RAISING CAPITAL FOR YOUR SOCIAL BUSINESS The Ethex share or bond support package

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1 RAISING CAPITAL FOR YOUR SOCIAL BUSINESS The Ethex share or bond support package Social businesses and co-operatives need to raise capital to grow. But the process of doing so can be complex, expensive, demanding and confusing. Costs can easily run out of hand. That s why Ethex has teamed up with solicitors Blake Lapthorn and accountants Critchleys to offer an affordable, comprehensive and supportive capital raising service for social businesses and charities that takes you all the way through from designing your investment product, to capital raising and subsequent investor relations and secondary market trading. Ethex is a new online investment platform which is designed to improve capital raising and liquidity for social businesses. Ethex focuses on positive ethical investments those that have a social or environmental objective at the heart of their mission, alongside financial return. Ethex aims to make positive investment easy to understand and easy to do. The website brings together a wide range of social investments into one site and clearly shows the social, environmental and financial performance of each, making it easy for investors to evaluate, compare and choose. Ethex also acts as a broker for these investments, guiding people through the investment process, and can also act as registrar. Ethex is a not-for-profit organisation controlled by its members, who are also its customers. It is building a network of several thousand investors interested to make social investments. Whilst initially focused on individuals, over time Ethex intends to become the destination of choice for all social investors, be they individuals or city institutions. Both Blake Lapthorn and Critchleys are well established professional firms with extensive corporate finance experience and a long history of supporting social enterprises, co-operatives and charities.

2 HOW DOES THE SERVICE WORK? Ethex s focus is on raising small amounts of finance from a large number of investors. The idea of the programme is as far as possible to empower you to understand and run the process yourself. We would hope that you would continue to raise finance year on year as your social business grows. Having prepared a high quality offer document and process the first time, subsequent raises should be easier to carry out. Here are the four stages that we will take you through for each offer: 1. BEFORE YOU START - Our investor-readiness consultancy service: It s crucial to find the right investment product and structure, and consider carefully the long term impacts that raising capital can have on your business. In a brief consultancy period that should last no more than three days, Ethex, Blake Lapthorn and Critchleys can work with you to: Design the investment product and the shape, size and timing of the capital raise; Identify the best vehicle for the receipt of investment; Decide the legislative framework under which your offer should take place; Evaluate any impacts on or changes to your business structure, your members rights or your articles that might be required and how these should be handled; Consider the best way to market your offer; Review any management implications of attracting investors and how these should be resourced; Consider the social and environmental impacts of your business and how best to report on them. Completing this first stage will mean that the shape of the offer is well defined and that the production of the offer document can commence. 2. PULLING THE OFFER TOGETHER - Our share or bond offer consultancy service: Share issue documentation can be complex and expensive to produce. We can demystify the process by working with you to: Provide you with a template offer document in which you fill in the text; Review and suggest changes to the structure and content of the offer document as you go along; Assist in the preparation of any financial forecasts; Win any taxation approvals; Undertake a legal and accountancy review and verify all documentation; Plan and budget your marketing strategy; Secure Section 21 (financial promotions) approval for the offer document and any marketing materials, if required. This stage will leave with you an offer document to take to market and marketing materials to support it.

3 3. RUNNING THE OFFER - Our marketing and order handling services: Once the offer commences we can: Give you access to Ethex s growing community of positive investors: Create a profile of your business on the Ethex website detailing its social, environmental and financial performance; Include the offer as part of Ethex s own marketing programme to new members; Advise on and manage any further promotions such as advertising or targeted PR; Receive orders and payments through the Ethex website and process these orders; Carry out an anti-money laundering check on each investor. Once the offer is closed, the money raised is made available to your business along with the full register of investors. 4. LIVING WITH YOUR INVESTORS - Our investor relations and management services: Your commitment to your investors continues whilst they continue to invest in your business. Managing these investors can get complex and expensive. Ethex can help by: Maintaining and updating the profile of your business, including any news stories, to ensure that investors stay fully informed; Managing your register of investors including share or interest payments, change of address, AGM invites and so forth, through our partners the Registry Trust. Providing a secondary market in your shares or bonds; Working with Ethex will help make managing investors simpler and will allow you to focus more on your core business.

4 HOW DOES THE SERVICE WORK IN PRACTICE? Once you contact us we will send you a quote for the service we propose. If you accept this, we will carry out the 4 stages described above roughly as follows: STAGE 1 - Getting ready for investment First you send us a package of information including your business plan, accounts, annual review and articles. We review this and then plan a half day face to face meeting so we can get to know you and understand your business proposition, and you can get a better grip of what is involved. It s likely that there will be more than one possible route to follow to raising investment, so we will provide you with a pre-structured pros and cons sheet to fill in, helping you to explore each option. At the same time we will explore for you any legal and financial issues that might influence your decision. Finally we will arrange a further half day meeting with you to decide the best route to follow. Resources available: An explanation of the various options. Template pros and cons sheet. Legal and accountancy advice at hand. Work our side: From 1 to 3 days. Work your side: From to 3 days. STAGE 2 - Planning the offer We will provide you with a template offer document, which includes guidance on what to say where, and a template for your financial projections. You will then complete these, with Ethex reviewing them at each stage, suggesting changes to content and ways to express points in the most readable English whilst remaining within the law. Ethex can also help you pull together your financial projections. During this period we would also work out a marketing plan with you and put a cost to it. Once we are happy with this documentation it will go to the lawyers and accountants for review. The document will also be verified at this stage meaning that the most important claims made will need to be supported by accompanying evidence. Then once the document is agreed you will need to attend a meeting in Oxford at the solicitors to sign off both the offer document and a director s liability statement. Resources available: Templates for the offer document, financial forecasts and verification. Legal and accountancy advice to hand. Marketing options presentation. Work your side: Perhaps 10 but could be as much as 30 days.

5 Work our side: Hard to predict, but perhaps from 5 to 15 days. STAGE 3 - Marketing and running the offer Once the offer is ready to launch, Ethex will work with you to market it as widely as possible. From the information we have collected in stages 1 and 2 we will create a profile of the business and the investment product on the Ethex website. Anybody wishing to invest will then be able to do so directly through the website. Money received will be paid to a bank account dedicated to the offer and in your name to which we have access. We will then report to you regularly on the sum raised. At the close of the offer, we can arrange for an allotment to be made and share certificates to be sent out to your investors. Work your side: The more time you can afford to spend on marketing the offer, the better! Work our side: We will work alongside you continuously marketing the offer in line with the agreed marketing strategy, and will handle the investors as they come in. STAGE 4 - Investor management and secondary trading Once the offer is over, you will still need to keep your register up to date with investors details; keep investors informed on progress with your business; make any dividend or interest payments; and deal with any investors wishing to sell or withdraw their investment or new investors coming in. Ethex can handle this entire process for you on an on-going basis, by keeping your profile up to date, by maintaining your register, and by broking any share sales, new investment or withdrawals. This leaves you free to focus on running your business and thinking about your next capital raise!

6 MEET THE TEAM Jamie Hartzell Managing Director, Ethex Jamie is one of the UK s leading social entrepreneurs. He is also an investor in a wide range of social businesses. Jamie is the founder and managing director of Ethex, in which role he also oversees the management of the Westmill Solar Co-operative on behalf of the co-operative s directors. Jamie began his career as a documentary film-maker for the BBC and Channel 4 but left television to found the Ethical Property Company in He led the company for 13 years, taking it from one employee to some 70 staff working in the UK, Belgium, France and the Netherlands. Jamie has undertaken four Ethical Public or Private Offerings, raising 14 million from some 1,300 investors in the UK, as well as a private offer in Belgium for 3.2 million. Jamie is a director of Ethex and of Zaytoun, a company importing fair trade olive oil and other products from Palestine. He has been a trustee of Student Hubs, a charity encouraging UK university students to get more involved with social and environmental issues; of the Phone Co-op, a co-operative providing telephone and internet services; of the Resource Centre (London) Ltd, the charity that owns the Holloway Road Voluntary Resource Centre; and joint Managing Director of both Ethical Property Europe and Ethical Property Nederland. He also founded the charity the Ethical Property Foundation. Nicola McConville Partner and Head of climate Change, Blake Lapthorn Nicola specialises in corporate work of all kinds including acquisitions and disposals of companies, and private equity transactions. She spent a number of years in London working in private equity advising both investors and management teams, from initial funding rounds through to exits, including trade sales and IPOs. Nicola was a key member of KPMG's Early Stage Advisory Board. She has continued to develop this experience at Blake Lapthorn working with many early stage technology companies including several university spin-outs and delivering training sessions on investment readiness for both companies and investors for ISIS Innovations, Finance South East, SEEDA, Angels for Growth, Venturefest and the Institute of Business Advisors. A large part of Nicola's practice involves advising companies active in the climate change sector from carbon offsetting to energy management, from renewable energy to ecological and carbon consultancy. To this end Nicola founded and is head of the Climate Change sector group at Blake Lapthorn and also sits on the firm's Environmental Policy Committee. She is also a director of Westmill Solar Co-operative.

7 Justin Ray Director - Corporate Finance, Critchleys Justin is well known and respected in the Oxford and Thames Valley professional community and has been involved in Corporate Finance since Justin is a Fellow of the Institute of Chartered Accountants in England and Wales and holds the Corporate Finance qualification, and has extensive experience in successfully completing corporate acquisitions, disposals, share valuations, fund raising, management buy outs/buy-ins and due diligence assignments. He has also been instrumental in a number of successful corporate turnarounds. Justin is a leading light in the Technology, Support Services (including Recruitment) and Property and Construction sectors, and has completed a significant number of transactions that fall under these banners. Justin enjoys watching and playing most sports, an activity that has been somewhat curtailed by the arrival of a young family. Sarah Flood Business Development Manager, Ethex As well as managing Ethex s relationships with new and existing business members, Sarah also leads on management of Westmill Solar Co-operative. For close to fifteen years Sarah has been delivering policy and practice to help the social economy and civil society sector thrive. She has worked with social investors, co-operatives, social enterprises and voluntary and community organisations, all with a focus on how finance can create social good. Prior to joining Ethex she worked at one of the largest social investment organisations in the UK, The Social Investment Business, where she was exploring new investment products and supporting new programme development. From , while at the Plunkett Foundation, she led Defra s Social Enterprise Strategic Partnership and helped to secure funding for community-owned shops and rural transport social enterprises. She has also worked for NCVO's pioneering Sustainable Funding Project and for New Philanthropy Capital. She is also an investor in and non-executive director of Cultivate Oxford, a not-for-profit social enterprise bringing fresh, local, organically-grown food direct from farmers to the city, and in Cafédirect.

8 WHAT DOES IT COST? As a not-for-profit organisation whose mission is to support the social and environmental business sectors, Ethex charges an affordable rate of from 500 to 600 a day for consultancy services, depending on the size of your business. Charges for marketing and handling investors during the share or bond offer are 1% of the sum raised. Ethex does not charge VAT, however Vat will be charged by Blake Lapthorn and Critchleys. The intention of Blake Lapthorn and Critchleys, the other professional advisors participating in the project, is to keep the work light-touch and the costs as affordable as possible. The preparatory work undertaken by Ethex helps to ensures that this is the case. SAMPLE COSTING This is a rough guide to what the entire process might cost based on a theoretical example. Actual price are subject to quotation and are likely to vary. Please contact us for an accurate quotation. EXAMPLE: Business A was founded with investment from three key supporters and has been trading for two to three years. It now wants to raise a further 1 million pounds. Although the business plan is clear, help is needed to design the investment product and to have this legally confirmed. The offer succeeds in raising 1 million from 500 investors. The Share Issue Process Getting ready for investment 2 days consultancy 1,000 Legal advice 500 Preparing the offer 10 days consultancy 5,000 Legal review 1,000 Accountancy review (if required) 1,000 Total fixed costs 8,500 Running the offer 1% of the sum raised plus 1,000 to 11,000 prepare your Ethex profile Offer cost 1.95% of total raised 19,500 Section 21 sign off (if required) Estimated 1,000 Offer cost 2.05% of total raised 20,500 Additional costs may be incurred if work is commissioned from other parties, such as for design and layout of an offer document or advertising space. On-going investor relations costs, per annum: Annual Ethex profile fee Includes updating your profile once a year 1,000 and as required Annual register fee Management of investors, change of 1,000 address and one dividend or interest distribution Annual cost 0.2% of sum raised 2,000

9 for further information, please contact: Jamie Hartzell, Managing Director on or Sarah Flood, Development Manager on on Ethex The Old Music Hall Cowley Road Oxford OX4 1JE