November 2014 The University of Warwick Science Park (UWSP), have operated an access to finance and business angel network since 1994 and have over the years build a good reputation for assisting early stage companies access the right type of funding which isn t always equity based. However much of our activity revolves around Minerva the Business Angel Network We operate with both a database of investors and seven small investor groups (syndicates) three based here at UWSP Coventry, then one each at Malvern Hills Science Park, Loughborough University Business School, Keele University Science Parks and University of Gloucestershire Incubator Hub in Gloucester for prospective companies to pitch. We now have over 100 members in the Investor groups, and who have invested over 5m into 38 companies since 2010, whilst the companies have over time also leveraged in another 15m+ from venture capital firms and other investors. We proved that even in these continuing challenging and uncertain times, business angels are willing to invest in well prepared opportunities, where combining their expertise and knowledge as well as financial support, there was less chance of a young company failing early and who might then go on to exploit their potential. We hope that if you join Minerva we will meet your expectations and help build a portfolio of good potential; opportunities with a few great ones along the way achieving the key objective of an exit that s good fro everyone. Yours sincerely Tim Powell, Senior Business Executive, Minerva Business Angels Tim Powell Senior Business Executive If you are interested in becoming involved in Minerva as an investor or want further information, please don t hesitate to contact us. e-mail: carol.bull@uwsp.co.uk Tel: ++44 (0)2476 323122 Web: www.minerva.uk.net 2
Minerva: Background Minerva Business Angel Network is owned and operated by the University of Warwick Science Park (UWSP). It was formed in 1994 as the Midlands Network of Entrepreneurs, Venturers and Angels (MINERVA) as a key part of UWSP s on-going investment in Access to Finance and Business Support programmes. Originally designed to support UWSP s tenant businesses, Minerva s remit quickly grew to encompass companies across the West Midlands. Today, Minerva works with firms and investors across the UK and beyond but retains its Midlands focus. Since its inception, Minerva has helped angel investors place more than 18m with innovative, high-growth businesses and been active in the management of debt and equity funds and a very innovative regional 6m Proof of Concept Fund. Since March 2010, Minerva Business Angels through the Investor Groups have made investments of more than 5m into 38 enterprises who have gone on to leverage a further 15M+ from Venture Capital, other private investors, Debt and grant funds to accelerate the growth of potential high growth businesses and development of world class technology in the UK. Minerva is a key part of UWSP s Access to Finance and Business Support programme and our activity is not restricted to raising funding. Our very experienced, but small team who have worked with enterprises in all stages of growth and sectors, will always look at what else we can offer the company and therefore investor. Including access to the University of Warwick facilities or indeed other Universities where access to knowledge, skills and equipment may be invaluable. Consequently, business angels who join Minerva benefit from proposals that are effectively screened and prepared. Our process still leaves work for investors to do, but we think we have created a workable enjoyable environment, that allows them to make independent, informed decisions, with their peers in the investment community and alongside selected professionals. We endeavour to help prepare businesses become investment ready, and when appropraite make them more business ready. Angels are encouraged to get involved from an early stage with the some of our proposals to advise and polish the proposition, and possibly become their champion when they eventually pitch for investment. We think it s a Win Win for both the company and the investors. 3
Minerva: Business Angel Network Minerva Today Minerva currently (November 2014) has c150 angels from around the UK and overseas. Not all angels are active at any one time and we are continually looking to recruit new members currently recruiting around 1 new angel per month. Of the 150 registered angels around 100 are also a member of the investor groups, who meet monthly to collectively view propositions and receive updates on existing investments. The groups meet for 2-3 hours every month usually seeing 3 opportunities, keeping up to date with those in due diligence and discussing progress of companies already invested into. Business Angels joining an investor group are not only looking for investment opportunities but also expect, and often will only invest, where they or fellow investors are able to get involved and assist the company in its development; which, we think is key to avoiding failure in the early stages and ultimately deliver the plan and associated success. Inevitably we have lost one company in the last 5 years but that s also perhaps not a bad record given the economic climate and early stage at which investments are made. The Minerva network will consider opportunities up to 1m but angels will often prefer businesses seeking 1 st round funding of around 50k- 250k, recognising that most concerns will probably need further investment at some point, although hopefully against progress to the plan and achievement of milestones. Part of the preparation work we undertake with the business, is to discuss the mix, timing and sources of funding required to make sure they are aware of what the options are and is right for them. Where larger sums are being sought we may be part of a consortium of providers, possibly other Angel networks and/or a Venture Capital Fund. Angel investors prefer to have EIS status for tax efficiency purposes and SEIS where appropriate for seed funded opportunities both schemes are powerful incentives to invest in early stage and often pre-revenue opportunities. We can provide details of both schemes and during the year will hold a variety investor interest sessions on such subjects. 4
Investor Group Meetings: Preparation The effort undertaken in assisting the business to become prepared for investment has one objective: to ensure they understand what s ahead and present a clear, accurate and compelling proposition to the Minerva investment groups. Once a company has been approved to pitch for investment, the Minerva team agree a strategy and timetable leading to the presentation day. Sometimes, that strategy may involve identifying one of our investors pre-viewing the company a few weeks beforehand to consider the opportunity and comment accordingly. This level of feedback may vary but is invaluable it can kill it before it goes too far or the firm may have a champion on board from the beginning. Whatever the case, we assist with the preparations prior to the event, completing a reasonably detailed summary document of each opportunity sent out 4-5 days ahead of a meeting. Those attending will also receive a pack containing the presentation documents, plus any additional information the Minerva team feel is relevant at this stage. This information is also available to all database only members after the event. We specialise but not exclusively in early stage opportunities and will consider investment proposals across all industry and market sectors, and stages of growth where there is potential and meet angel investable attributes. Not every proposition is right for equity for a host of reasons and equally every proposal approved will always have flaws but when equity is the most appropriate source of funding attributes we look for include balancing the degree of risk against a believable and sensible business plan; People are always crucial and investors need to be convinced that the plan can be executed by a good team fit for purpose with business acumen or a track record of achievement. Investors prefer the product/service to be further than proof of principle/concept ideally and preferably fully developed, ready for market, with robust IPR in place or possible in an expanding market or niche sector. The route, timings, dynamics and channels to market need to be understood and accessible by an SME, and/or a business model that will allow a licence/royalty strategy. Nothing too unusual of course and finally, a valuation that is reasonable and realistic...often a challenge! 5
The Investment Groups What can an angel expect at a Minerva meeting? Minerva currently operate seven groups split by location, meeting days & times only. Whilst there is no sector specific preference targeted to any group, very often engineers feel most comfortable with other engineers and software/it people the same and so on, but a mix is good and new members usually join the group that best fits their location. Minerva investor groups have no more than 20 members in each on the basis that at any time up to 60% of members attend a meeting. We emphasise that pitching by companies is a serious matter for both them and investors and should be treated as such Between 10-12 members is a workable group to listen, question and discuss an opportunity effectively but also be interactive and therefore usually more enjoyable for the company and the angels. Each group has a chairman to manage the agenda of usually no more than three opportunities presenting for 15 minutes followed by 10-15mins Q&A at the end of which, members discuss the merits (or not) of the opportunity and volunteers are sought interested to follow up with a fact finding investigation if appropriate. Members following up may join with members from another group, even allow a few to lead on investigations where their a mix of skills and experience can help make assessing more effective. We will help to facilitate meetings and assist with communications as required. Although presentations may have been viewed collectively and indeed investment terms will be the same for everyone, members make an individual decision to invest start at 5k. There will be some who wish to be actively involved possibly as an NED or observer whilst others are happy to be passive investors. Generally the NED if appointed would be approved by others and the combined experience of all the investors alongside the NED can be a crucial aid in the early years of growth. Minerva angels are considered to be sophisticated investors and therefore are able to make complex investment decisions and can often invest very significant sums. Nevertheless, many value considering opportunities with their peers and spreading risk across a broad portfolio by making a large number of small investments rather than a smaller number of large ones. 6
Investor Group Meetings: Investigation Naturally, although a great deal of effort goes into screening and preparing businesses prior to the syndicate meeting, an even greater effort is required in following up the opportunities. If a proposition progresses to investment, at least one member investor would normally attend board meetings as an observer on behalf of the Minerva investors. But one of the attractions to both Angels and the businesses is attracting an investor as a Non Executive board member who is able to bring relevant expertise to the business and call on other investors or group members if and when necessary. The advantage to members is this syndicate approach brings a broad range of skills, experience and contacts to aid the company achieve its potential over the long term This encourages and allows a member to more confidently employ a portfolio strategy to their investments than otherwise would have been possible. Minerva have also adopted a policy of working with the professional community and have established relationships with local solicitors and accountants who attend every meeting.. They then build up a relationship with the investor groups and are able to offer invaluable input when necessary during assessment discussions This arrangement has allowed Minerva to leave the legal and company structure process with the professionals, who have also agreed favourable terms for all investee companies, that is also beneficial to the investors. In essence the Solicitors and accountants have a set of standard Minerva documents that makes their process effective and efficient in the majority of cases. Case Study The Business Loan Network Start-up: 2010 Location: Staffordshire Minerva Investment Round: Seed Established in 2010 through their brand www.thincats.com they are now an acknowledged leader in their peer to peer auction style lending platform that has focussed on secured loans where businesses can raise loans quickly at competitive rates whilst investor members can secure low risk investments that produce a better than average return and regular predictable income. From a standing start they now have 80m under management. 7
Categories of Business Angel One of the key benefits to an investor joining the Minerva Business Angel Network is the systemised process of screening an enquiry before allowing it to be presented as an investment opportunity. Within Minerva, there are typically four types of business angel. Solo Passive (SoP) You can be a passive member of a network - registered on the database and receive updates on activity and detail on opportunities from which you decide as a "solo" if you want to invest Syndicate Passive (SyP) Join one of the groups of Minerva investors see presentations, listen to comment by other members and benefit from the follow up investigation before deciding if you want to invest as an individual - the real benefit is you will have the opportunity of considering lots of smaller investments, into a wider range of sectors and stages of development then you would probably on your own and enjoy the interaction with the other members. Syndicate Active (SAc) You may want to be more involved in the opportunity - helping with both pre presentation advice and post presentation investigation- usually working with other syndicate members with whom you will often form a good relationship. Sometimes you will concentrate on specific sectors and/or transfer your expertise into other markets. In addition, possibly willing to attend seminars on subjects relevant to angel investing or sectors some of our invested companies operate and report findings back to the group. Lead Investor Active (LInc) You are happy to lead in an investment opportunity, primarily through a high level of involvement and a larger amount invested. This is also usually determined by the company understanding they may be asked to accept you as a Non-Executive Director/Chairman, whilst the other investors in the opportunity would also need to approve/feel comfortable about the appointment and the role. 8
Angels Operating Within Minerva We expect a member to be capable and prepared to invest at least 30k per annum and many are able to invest many times that amount. However, there is no obligation to invest and it is reliant on the Minerva team finding investment opportunities that our angels like. Whilst individuals will often follow their own investment preference, the advantage of being part of a group of similar like-minded individuals should promote a portfolio investment strategy, enabling smaller investments into a wider range and number of opportunities that ordinarily might not be possible. Whilst early stage angel investment inevitably carries high risk getting involved early and having the benefit of a group of angels investing, monitoring, mentoring and generally guiding the company when required, can reduce risk considerably and at the same time be very rewarding. Minerva is a member of the UK BBAA but is not FCA registered nor intends to be as we only introduce individuals looking to invest to companies seeking investors. In accordance with current guidelines all members whether database only or a group member must complete a registration form and FCA compliant self-certification statement. This statement is confirmation of your status as a High Net Worth Individual or Sophisticated Investor and which has to be renewed annually, which we do onblock each November. Without these statements duly signed and held by us we are unable to allow you access to prospective investment opportunities and associated information. If you go on to join a group we will also require completion of our Investor Group agreement which in essence reminds you of the confidentiality nature of the information you may see or receive. Ultimately the lifeblood of any investor network is the appetite of investors to invest and to do that we do have to continually recruit investors, produce and present quality propositions. But we also try and make meetings enjoyable as well as interesting, with good opportunities that are investible with varying degrees of risk, that aspire to be very profitable at some point in the future and hopefully achieve a profitable exit. 9
Minerva: Success to Date Whilst our core activity is to raise finance both equity and debt as Minerva is operated by an organisation like the University of Warwick Science Park and been around since 1994 it makes us slightly different and we are often perceived as neutral, independent honest brokers. We attract and are comfortable with technology opportunities and UWSP can evidence where they have raised and been influential in raising funding, stimulating growth, job creation and had a positive impact on the business community. Access to appropriate finance in itself has always been and will remain an issue for start-up/early stage and technology based, including University spin out, companies. But accessing finance is only part of the process and assistance that BAN s and their investor members and networks can bring to any business seeking funding for development and expansion. In today s economic and finance climate - Business Angel funding and support is even more essential than ever before and may well be the foundation of early stage funding for many years to come. Packages of funding and support are often required and consortiums are becoming more common. We have good links into all the major Banks and other finance providers including local CDFI s. But not only has Minerva built strong relationships with the local professional and finance community, through both UWSP and the Access to Finance service, Minerva and the team has a wide business network that adds value and additionality to the Minerva offer. UWSP-Minerva and the team have an extensive contact network including : Other & Alternative Business Angel Platforms & Investor Networks eg SWAIN ( South West Angel Investor Network) & BANC ( Business Angel network Collaboration), The Syndicate Room (Crowd Funding ) VC & Co-Investment Funds e.g. Midven, Angel Co-Fund Public Funds- Innovate UK. University of Warwick/Warwick Manufacturing Group/ Warwick Ventures, Warwick Business School Other Universities & Science Parks in the Midlands region MAS / UKTI /Growth Accelerator Banks/Asset Loan providers & Providers of non-bank funding facilities 10
Minerva: An Angel Profile John Dixon, 68, is one of the men filling a funding gap created as traditional sources of funding tighten their purse strings. After leaving school with no qualifications, John worked as a milkman and a carpet fitter before establishing and subsequently selling Coventry-based IT firm Computime. Now he is hoping his experiences as well as his investments can help fledgling businesses in the area replicate his success. Being an angel investor is not just about giving money to promising companies with the hope of seeing a return, it s also about being a mentor, said Dixon. That s my area of interest, being able to share my experiences and help others avoid mistakes I made. Ultimately to help them succeed. The desire is obviously to see a return on our investments, but I think this is an extremely challenging and exciting way of remaining involved with the business community. With business loans increasingly difficult to secure on reasonable terms, Dixon believes the shift towards private investors as a source of funding for fledgling business is likely to be a long term one. Angel investment is a route more and more early stage businesses are being forced to go down and it s something the government is encouraging, said Dixon. There are always risks for investors, but recent legislation allowing investors to claim up to 50 per cent of tax back, is really encouraging people to look into the possibility of becoming a business angel. The benefits are not just for the investor, businesses are likely to get expertise and hands-on support from a private investor that would not be available through more traditional sources of finance. But of course there are big incentives for investors, and in the current climate, those willing to become business angels are likely to see a much healthier return on their cash than if they left it lying dormant in a bank or building society. So far Dixon has invested in three early stage businesses, with another potential deal on the horizon. 11
Summary of Meeting Dates 2015 Minerva Investor Group ( MIG's) Meeting Dates 2015 Group Venue Monthly Date Timings Jan Feb Mar Apr May Jun Jul MIG 1 UWSP,The Venture Centre, Coventry, CV4 7EZ Last Tuesday Morning - 10-12.30 27th 24th 31st 28th June 2nd 30th 28th MIG 2 UWSP,The Venture Centre, Coventry, CV4 7EZ Last Tuesday Afternoon- 1.30-4.00 27th 24th 31st 28th June 2nd 30th 28th MIG 3 UWSP,The Venture Centre, Coventry, CV4 7EZ First Tuesday Morning - 10-12.30 3rd 3rd Mar 31st May 12th 2nd 7th MIG 5 Malvern Hills Science 2nd Thursday Morning - Park, Malvern, WR14 3SZ 10-12.30 21st 19th 12th 14th 11th 9th MIG 4 & 6 Keele University,The Old Library,Keele Hall, ST5 5BG Third/last Thursday morning- 10-12.30 22nd 26th 19th 23rd 21st 18th 23rd MIG 7 Loughborough University, School of Business & Economics, LE11 3TU 2nd Wednesday Afternoon 12-15.00 5th 25th 22nd 20th 10th 8th MIG 8 Cheltenham /Gloucester 1st /2nd Thursday Afternoon - 12-1500 15th 5th 9th 30th 4th 12