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Qi3 Ventures Insight

Advice for Entrepreneurs: Part Two – Due Diligence Material

This is the second in a series of blog entries intended to give advice to entrepreneurs who approach Qi3 Ventures.

Think about it from my perspective.  It’s much easier to invest in a proposition if you have already thought through all of the questions that people will ask you, and prepare concise written material to release to potential investors who show serious interest.  Your preparation will thus look professional, and save me time scratching my head.

In a past investment, I was impressed that the entire due diligence pack was available for download from a secure web site.  This made the investment process so much easier, and gave the immediate impression of competence and preparedness. (They still went bust, but that was technology failure rather than lack of investment readiness).

The obvious checklist of due diligence information includes:

  • Corporate structure, shareholdings, articles of association
  • Past financial accounts and up to date management accounts
  • Service Agreements with key staff
  • Evidence of contracts and grants in place
  • Schedule of Intellectual Property with status
  • External market assessment
  • External technical assessment
  • External IP assessment
  • Appendices to the Business Plan, showing how assertions were arrived at

A recent due diligence pack also included the directors’ responses to the external assessments, so I was able to feel a conversation going on and understand more.

In contrast, it’s amazing how some entrepreneurs seem to expect the potential investor to dig out all of this information themselves, and not get bored or give up in the process.  Due diligence should be a matter of reducing risk and confirming one’s interest in a business.

This may seem daunting from the entrepreneur’s perspective.  But I can assure you that a well prepared due diligence pack speeds up the evaluation process and leaves a good impression.

 

Advice for Entrepreneurs: Part One – Business Plan

I’ve been asked by several people to provide some practical guidance for entrepreneurs who approach us.  I’ll do this in several parts over the next few weeks as inspiration arises.  This first item focuses on the Business Plan.

The first rule is that everybody has their own idea of what constitutes an effective Business Plan, so my views are just preferences.  I see the Business Plan rather like a CV – it doesn’t get you the job but should get you invited to an interview.

If you look at it from an investor’s perspective, the following are good guidelines:

  • A strong Executive Summary that explains the proposition within a paragraph and the business plan within two pages
  • A short overall Business Plan – does it need to be longer than 30 pages?  Cover the main bases and leave the rest to the appendices
  • I’ve moved over the years to prefer slideshows to documents.  If your Business Plan is in document form, at least consider how pictures / graphics can bring your concept to life

And here are the main bases to cover:

  • An easily explained business proposition and revenue model
  • A credible team with experience that can deliver the Business Plan
  • Evidence of a substantial and growing market
  • How you will disrupt the market with your new proposition
  • Intellectual Property that gives you sustainable competitive advantage
  • A business model that will enable extraction of profit from the value proposition

And if you’re approaching Qi3 Ventures, remember that we have a preference for active involvement in businesses, and make passive investments only where we are absolutely convinced by the team that they can deliver the business plan.  So tell us in your covering letter where you think we can be of specific help to accelerating the business.

 

Qi3 Accelerator and friends win 2014 angel investment awards

Qi3 Accelerator, together with some of our close associates and friends, carried away two of the top awards at the UK Business Angels’ Association annual dinner, held this year in Liverpool as part of the International Festival for Business 2014:

Best Syndicated Deal of the Year: Blu Wireless Technology (Supported by the British Business Bank)

First spotted by Nathan Hill at a London Business Angels presentation event, and led by a tour de force combination of Tim de Vere Green and Rajat Mulhotra (Wren Capital), we pulled together a >£2m funding round which has already leveraged ~£1m of regional grant funding and excited further trade interest.  As part of this sterling effort, expert board level input has been drawn in from James Collier (one of the founders of Cambridge Silicon Radio) and Robin Saxby (former CEO and Chairman of ARM Holdings).  It’s exactly this value-add that characterises our investment approach.

Nominated by Angel CoFund for the Qi3 Accelerator Syndicate and the London Business Angels EIS Round Table Syndicate, the deal involved a number of syndicates including the LBA (EIS Round table Fund), Wren Capital and the Qi3 Accelerator Syndicate and the company also secured the investment from a leading semiconductor expert.. The judges felt that there was a strong collaborative approach between the syndicates and proactive interactions between the syndicates, whilst the role of Qi3 Accelerator and notably of Tim de Vere Green, as the lead angel in coordinating the process with the different participants was especially commended.

Angel Investor of the Year: Peter Cowley (Sponsored by Lloyds Bank)

A friend and co-investor over numerous deals, we were delighted that Peter Cowley was awarded the distinction of Angel Investor of the Year.

Nominated by the Angel CoFund, the judges felt that Peter Cowley had demonstrated long term commitment to angel investing having made over 30 investments  to date in early stage businesses across a wide range of sectors and through a range of models including syndicates , alongside crowdfunding and through corporate venturing. Peter has also shown extensive  support for entrepreneurship as a mentor  and educator and  helping to accelerate start-ups whilst taking a strong role as a proponent of angel investing not only in the UK but internationally.

Qi3 Accelerator Bootcamp

Qi3 Accelerator’s Bootcamp is now finished. The 2-day intensive programme provided professional guidance and hands-on experience for six HVM and Engineering companies – Omnisense, Inova Power, Zinir, Croft Engineering Services, Drop-Tech, and Vantage Power. The objective was to help teams become more attractive to investors through Qi3 Accelerator’s rigorous investment process, working with mentors and coaches in a series of workshops.  We are grateful for the sponsorship received from Qi3, ideaSpace, Williams Powell, Harrison Clark, Synergy Energy and Wren Capital, and the support received from the Technology Strategy Board, NESTA, HVM Manufacturing Conference Series and f6s.  Above all, we’re grateful for the time put in by all of the organisers, mentors, coaches and other people associated with the bootcamp.

Both Cambridge teams – Omnisense won the award for Best Company, and Drop-Tech was Most Improved Company.

Reflecting on the Bootcamp, Andy Thurman and David Bartlett from Omnisense tell us some of their thoughts: “The breadth of expertise on offer was exemplified in the short, sharp mentor group sessions in which different strategy elements could be tested and either discarded or refined into a more compelling whole. Special thanks are due to our coach Paul Anson for his enthusiastic and valued support, and patience. We very much enjoyed working with him.  I believe it needed to be this intense. Thanks to all of you for putting so much effort into the organisation, and running of the bootcamp. It was worth it!”

“It was quite frankly the most intense but valuable investment-related event I have been to, and the quality and knowledge of the coaches and mentors were exemplary. I would strongly urge you to do it again next year (with the same weather!) if possible as I think there are numerous other startups in the manufacturing field that could benefit from this.”

- Alexander Schey and Toby Schulz, Vantage Power

“The accelerator bootcamp took our business model through a rapid prototyping process and helped us understand where we need to refocus to become investable.
In forty-eight hours of speed mentoring and targeted workshops we were able to access feedback and advice on our pitch and business model from a large number of successful, seasoned entrepreneurs, investors and professional advisers. The value of their expertise over two days is more than we could have hoped to access in any other extended programme.”

- Ian Goodyear and Tracy Nattall, ZinIR

“The Qi3 Accelerator High Value Manufacturing bootcamp was a great experience for everyone involved. It showed how top advice and coaching can add significant value in shaping business models, improving focus and inspiring entrepreneurs to go and do it! The opportunity to meet with other exciting UK manufacturing companies in the making plus those who have already done it shows the excellence of cutting edge UK engineering innovation.

We were very impressed with the Bootcamp. We thought the structure format and deliverables were brilliant. It has really helped us achieve a coherent message in our business development.  We really believe your approach could really help companies in the manufacturing sector interface more successfully with potential investors.

This approach could help many companies outside the South East and it would be great to see this being developed as a UK wide scheme.  Once again thanks for inviting Inova Power to take part.”

- Christian Bunke, Mark Nailis and David Wilkinson, Inova-Power

Qi3 Accelerator would like to thank the coaches and mentors for their hard work in making this experiment such an outstanding success. Now which will be the first to secure angel investment?

ideaSpace

Qi3 Accelerator Partnership with ideaSpace Enterprise Accelerator Funding Programme

The year-long partnership programme with ideaSpace (http://www.ideaspace.cam.ac.uk/)  Enterprise Accelerator has enabled Qi3 Accelerator to test its new model for hands-on business acceleration for high value manufacturing, engineering and instrumentation enterprises.  The programme has enabled Qi3 Accelerator to ruggedise its evaluation process providing valuable support both to entrepreneurs and investors alike – entrepreneurs in understanding the gaps in their propositions, and for investors in understanding in which areas support should be concentrated.  Over 50 companies have been supported over the year, receiving targeted feedback on their business based upon the Qi3 Accelerator Evaluation Metric.

Qi3 Accelerator has been selected as a partner by the ideaSpace Enterprise Accelerator, which is delivered by Cambridge University’s Institute for Manufacturing. The company was selected for one of four partnership awards from twenty applicants in this year’s programme.

Pointy-headed perhaps, sharp advice certainly

When I tell you that ICAEW stands for the Institute of Chartered Accountants in England and Wales you’ll probably have stopped reading by the end of this sentence – DON’T!

One of their senior people is part of the Number 10 Angel Expert Group that I’ve been attending.  They are pretty proactive and have recently produced a best-practice guide for SME Finance. The guide aims to help entrepreneurs learn how to raise finances and support business growth. It also outlines some of the financing options and key issues that should be considered when looking for financing opportunities. There is a vast amount of information on various topics, such as investment readiness, equity financing, debt financing, etc. If you would like to learn more about financing options for your company, please check out the guide.

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