enterprise capital funds · prospective fund managers and investors february 2016 . @britishbbank...

www.british-business-bank.co.uk

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Enterprise Capital Funds

Seminar for Prospective Fund Managers and Investors

February 2016


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Overview

Ken Cooper

Managing Director Venture Solutions


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British Business Bank - What we do

• Aim to change the structure of the finance markets for smaller businesses, so they work more effectively and dynamically

• In turn, this will help businesses prosper and build economic activity in the UK

• PLC since 1st November 2014.

An Economic Development

Bank A plc – 100% owned by UK Government

Working with 80 partners

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Enable

Help to Grow Programme

British Business Bank – where ECFs fit

Scale up Stay ahead

Mentoring and funds to ‘be your own boss’

Funds for high growth potential businesses

More funding options and choice of provider

Investment Programme

Providing loans and mentoring support to help entrepreneurs to start a business.

Supporting a vibrant and diverse venture capital market for early stage and high growth businesses.

Venture Capital Solutions

Allowing fast-growing firms to reach their potential. It will include debt finance with equity elements - junior debt.

Supporting a greater range of funding for smaller businesses

Funding and capital products to help increase the flow of finance

Enterprise Finance Guarantee

Encourages financial institutions to lend to viable smaller businesses lacking collateral or track record.

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Angel Co Fund

Matching equity investment in smaller businesses from business angels.

Start up

http://www.startuploans.co.uk/


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ECF Portfolio - Key facts

2006 2015

19 Enterprise Capital Funds Range of fund sizes - from £10m to £75m Range of strategies - from SaaS and creative industries to more general portfolios Range of stages - seed to later stage venture


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ECF performance is good

ECF fund of funds is TVPI positive

Providing £660M+ of investment potential to UK high growth businesses

Good exits & first NASDAQ listing of a portfolio company

ECF companies have attracted top tier investors in follow on rounds

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Over £295M invested across more than 225 companies


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The ECF Franchise

British Business Bank is a long term participant in the venture market and a professional LP

We have backed emerging managers who are/will be household names on the UK and European Venture stage

ECF Fund managers are building fund management businesses using a multiple fund model

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We have backed 7 of the 15 ECF Managers in a second fund with more expected


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Next steps

We will continue to support good emergent fund managers

ECF programme is well funded in the coming years

Panoramic and the Funds team are here today to answer any questions informally

If you are interested read the Guidelines and get in touch

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Legal Notice

No representation, express or implied, is made by British Business Bank plc and its subsidiaries as to the completeness or accuracy of any facts or opinions contained in this presentation and recipients should seek their own independent legal, financial, tax, accounting or regulatory advice before making any investment decision.

No part of this presentation should be published, reproduced, distributed or otherwise made available in whole or in part in any jurisdiction where to do so would be unlawful.

British Business Bank plc is the holding company of the group operating under the trading name of British Business Bank. It is a development bank wholly owned by HM Government which is not authorised or regulated by the Prudential Regulation Authority (“PRA”) or the Financial Conduct Authority (“FCA”). British Business Bank plc operates under its trading name through a number of subsidiaries. Neither British Business Bank plc, British Business Finance Ltd nor British Business Financial Services Ltd is authorised or regulated by the PRA or FCA. British Business Bank plc and its subsidiary entities are not banking institutions and do not operate as such.

A complete legal structure chart for British Business Bank plc and its subsidiaries can be found at www.british-business-bank.co.uk.

Please note that British Business Finance Ltd is acting as an investor for the purposes of the ECF Programme and therefore this presentation does not require approval under financial promotion legislation or corresponding rules.

© British Business Bank plc February 2016

http://www.british-business-bank.co.uk/






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Enterprise Capital Funds: Selection and Process

Christine Hockley

Senior Investment Manager

Venture Solutions

February 2016


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• A “geared” return structure designed to be competitive with other investment opportunities for the private investors

• A significant commitment from British Finance Limited “BBFL” of up to £50m and 60% to 66% of the fund.

Key features of ECFs

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Waterfall

Private Investment

• 3% prioritised return to BBFL • Repayment of capital to BBFL and private investors • Distribution of a fixed share of profit to BBFL – remainder

shared between private investors and the fund manager

• Investors must invest on a commercial basis • Private investment must be new money in to the equity

gap


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• Initial round size and total investment limits focused on “equity gap”

• Equity component with a significant prospect of a material capital gain

• Unlisted SME either pre-commercial sale or within 7 years of first commercial sale or is launching a new product or into a new geography requiring investment > 50% of preceding 5yrs average annual turnover.

• Investment must be for the benefit of the UK economy

• Investment must be a ‘qualifying trade’

• Fresh capital only except in specific and limited situations

The Strings - ECF restrictions

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Full details of the restrictions are in our Guidance for Prospective Fund Managers


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Four broad areas of assessment:

The programme is competitive with only the strongest proposals being taken forward.

Successful proposals must also offer the best overall value for money in meeting BBFL’s objectives.

Assessment Criteria

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Strength of investment team, relevant experience and expertise

Investment strategy

Sources of private capital

Financial terms


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2-4 funds per annum

• Call, email or come and see us for initial feedback

• Iterative process, keeping contact until ‘investment ready’

• We may start ‘light’ due diligence, including referencing and consideration of track record, experience of team etc.

• Formal ‘5-pager’ comes later

The Application Process

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The Application Process – Common sticking points

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Team

Track Record

Terms

New team demonstrating they can work together effectively Existing team demonstrating they have the bandwidth to deliver a new fund

Portfolios that are largely unrealised Whose deal was it?

“We’d like some feedback on our commercial terms.”

Private Investors “We don’t want to fund raise until we know you are in.” Private investors with motives other than commercial return.

Strategy “Me too”, no differentiation or obvious links to team’s skills Conflict of interest


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The Application Process – Common sticking points

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NO SURPRISES !


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• Quality of WIP is excellent which reflects increased venture returns

• Much longer tail of quality proposals for everyone we invest in

• Limited number of teams we can work with and invest in

Current Appetite

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Strength of proposition remains paramount

Looking for ‘stand out ‘ proposals


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• ECF’s structural requirements and restrictions must fit with your investment strategy

• No minimum or maximum fund size – managers need to demonstrate that the proposed fund size is appropriate to the investment strategy

• Maximum ratio of BBFL participation set by type of company that the fund will focus on

Further details at:

http://british-business-bank.co.uk/ourpartners/enterprise-capital-funds/

Is an ECF right for you?

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Read the Guidance and if you still think an ECF is for you get in touch!

Still interested??

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@britishbbank

Legal Notice

No representation, express or implied, is made by British Business Bank plc and its subsidiaries as to the completeness or accuracy of any facts or opinions contained in this presentation and recipients should seek their own independent legal, financial, tax, accounting or regulatory advice before making any investment decision.

No part of this presentation should be published, reproduced, distributed or otherwise made available in whole or in part in any jurisdiction where to do so would be unlawful.

British Business Bank plc is the holding company of the group operating under the trading name of British Business Bank. It is a development bank wholly owned by HM Government which is not authorised or regulated by the Prudential Regulation Authority (“PRA”) or the Financial Conduct Authority (“FCA”). British Business Bank plc operates under its trading name through a number of subsidiaries. Neither British Business Bank plc, British Business Finance Ltd nor British Business Financial Services Ltd is authorised or regulated by the PRA or FCA. British Business Bank plc and its subsidiary entities are not banking institutions and do not operate as such.

A complete legal structure chart for British Business Bank plc and its subsidiaries can be found at www.british-business-bank.co.uk.

Please note that British Business Finance Ltd is acting as an investor for the purposes of the ECF Programme and therefore this presentation does not require approval under financial promotion legislation or corresponding rules.

© British Business Bank plc February 2016






enterprise capital funds · prospective fund managers and investors february 2016 . @britishbbank...

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