the most promising impact businesses. It is a concern for the future motivated not simply by financial reward, but more importantly by the hope of a better world for themselves and future generations. We need to do everything we can to support this.

You can read the original article on Angel News here

Should you Invest in ICOs?

The cryptocurrency market has caught the attention of many people in recent years – from traders who want to make a quick profit to angel investors concerned about the authenticity and transparency of the system. Within the startup community, ICOs (Initial Coin Offerings) have come into prominence.

So far, ICOs have helped many entrepreneurs raise funding far more rapidly than traditional avenues. Many investors too have reaped the rewards of being able to exchange an asset that would normally only realise its value when and if the business exited via trade sale or IPO.

How does an ICO work?

Before a currency is put on the market, ICOs are made available for sale as tokens, which can be converted into currency or resold as tokens once the company becomes successful. When an ICO is started, the tokens are usually sold at a very low price making it easy for investors to buy lots of them.

Once the ICO hits the exchange platforms, there are very high chances that their value will increase. Investors who bought the tokens can sell them at higher prices if there is demand.

There have been lots of success stories on ICO funding, and people are already anticipating that there will be an increase in the number of ICO fundings within the next five years. We have certainly seen a rise in the number of companies offering ICOs on Angel Investment Network in the last year or so.

Btxchange.io mentions the example of SpectreCoin in their infographic, as one of the most successful ICOs of all time with a whopping 37,175% increase in their crypto coin value.

Are ICOs all good news?

While ICOs can have advantages compared to conventional funding methods, there are some downsides that investors should be aware of.

ICOs are poorly regulated by nature, and there have been incidents of fake fundings like the Benebit case in 2017. The initiators of the coin offering scammed people into investing large sums of money, and then just disappeared with the funds, without a trace.

Also, even if the ICO is legitimate, there is no guarantee that the new coin will gain enough value for you to make a profit. It’s a gamble like any other investment!

The bottom line is that, if you are interested in ICOs, and you don’t mind taking the necessary risks, then there is an excellent opportunity to generate quick returns from startup investments. Initial coin offerings have fast returns which could double or triple your capital in just a few months.

If you are either a complementary investor or an angel investor, it’s a good time to get involved with ICOs.

Btxchange.io have produced a helpful infographic to explain the ICO landscape further:

REVOLUTIONARY WAY TO GET FUNDED: ICO ROUNDUPS

https://btxchange.io/ico-roundups-infographic/

Infographic: How Startup Funding Works

Raising funding for your startup is, in part, a navigation problem. This is especially true when you are doing it for the first time. Entrepreneurs often focus on the problems right in front of them and so lose sight of the bigger picture. It is always helpful to approach immediate problems with knowledge of the lie of the land ahead.

This infographic on how startup funding works is one of my all-time favourites. It neatly and concisely sets out a typical map of what a fundraising journey looks like over the lifetime of a successful company.

startup funding infographic

I hope you find it useful.

Credit to Anna Vital for producing such a great graphic.