funding for innovation - citrus mind, jumpstart, metis partners, lending crowd

Bill GrantNetwork Integrator Team, Digital Health & CareNovotel Hotel - Edinburgh Park 2 March 2016

www.citrus-mind.comV-0.3

2

About Today

1. Introduction & housekeeping

2. Context: the digital health and care opportunity

3. Crowd Funding: Ian Cunningham, Lending Crowd

4. IP: Stephen Robertson, Metis Partners

5. Research & Development Tax Credits: Sandy Finlay, Jumpstart

6. Q & A

7. Wrap-Up

www.citrus-mind.com

3

Network Integrator, Digital Health & Care Scotland

www.citrus-mind.com

4

Digital Health & Care companies we work with“Snapshot” excluding Life Sciences & Med Tech

Telemedicine, Telehealth and Telecare: digital clinician-to-home comms, sensors and wearables

mHealth: integrating personal consumer hardware (phones/apps, wearables)

© Citrus Mind Ltd, 2014-16, Deloitte Report for Office of Life Sciences, September 2015; Tractica Report “ Home Health Technologies”, 2015.

Home Health Technologies

Analytics: Healthcare System OperationsGenomics DiagnosticsStratifiedMedicine

Digitised Health Systems: including patient- & health system recordsData

5

Context: The Digital Health & Care Opportunity

www.citrus-mind.com

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The costs of health and care delivery will grow

Whilst the overall Scottish population is expected to grow by 9%.......

4.0

4.5

5.0

5.5

6.0

2012 2017 2022 2027 2032 2037

Population Growth, Scotland 2012-2037f

0.0

0.5

1.0

1.5

2.0

2012 2017 2022 2027 2032 2037

Growth in older population, Scotland2012-2037f

Growth in # of people 60+ Growth in # of people 75+

…the rate of growth in the number of older people will be much faster

+43%

+86%

+9%

m

m

Source: http://www.gro-scotland.gov.uk/statistics/theme/population/projections/scotland/2012-based/list-of-tables.html

7

……..but the opportunity is very much bigger.Changing mix of Population within “More Developed Countries” *, %, by age band *

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1950 1975 2000 2025 2050

More Developed RegionsChange in % of population by age band, 1950-2050f

33%

51%

16%

Age 60 +

Age 15-59

Age 0-14

12%

61%

27%

20%

62%

18%

* - More Developed Regions = Europe, Northern America, Japan, Australia, New ZealandSource: “World Population Ageing: 1950-2050 », United Nations Department of Economic and Social Affairs, Population Division, 2002

c.395.1m

8

What businesses can we help?

Businesses that have…

• An innovative product or service – be that idea, prototype, in-use

• Commercial potential – for the business, and the Scottish economy

• Something we may be able to connect/combine

• Ambition (and capacity) to help add to our national wealth

www.citrus-mind.com

TODAY’S EXPERTS…

www.citrus-mind.com

Crowdfunding: An Introduction

Digital Health and Care Innovation Workshop

Ian Cunningham FCIBS

10

LendingCrowd

www.lendingcrowd.com

@_lendingcrowd

Private & Confidential

Brief history of crowdfunding

Early crowdfunding

1713 1884

Mozart offers invitations and

manuscripts to people

donating to fund his concert

The New York World newspaper

fundraises for the base of the

Statue of Liberty, raising

$101,091 from 160,000 people

Modern crowdfunding

1997

British rock band Marillion

funds their US tour with

online donations from fans

2000

2008/20092010201120142015

First reward crowdfunding site ArtistShare

launches, inspired by Marillion

Launch of Justgiving, followed

by other crowd fundraising sites

in early 2000s2005

2006

P2P consumer lending

takes off - launch of Zopa

First recorded use of

term ‘crowdfunding’

Rewards crowdfunding goes

mainstream – launch of

Kickstarter and Indiegogo

CrowdCube is the first

equity-based

crowdfunding platform

First UK peer-to-business

lending platform is set up

(Funding Circle)

Pebble Technology’s 2nd

Kickstarter campaign hits

$500,000 goal in record

17 minutes

October – launch of

LendingCrowd, first

Scottish P2P platform

New FCA regulations

on crowdfunding and

P2P come into force

Alexander Pope asks for

people to fund his work

translating Greek poetry into

English in exchange for being

acknowledged in his book

1784

Crowdfunding and non bank finance

Private and Confidential

LendingCrowd


@_lendingcrowd

Crowdfunding – A growing market


LendingCrowd


@_lendingcrowd

Source: nesta.org.uk

Growth of Online Alternative Finance

Market

LendingCrowd


@_lendingcrowd

Source – Pushing the Boundaries: The 2015 UK alternative finance industry report, NESTA

Equity-based Crowdfunding

Market

LendingCrowd


@_lendingcrowd

Source – Pushing the Boundaries: The 2015 UK alternative finance industry report, NESTA

LendingCrowd


@_lendingcrowd

What is driving the strong growth

of the Crowdlending market?

SMEs finding it difficult to

secure loans from traditional

lenders.

Greater convenience and

speed that Crowdlending

offers borrowers and

investors.

Competitive interest rates that

the platforms provide to both

investors and borrowers.

Range of offerings

crowdlending platforms'

can provide to borrowers.

The rapid growth of Crowdlending is being fueled by:

“With their low operating costs, minimal regulatory constraints and data-

driven models, marketplace lenders are giving borrowers easier access to

credit, and answering the needs of yield-starved investors.”

Morgan Stanley

Why are SMEs struggling to raise funds?

LendingCrowd


@_lendingcrowd

SMEs are spreading their wings through Crowdlending. It is giving businesses a helping hand to secure finance.

Recently, SMEs have experienced difficulties in securing loan finance from traditional sources. Loan approvals

were slow and their competiveness was poor.

SMEs: a key component of the UK economy

60%of private sector employment

(14.4 million people).

47%of private sector annual turnover

(£1,600 billion).Source: Department for Business Innovation & Skills, November 2014

SMEs are companies employing up to 250 people

.

FINANCE NOT EASY TO SECURE

79% of borrowers had attempted to get a bank loan

before turning to Crowdlending, with only 22% of

borrowers being offered a bank loan

MANY APPLICATIONS UNSUCCESSFUL

53% of loan applications were successful in the 18

months to Q2 2014, 10% took other funding and

37% ended with no facility

BANK DECLINES DETER BORROWING

5% of all SMEs said that a previous decline

by the bank had made them more

reluctant to apply for finance

LACK OF AWARENESS

Only 24% of SMEs were aware of

Crowdlending in November 2014

Sources: Nesta, Department for Business Innovation & Skills Oct. 2013, bdrc Continental SME Finance Monitor 2014

The solution?

Crowdlending has become an easy, fast and affordable option for SMEs

As the name suggests, Peer–to–Peer Crowdlending works using a crowd of investors who bid to fund a loan application

for a business (or on some platforms, an individual). The borrower has been credit-assessed and given a risk rating with

a minimum rate of interest for loan bids.

The result? A competitive and transparent funding model for companies seeking loan finance, and investors looking for a

return. P2P Crowdlending – A simple guide

Investors Borrower

Platforms

PRINCIPAL PRINCIPAL SETUP

FEE

PRINCIPAL

+

INTEREST

ANNUAL

FEE

PRINCIPAL

+

INTEREST

At the start of the Loan At the end of the Loan

Investors Borrower

Platforms

LendingCrowd


@_lendingcrowdWhat is Peer-to-Peer Crowdlending?

Borrowers’ Requirements

1. Limited Company, LLP, Partnership or Sole Trader

Limited or limited liability partnerships with four or more

partners, sole traders and partnerships borrower more than £25k

LendingCrowd


@_lendingcrowd

2. Have a turnover of approx. £100,000 per annum or more

By fulfilling this requirement it indicates a business is more

established meaning the likelihood the loan will be repaid is

higher.

To be eligible for a loan on LendingCrowd’s platform companies must meet the following requirements:

3. At least two years’ of accounts

We need at least two years of trading to be able to properly

analyse the business’ finances.

4. Strong credit history with no defaults or CCJs

Loan Evaluation Process

1. Initial Criteria

Meet the Borrower requirements and apply for a loan on LendingCrowd.com

LendingCrowd


@_lendingcrowd

2. Financial Information

Provide the required financial documentation and the application is

complete

3. Credit Assessment

LendingCrowd’s credit team will assess the application and run it through our bespoke models

4. Credit Band Assignment

If approved the business will be given a credit score which will range from A+ to C+

5. Security

A security such as a director’s guarantee or debenture may be required depending on

the entity

6. Identification

Identification checks are carried out on all Borrowers or significant shareholders

within a business

http://www.lendingcrowd.com/

Credit Ratings

LendingCrowd


@_lendingcrowd

A+ Interest rates from 5.95% to 9.95%

A Interest rates from 7.95% to 11.95%

B+ Interest rates from 8.95% to 12.95%

B Interest rates from 10.35% to 14.35%

C+ Interest rates from 12.25% to 16.25%

Poor risk decline

High risk decline

Credit Assessment

Using the information provided on the business our credit team,

using our proprietary risk engine, determines a credit rating of the

loan application.

Government supports CrowdLending

• The British Business Bank has been

provided with £500 million to promote

finance to SMEs

• The first £1,000 of peer-to-peer earnings will

be tax-free from April 2016 (capped at £500

for higher rate taxpayers)

• Government has committed funding of

between £20-£40 million to Crowdlending

providers to create a more effective and

efficient finance market to SMEs

• Innovative Finance ISAs to be introduced

in April of this year

• FCA took regulatory responsibility on 1 April

2014

• Regulated by FCA Policy Statement 14/4

since April 2014 – reviewed in February 2015

• Financial promotion – rules on how benefits

and returns can be worded

• Emerging influence of industry bodies, e.g.

UKCFA, P2P Association

• Full post-implementation review of the above

market and regulatory framework in 2016

• Full FCA permissions to be granted early this

year

LendingCrowd


@_lendingcrowd


Supporting Initiatives Emerging Regulatory Framework

LendingCrowd


@_lendingcrowd

• Over 1750 signed up to

date with 470 actively

investing

• £5 million on loan to over 50

growing SMEs across the

UK

Award winning platform

LendingCrowd


@_lendingcrowd

One of the first P2P Lenders in the

UK to launch a Mobile App

Manage your portfolio Bid on loans Monitor your risk

Conclusion

LendingCrowd


@_lendingcrowd

• Is crowdfunding now mainstream rather

than alternative?

• Capital constraints, high costs and

prescriptive credit policy are still barriers to

bank lending

• Internet and on online platforms have

provided a democratised revolution in the

funding space

• SMEs will look at Crowdfunding as their

preferred choice?

• Increased flexibility and choice are opening

up opportunities for retail investors to look

at this asset class against a backdrop of

low yields for near liquid funds

Thank you and Questions?

Register


Recommend Contact Us

[email protected]

+44 (0)131 564 1600

/lendingcrowd

/_lendingcrowd

/lendingcrowd

26Private and Confidential

© Metis Partners 2016

Taking the luck out of making IP FORTUNES!

Funding for Innovation 2-3-16



Agenda

Who are Metis Partners?

What’s IP & who’s interested?

How’s it recognised?

Using IP to leverage finance

Practical examples


Who are Metis Partners?

Award-winning boutique IP firm > 10 years trading

Broad presence: offices in Glasgow, London & Silicon

Valley, CA

Growing multi-disciplinary team

Industry recognised specialists

Creators of the UK’s first ever IP League Table


IP for SMEs - 92% of SMEs don't know what their IP is worth!

In 2016 - top 3 concerns for SMEs are:

(1) Lack of access to finance and funding (32%)

(2) Finding new business and entering new markets (32%)

(3) Challenges & costs of employee rights/restrictions (26%)

We help with 1 & 2 - protecting and valuing IP so that they can use this knowledge to:

Attract finance & funding

Slow down and even crush the competition

Scale up quicker and enter new markets using robust IP backed processes and business

structures

Exit at much higher valuations

Negotiate better partnerships and JVs to improve market share


IP for SMEs - “Clydesdale and Yorkshire Banks IP League Table”?

Free to enter - ranking of companies based on rating their IP assets

IP asset classes: brands, software, patents, trade secrets and critical

databases

IP100 Club for all entrants

Currently > 75 IP-rich companies entered and another 20 registered

Small companies with great brands and secret recipes to larger tech

companies with 80 patent families, £small to £30m turnover

Geographically split equally between Scotland and the rest UK


What does it mean for you?

Gain recognition for investment made in IP using it to:

Boost the exit valuation of your business - Microsoft acquired

SwiftKey for $250m in February 2016

Leverage new funding options – Sphere Fluidics secured $7m in

funding in February 2016

Differentiate from competitors & create new barriers to entry

Learn how to use IP to crush competitors and accelerate growth


We identify, assess and value all IP

assets

IP assets make up the majority of

company value in most sectors

IP underpins a company’s

competitive advantage

Tangible assets are the “tip of the business valuation iceberg”


Even management struggle to identify IP at first

Patent

Applications Trade Secrets Granted Patents

Organisational

Knowledge

Know-how Customer

Relationships

Brand and

Reputation (TMs) Key Partners Key Suppliers

Critical Business

Processes

Product 1

Switch controller

Software

2013 - $8.4m

Testing Software

ISO 9000 standard

project and

programme processes

Manufacturing

Specifications and

Manufacturing Tests

Solidworks CAD

mechanism &

technical design Position Sensor

Software ABC Co: for

development of Piezo

actuators

#’s 1 – 20 including

#2 (UK, PCT & Canada)

#9 (USA)

European Registered

CTMs:

“ABC Co” “ABC” and

“Co”

Sharepoint Data:

• Software

Development

• Customer

Deployment

• User Information

Key Databases:

• Software

Repository

• Software

Documentation

• Customer Sales

Information

5 Key individuals*

identified with know-how

including:

• Algorithms (AM)

• Software development

and deployment (PQ)

• Geo-location (SP)

• Hardware architectures

(PM)

• Databases (JB)

• Wireless networks (SR)

*Includes three individuals

named as inventors

Trade Secrets:

• Unique calibration

method

• Micro-positioning of

control loop

• Increased path

connections

Network Interface/

Network card

Software

Architecture know-how

including:

• Database Structures (JB)

• Summarisation Engines

(PQ)

• Loading Chain (PA)

• Data Management and

Indexing (PM)

Negative know-how:

• Positioning frequency

Granted Patents

#PF5, #PF33, #PF34,

#PF37, #CF14

User Manuals

Granted Patents

#PF34, #PF37, #CF14

Often the initial IP assets identified by management

miss a few which we have to add later outlined in pink

as management recognise our approach. © Metis Partners 2014

What an IP

Audit

reveals!


IP underpins competitive advantage

Brand &Reputation

Know-how & Key people

Low Value – Recognition of critical

know-how in business

Medium Value – protection of key

know-how / trade secrets -

competitive advantage

High Value – JVs / collaboration,

sharing know-how e.g manufacturing

case study

Low Value – unregistered TM/logo

use

Medium Value – TM’s ® & awards

and broadened reputation

High Value – expanding online or

into new markets / channels e.g.

musical instrument case study


Put another way!

What information / data

would you be worried about

a member of staff putting on

an USB stick and walking

into a competitor with?


IP Valuations we’ve done…. basic

Transfer of IP interCo / IPCo / offshore SPV

To settle IP disputes

To bridge a valuation/asset gap

To agree “relief from royalty” rates

To support licensing deals

To facilitate pension-led funding

PPA of intangibles


Transaction valuation of IP assets

Cash-flow valuation of IP assets

Strategic valuation of IP assets

Technical assessment / value of IP assets

IP asset valuation improvements - annually

A few examples to follow…

IP Valuations we’ve done…. specialist


Why Does IP Work as a Leveragable

Asset - Funders TRUST ?

Underpins competitive advantage

Not “black box” hypothetical valuation

Linked to current turnover / revenues of business

Relies on a “expert rating” of IP assets

Incorporates distressed / insolvency sale value £xxx’s

Reasonable royalty rate based on IP asset rating – “range”

IP can be “controlled” or “secured”


Banks recognise - IP has increasing value even in Insolvency?


Metis Partners’ database of IP recovery £values –hundreds of IP sales

IP asset class “Sweet spot”

Software £25k - £150k > +

Brands/TMs plus £20k - £125k > +

- Websites & domains £10k - £250k > +

Patents £25k - £250k > +

Databases £15k - £25k > +

Trade Secrets £15k - £75k > +


IP BACKED FINANCEMetis Partners’ has been involved in deals raising over

$100m

As specialists in IP-backed finance, we use intangible assets to increase financial liquidity. Working with banks and their credit teams, we

highlight which IP assets are critical and underline competitive advantage and create sustainable growth.

HERE ARE SOME OF THE DEALS WE WORKED ON


CASE STUDIES


#1: “START UP WITH POTENTIALLY BIG DEALS BUT NO CASH”Agrotech idea - IP not yet proven

Technology at “medium readiness level” but no cash

“Lots of interest & big deals” on table

Opportunity to monetise IP in new structures

Metis vCIPO - created value & £100k cash from cornerstone IP

Metis assisted in getting £750k funding based on early IP value


#4: “VALUE OF BARRIERS TO ENTRY”£12m TO software business handling big data

Fast moving & highly competitive environment

Great software needed moat (patents) around it & speed bump IP to slow

down competitors

IP at heart of business growth strategy

Metis Exit Improvement – buyer recognised 12-18 month IP advantage

Metis prevented soft IP assets “walking away” from exit valuation


#7: “IP SEEN AS INFLEXIBLE ASSET”Oil & Gas products business

• IP asset mapping – what’s the important stuff?

• New venture & investment in Middle East

• Moving IP into new territories creates new risks

• Alternative strategy to ring-fence IP assets & fundraise

• Maximise Metis IP asset valuation


#8: “IP USED TO BRIDGE VALUATION GAP”

Software MBO team losing patience

Management wanted to invest & grow faster

Founder & VC weren’t aligned on exit plan

Metis IP Audit recognised software modules were most valuable assets

Bank didn’t need security over all software

Metis IP valuation & IPCo structure created “bridge” to solve BIG

PROBLEM


#10: “BRANDS NOT CONSIDERED VALUABLE”

CG business on brink of administration

Well known “niche” brand >25 years old

Business model undervalued brand

Weak Balance Sheet & brand value at £250k

Metis IPCo structure unlocked new finance opportunities

Private investor valued heritage and £600k c/flow valuation


#16: “VALUABLE IP SEEN AS SUNK COST ”Oil & Gas infrastructure business

Insolvency Practitioner selling ALL assets (incl. IP) for £35k

Metis Corporate Recovery secure offers circa £200k for

“forgotten” IP – US tech specs

Metis highlighted value in European accreditations / specs

Company missed out on Metis IP Commercialisation value –

could have saved business earlier


An Intelligent Approach to IP

+44 (0)141 353 3011

www.metispartners.com

TANGIBLE ASSETS ARE THE TIP OF THE ICEBERG

Talk to the EXPERTS!

Wednesday 2nd March 2016

R&D Tax Relief Explained

6 Atholl Crescent Edinburgh, EH3 8HA

SANDY FINDLAYPartner Manager

M: +44 (0) 7721 314900T: +44 (0) 131 240 2900E: [email protected]: www.jumpstartuk.co.uk

Scheme Basics

Scheme highlights

R&D Eligibility – The Complexity

Complex and challenging activities with uncertainoutcomes.

What to be aware of.

Which industries claimthe most?

£335M £635M £415M

Best People + Best Processes= Best Results.

UK R&D TAX ADVISORY FIRM OF THE YEAR 2014 AND 2015

INTERNET OF

THINGS

Developing global

services for machine

to machine

operations in digital

signage

BENEFIT RECEIVED

£114,779

LIFE SCIENCES

Developing robust

models to test

efficiency & safety of

drugs and vaccines

BENEFIT RECEIVED

£106,091Over 5 years

MEDICAL DEVICES

development of

sterile swabs and

transport media for

in-filled sample

collections

BENEFIT RECEIVED

£87,658Over 2 years

4 Common objections

WE DON’T DO R&D.

R&D isn’t just about men in white lab coats, most companies are involved in some form of R&D.

ISN’T THIS A FORM OF TAXAVOIDANCE?

NO! this is a legitimate scheme, promoted by the UK government.

WE ALREADY CLAIM THROUGH OUR ACCOUNTANTS.

GREAT! But are you claiming all the benefit you are entitled to?

IT WOULD TAKE UP TOO MUCH OF OUR TIME.

WRONG! Jumpstart do all the work so you can focus on running your business.

The Jumpstart difference

The Technical Consultation Approach

Our Client Services and Support

The value of a technical consultation.

Any questions?

Summary & Wrap-Up

www.citrus-mind.com

www.citrus-mind.com

68

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“Marketing” /

Dissemination

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Thank you

www.citrus-mind.com

• Scottish Digital Health & Care Innovation – http://bit.ly/dhcinnovate

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• E: Bill Grant; [email protected]

• E: Ian Sibbald; [email protected]

Citrus Mind Ltd, Fleming House, Kirkton Campus, Livingston EH54 7BN; T: 01506 238373

http://bit.ly/dhcinnovate

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mailto:[email protected]

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funding for innovation - citrus mind, jumpstart, metis partners, lending crowd

Economy & Finance