roundtable ... continued from previous page


Telling agreed that the arrival of alternative financing through crowdfunding, peer- to-peer lending etc had enhanced the market. “There’s diversity and more funding roads to go down, but the difficulty often lies in how much control managements of earlier stage companies are willing to give up to gain financing.”


Peter Francis


Francis accepted that businesses often didn’t want “the issue of having someone around the boardroom table who wants to be involved, doesn’t have the time to do so, and disturbs the capacity to take the right direction.” With mainstream bank debt also usually linked to restrictive covenants “appropriate funding in chunks of around £5m” remained tricky, he confirmed. “And the question is always: Do we need this funding risk to get us to the next level of growth?”


Taylor mentioned asset-backed lenders such as Shawbrook and Leumi, and private banks who were generally less prescriptive. “The greatest failing some entrepreneurs make is to give too much away too early – not necessarily in control, but in the later value of shares.”


Bob Atkinson


Private banker Hill responded that “access to the right kind of private deal is often highly desirable” but such access was available, albeit often through personal networks rather than professional advice, due to “private banks seeking to manage the risks exposed to clients.” The most backable qualities, he added, were confidence, proven track record and some ‘skin in the game’ capital from the applicant.


“Are there any business angels out there?” queried David Murray.


John Scholes


Hill: “Yes, but it is knowing how to find them and understanding their risk appetite. There is a lot of private money often seeking returns, perceived to be in excess of what property or standard investments can deliver.”


Warm introductions and a ‘dating site’ required?


Scholes said the key was effective matchmaking between funders and applicants. “It won’t work if you have a technology entrepreneur pitching to a roomful of people who don’t understand the words.”


John Taylor


Griffiths suggested an online communication platform for funding, similar to dating sites, would help.


Scholes said such networks and platforms already existed in America, often focused around universities (eg MIT, Stanford). “Things are now happening the UK; that communication is getting better.”


40 businessmag.co.uk


Telling highlighted the human factor. “A lot of the investment goes through people that funders know and trust.” The role of the business-savvy middleman was becoming increasingly important in arranging ‘warm introductions’.


Perhaps less ‘cold’ than traditional high networth angel groups, several UK universities now have informed funding networks associated with them, Riddick acknowledged. He highlighted SetSquared Partnership, the successful southern universities collaboration. “It’s useful because it’s a ‘club’ with human interaction.”


Atkinson noted the irony that most teenagers now use online relationship platforms and networks, yet ‘offline’ human interaction was the funding answer.


Do product or service-based businesses scale best?


“Key decision-makers should work on their business not in it, stated Taylor. “In a service-based business that’s much tougher to do because you are probably the ‘product’. You would imagine that scaling a product-based business is easier, but you are still probably implicit within the client relationships that create your product sales, so find yourself working in the business.”


When Steve Jobs rejoined Apple he spent 20% of his time talking to potential hires and recruitment candidates. “He reasoned that the way to scale the business wasn’t around him – and Apple is the ultimate product business.”


Atkinson felt product-based business scale-ups could be less risky because projected revenues were more certain, though based on tighter profit margins. Production contracts tended to be longer and tied into process and supply- chain networks, whereas service-based workbooks and projects could be postponed or changed virtually at the client’s whim.


McLeman felt the difference was not stark since service businesses could also create products. His service-based company Ancoris had developed a SaaS product and spun it into a HR business now maturing rapidly with good scale-up opportunities. “In service-based businesses, hiring the right people is the thing that limits your ability to scale, plus, you are constantly debating revenue versus utilisation.”


Scaling up through a franchise model


“It’s not an easy option. You have to have something really proven to take to market, something in an exact form that has resonance and value. And, don’t try to franchise it too soon.” Telling advised.


THE BUSINESS MAGAZINE – MARCH/APRIL 2018


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