FAQ'S
SWAIN frequently asked questions
SWAIN is widely regarded as one of the most active Angel Networks in the UK. As an introduction to the way in which we work, we have set out below a series of responses to those issues which are raised most frequently by investors and entrepreneurs alike.
We hope that you will find this document helpful.
From businesses seeking to raise equity finance:-
The first stage in the process 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 prefer 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 (we do provide very valuable introductions). 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 Regional 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.
Assuming that SWAIN wish to progress the opportunity, the second stage involves a more detailed Evaluation usually involving a meeting and often at the client’s premises. There is a cost of £75 + VAT (correct as at 1 Jan 2007). Feedback is always given by e-mail.
SWAIN may then offer an opportunity to present at an Expert Panel. Typically the panels are comprised of four or five panellists drawn from a Venture Capitalist, an active Business Angel, an Accountant with specific Corporate Finance experience, a Corporate Lawyer (often with IP experience) a Corporate Banker, a Marketing Consultant. Businesses who are seeking input on how best to shape their proposal or are perhaps uncertain as to the best way to approach their addressable markets often obtain significant benefit from this process. There is a cost of £75 + VAT (correct as at 1 Jan 2007). Feedback is always given by e-mail.
Again assuming that discussions are positive, the Regional 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).
Opportunities are introduced in one of two ways.
1) They are listed on our website (for a finite period of time) and included into a series of regular Updates which are circulated to potential investors.
2) In addition to (1) above they present a 12 minute ‘pitch’ at one of our Investment Forums
SWAIN Investment Forum
At each event between four and six companies each present a 12 minute ‘pitch’ often supported by a PowerPoint presentation.
Typically the event registration commences at 4.00 pm (we ask companies to arrive at approx. 3.15pm for set-up) leading to a 4.20pm start.
The presentations are divided into two sets of (say) three separated by a 10 minute comfort break.
The presentations are followed by a networking session of approximately one hour when individual investors can have more detailed discussions with the businesses who have presented. We aim to close by 7.00pm
Our most frequently used location is the Bristol Golf Club which is favoured because of its excellent function room and ease of access being located some 200 yards from the M5 Exit 17 together with ample car parking.
We shall require:-
- Short Summary (limit 150 words) ideally 10 days before the Forum date;
- One page summary;
The short summary should be close to the summary provided on this website as part of the registration process. The one page summary will replace the full profile that you also provided as a part of the registration process. In practice businesses will usually want to reshape both the short summary and the one page 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:-
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. There is currently no charge for this service.
Fees summarized
| Desk appraisal |
Free |
| Evaluation (including meeting and feedback) |
£125 + VAT |
| Expert panel (optional) |
£75 + VAT |
|
Either Introduction by Update and Website
OR
Introduction at forum plus Update / Web
|
£300 + VAT
OR
£450 + VAT
|
Success Fee
For all amounts
|
4% of investment (min £1000)
+ VAT |
This question is impossible to answer. ‘Gun to tape’ times have ranged from less than a month to over a year!!
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 scaleable, 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.