FAQ'S

•         What is the SWAIN process?

•         What information and documentation do I need to prepare and provide?

•         How much does it cost?

•         How long does it take to find an investor?

•        What is investor readiness? How important is it? and Who provides it?

•         Financial Services Act - what is it?

•        Critical success factors in attracting equity capital 

•        Most Common mistakes 

•        What do deals look like? 

•        Process for investors – website registration  

•        Process for investors - Post-registration activities 

•        Process for investors – Annual activities 

What is the SWAIN process?

Registration process

The company registration comprises four stages: contact information; profile; engagement agreement and finally director's declaration.

Naturally contact information is principally that information that we will use to contact you.

The profile helps us to get a very quick understanding of the business and how much you are looking for. In practice at the registration stage this provides us with background information when we contact you. If we agree that you should progress through the process then we will ultimately rely on the business plan and in the first instance the executive summary which should always be provided in electronic form (via email).

The engagement agreement is a legal agreement between SWAIN and you. It only needs to be signed once and the process provides for electronic signoff. You will be sent an email that provides the full content of the agreement between us and you also observe a link to a PDF version of the engagement letter which is more suitable for printing out.

The director's declaration will require you to answer a series of questions that relate to both the company and the director's personal activities. It is important to understand that any investor looking to invest in your business will be likely to ask similar questions. Naturally these will be kept confidential.

Once you have registered with SWAIN then we are in a position to work with you to help you find investment. We break this down into three phases: the Evaluation phase; the Preparation phase and the Introduction phase. These are designed so that you progress to the next phase once we agree that you are ready. Each of the phases are described below. The costs are described separately below (see “How much does it cost?”).

Evaluation Phase

The first stage of evaluation is for a Business Plan to be sent to us. In our experience the most effective format is for the plan to be no longer than 25-30 pages, and to contain a two page Executive Summary. Financial projections incorporating profit, cash and balance sheet statements are highly desirable. We are happy to receive Draft plans and require them to be sent electronically.

Non-disclosure agreements and Engagement Letters: We are quite comfortable in entering into NDAs. We always use our own simple but mutually binding NDA. We believe that it is reasonable for our client businesses to enter into the same obligations as ourselves. Our preference is to formalize the arrangement between us as soon as possible and we therefore ask client businesses to sign a standard Engagement Letter as early as possible in the process. In this way both parties commit to a structured and transparent process which is set out clearly and simply.

The enquiry will be passed to the most appropriate Deal Manager who will carry out a Desk Appraisal of the opportunity. An early decision is made as to whether or not SWAIN wish to progress with the proposal. Initial feedback is given. There is no charge for this early review stage.

Preparation Phase

The level of preparation required will depend on how ready you are for investment and also what experience you already have in seeking investment and presenting your pitch.

The Preparation Phase consists of a meeting with your Deal Manager for an Investment Ready Review.  The review is made up of three sections:

Sindex Report - prior to the review, companies will be asked to complete a Sindex Report which examines at a high level, the various components that are required to ensure that the company has a business that is valuable to them, the investors and the market. During the review, the Deal Manager and company will assess the answers in greater detail - identify the areas of the business which need to be focused on to provide greater value.

Areas might include:

Preparing a Business Plan / Projections

Working up a Business Model

Preparing for Due Diligence

Approach to Valuation / Negotiation

Preparing for Transaction

Selecting and working with professional advisors

Video Elevator Pitch - at the review a formal video will be recorded of the company and edited to show to investors, allowing interested investors to gain a fuller understanding of the investment proposition – the questions to be asked will be made available to company prior to the review.

Campaign Plan – during the review a tailored plan of campaign will be established for the company determining next steps and areas to work on before formal presentation of the company to investors.

Where companies require more intensive assistance and additional time then we can work on a per hour rate. We also have an extensive network of consultants and professional advisors as required.

We also provide a number of optional workshops and seminars designed to improve your presentation and readiness. These include:

An opportunity to present to an Expert panel. A chance to test your pitch and the key business attractiveness to a panel which will include a lawyer, accountant and investor.

A “Prepared for investment” workshop. This full day workshop provides is based on a realistic case study and provides an in-depth understanding of what to expect as you go through the transaction process.

A “Pitch Perfect” workshop will help you to provide the best possible pitch and also provide you with a video of the practice presentations.

Our managers also have extensive experience in preparing companies for introduction to investors and in assisting the active management of deals once an investor has expressed an interest. We provide a number of bespoke services tailored to meet your precise needs.

Again assuming that discussions are positive, the Deal Manager will then put the proposal to SWAIN’s Cases Committee which decides which Businesses to introduce to potential investors and by which channel (see below).

Introduction Phase

The Introduction Phase is the phase in which you are introduced to investors. The basic package includes the following:

1) Listing of your A4 Summary on our website for 3 months and circulated to our listed investors. We encourage companies to provide us with updates as the business advances or makes progress with the deal. These updates can be made in a number of ways as is most appropriate.

2) The opportunity to practice your presentation at Dry Run and to attend one of SWAIN’s Quarterly Investment Forums.

Presenting at subsequent meetings may be available, although it will generally trigger an additional charge.

An additional 3 months visibility on the website is available.

Some companies are more likely to be successful if introduced through a much more focussed meeting where investors have already been provided with information and only attend if they are interested. For further information please talk to one of our managers.

What information and documentation do I need to prepare and provide?

We shall require:-

·         Short Micro-summary(limit 150 words) ideally 10 days before the Forum date;

·          A4 Summary 

The short micro-summary should be close to the Summary provided on this website as part of the registration process. The A4 Summary will replace the profile that you provided as a part of the registration process. In practice businesses will usually want to reshape both the short micro-summary and the A4 Summary from the information that was used as part of the evaluation process. It is also important to note that both summaries as presented to investors should be anonymised.

Investors will always seek:-

·          A Business Plan  

You should also consider preparing:

·         A Non-disclosure agreement;  

·         An Information Bible (typically a lever-arch A4 binder containing such items as:-

·         Copies patent applications;

·         Management accounts;

·         Statutory accounts;

·         Supporting assumptions and calculations underpinning financial projections;

·         Market research materials;

·         Copies material commercial contracts;

·         Copies leases;

·         Memorandum and Articles of association of the Company;

·         Copies of Employment contracts;

·         Board minutes;

·         Taxation, VAT, NI and PAYE correspondence;

·          Insurances;

·         Copies bank facility letters;

·         CVs of key management team members;

·         Organization chart;

·         Details of any litigation;

·         Pension details;

·         Etc.etc.

SWAIN Dry Runs

In order to ensure that your presentation is as effective as possible we require business who are presenting at a SWAIN Forum to make a Dry–Run presentation between 10-7 days prior to the event itself. In our experience this is a particularly valuable exercise.

How much does it cost?

Part 1: Investor’s fees

Enrolment fee of £180 plus VAT

Annual review of £90 plus VAT

Investment success fees will be due for all investments as defined above, at a fee of 5% of the investment. VAT is applicable for the success fee. Additional success fees will be due for finance secured from other sources as defined above resulting from a SWAIN introduction at a fee of 1% plus VAT for the first £500,000 of investment and a further 0.5% plus VAT for finance secured above £500,000. A minimum success fee of £1250 + VAT will be levied following any investment or raising of finance as defined above.

How long does it take to find an investor?

This question is impossible to answer. ‘Gun to tape’ times have ranged from less than a month to over a year!!

What is investor readiness? how important is it? and who provides it?

Investment Readiness (IR) must be one of the most widely interpreted and least understood phrases in common use today. At its simplest it is the process whereby businesses prepare themselves for the presentation, evaluation and negotiation cycle which leads to an equity investment.

Businesses who have prepared thoroughly and taken professional advice in advance of the process are likely to benefit in the following ways:-

·          The preparation will manifest itself in a focussed, elegant pitch concentrating on relevant investor-orientated issues;  

·          A strategy for negotiating valuation will have been devised;  

·         The Due Diligence process will be easier and shorter;

·          The investigations and negotiation processes will be more structured

·         The likelihood of deal being completed will increase.  

The best IR advice is provided by the professional community operating either through the Corporate Finance divisions of Legal and Accountancy practices or occasionally as independent Corporate Finance Boutiques. We will be pleased to introduce you to leading organizations with whom we have either worked previously or know of as recognized exemplars in their field (our preferred style is to recommend at least three alternatives and suggest that you work with organization with whom you feel most comfortable). There is no charge for this service. Alternatively we can refer you to an intermediary such as the regional Investment Readiness Service (provided by the Business Links) which acts in a brokerage capacity.

We have produced the SWAIN Guide to Investment Readiness which has been highly acclaimed, and provides an excellent summary of the issues. This is available either as hard copy or downloaded from our website.

An excellent book which we would also recommend is The New Business Road Test by John Mullins (Financial Times publication).

Financial Services Act

No précis on this topic would be complete without reference to this legislation. It is vital to take professional advice on this matter. It can be a serious criminal offence to promote investment opportunities in an inappropriate way.

Critical Success Factors in attracting Equity capital

 A successful company will always have more than half of the following attributes:-

·         Strong and experienced management team

·         Strong defendable strategic assets

·         Strong USP

·         Sells into a growth sector

·         Is scalable, commercial and realistic

·         Has well researched and demonstrable market demand

·         Already generates revenues

·         Offers a ’must-have’ rather than a ‘nice-to-have’ product

·         Produces high profits and strong cash flows

·         Is committed to a credible exit strategy

·         Offers its customers a strong value proposition.

Most Common mistakes

Not allocating sufficient time or energy to what is often a very debilitating, frustrating, energy-sapping and time consuming process; 

·         Skimping on professional advice fees;

·         Not following investor interest up quickly and enthusiastically;

·         Lacking real commitment to investigating, formulating and executing a realistic exit strategy;

·         Seeking an investment at an unrealistic valuation

·         Taking an unstructured approach

·         Underestimating the whole exercise

What do deals look like?

·         The typical equity holding is in the region of 20%

·         The typical valuation (post money) of a business is less than £1m

·         The mean equity content is approx. £120,000

·         Most businesses raise their cask as a mix of equity and loan capital

A few final thoughts…

If after having read and objectively considered all the gloom and pitfalls above, you still feel that you would like to progress with an equity solution do remember:-

Equity is not a soft option, it’s certainly not easy to obtain and it’s definitely not cheap.

If you’re still interested and think that you’ve got what it takes – we’d like to meet you.

Investor Registration

Website registration

The investor registration is made up of four main components. These are: contact information; investment profile; engagement agreement and finally self-certification.

Naturally contact information is principally that information that we will use to contact you. Most of our communications to you will be via email, although we will often call you to remind you of forth coming events. We are also making more use of texts as an automated reminder. Companies will be normally be given your email and address as the first point of contact once you have requested further information.

The investment profile helps us to understand the sort of businesses you are interested in. You will always receive summary information on all the businesses that are being introduced via email, but the more specific information helps us to determine for instance whether you might be interested in a “sector specific” event. We naturally keep all this information confidential.

The engagement agreement is a legal agreement between SWAIN and you. It only needs to be signed once and the process provides for electronic signoff. You will be sent an email that provides the full content of the agreement between us and you also observe a link to a PDF version of the engagement letter which is more suitable for printing out.

Since March 2005 'The Financial Services and Markets Act (2000)' makes it a legal requirement that Business Angels wishing to receive promotions from firms must be self-certified as either high net worth individuals or sophisticated investors. In order to safeguard both the interests of our investors and investees SWAIN will only make introductions to investors who have provided a signed certificate. The certificates are only valid for one year so please re-certificate when you receive a reminder on the main page of your SWAIN account. If you have any concerns about the implications of self-certification, then you are advised to take professional advice. To self-certificate online you must firstly indicate whether you are a High Net Worth individual or Sophisticated investor.

Post-registration activities

Once you have completed the website registration process then one of the Investment managers will contact you. In the first instance he will have a discussion with you by phone to answer any of your questions and to gain further understanding about your background and the sort of opportunities you are seeking. We will ask you for a reference, which we are more than happy to pick up verbally via a telephone call. In most cases investors put us in touch with a lawyer or accountant who they have used for recent transactions. The main purpose of the call is to set up a meeting. It is helpful, although by no means compulsory if you can provide us with a CV.

Once we have been through this process then assuming you still wish to become a member of SWAIN you will be invited to join the network. Once you have settled the enrolment fee then you will enjoy full access to the website and will get the chance to attend our Introduction forums and other “investor only” events.

Annual activities

Whilst in most cases we are likely to meet at numerous SWAIN events during the year, we also feel it is important to meet our investors formally for an annual renewal review. This allows us to discuss your view on our performance and to make any suggestions that might improve our service to you. You may also wish to make us aware of changes in your circumstances or to provide feedback on your investee companies.

It is also important to remember that the self-certification needs to be renewed on an annual basis.