Qi3 – Quality, Insight, Integrity & Innovation - UNITING TECHNOLOGY & MARKETING

Tag: investment process

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.

 

Join the angels

If you’ve ever thought of becoming an angel investor, the new Be an Angel web site, launched today, is hosted by the British Business Angels Association, and has been designed to provide you with the information and resources you will need before making your first investment.

The launch of the Be  an Angel web-site coincides with the launch of Lord Young’s Enterprise report “Make Business Your Business” being launched today and a new £82m loan scheme for young people seeking to set up a new company.

It’s aimed at raising awareness  and encouraging individuals to become Business Angels,  giving detailed information and advice about the overall angel investing process and identifying the risks and rewards. The site also includes new downloadable fact sheets  on due diligence as well a  newly revised legal precedent documents and a new revised guidebook on technical and regulatory issues related to Angel investing. It also includes quotes from angels (including yours truly)  about why they became angel investors and encouraging others, as well as entrepreneurs that have received angel investment.

I’m welcoming of this online initiative, together with the enthusiasm that the government is showing for upping the rate of formation of new businesses.  In the end though, it’s up to us as individuals to decide whether we want to back these businesses with our hard-earned cash.

Why we’re passionate about High Value Manufacturing

After this week’s announcement of the Qi3 Accelerator Bootcamp, friends are asking me why we’re doing it.  Are we mad? How will we make money? And, above all, why High Value Manufacturing (HVM)?

The simple answer is that we’re doing it because we see the need!  After reviewing nearly 400 prospects, we see a common set of areas in which businesses need to improve if they wish to attract investment.  Let’s be clear here, I’m not just talking about seed stage ideas.  I’m expecting that the bootcamp will be most attractive to young established businesses looking for early or expansion stage capital.  We’ll be helping on all aspects of engineering businesses, from managing technology and product development, go to market strategy, finances and Intellectual Property.

When I attended the NESTA Startup Factories conference  last summer, it became obvious to me that, whilst Accelerator Programmes were flourishing in the software and Internet space, few people had tried them in ‘harder tech’.  When we set up the partnership with Cambridge’s ideaSpace, it seemed natural to run a bootcamp as a one-off pilot to test our evaluation process and the concept of such a programme.  We aim to support 8 businesses with tough love through an intensive 3-day process, and we’ve attracted a range of top notch coaches and mentors to get the best out of this short, sharp shock.

But above all, it’s about having fun working with ambitious people in the field I love.  I grew up at Oxford Instruments, a mid-sized engineering company where the customer was king and the love of technology and manufacturing was deeply ingrained.  I’ve spent my life selling and marketing other people’s technical inventions around the world.  For me, HVM means making real engineered products, be they destined for environmental sustainability, healthcare, industry or defence.  My pleasure as an investor is seeing engineering and commercial jobs created here in the UK, and products exported across the globe.

We’ve been fortunate to attract partnership from ideaSpace, sponsorship from Harrison Clark, Williams Powell, Synergy Energy and Wren Capital, and support from NESTA and the Technology Strategy Board.  Bootcamp participants will have to contribute a token amount towards their accommodation in Cambridge’s lovely Madingley Hall, and we’ll make up the balance of the costs ourselves.  We are not seeking equity stakes in the companies that participate, although we’ll naturally be keen to see if they are attractive investments at the end of the process.

So are we just do-gooders?  Well perhaps.  I see it as a superb experiment, an opportunity to help some great businesses, committed entrepreneurs, and work with experienced mentors whilst having great fun.

To join the bootcamp apply here.  It’s a one-off; entries close on 4th May and the bootcamp will be held on 23rd – 25th July.

My next posting will be the one about the aubergine…

Who invests in High Value Manufacturing? We do…

Readers of Qi3 Accelerator Insight will know that we’re absolutely passionate about investing in UK technology businesses.  We’ll soon be making announcements about deals that have closed, or are about to close.  It’s been an exciting few months for us, working as a team to evaluate some exciting companies and working with a range of investors to form syndicates.

Meanwhile, I’m pleased to open the first call of 2012 for proposals for Qi3 Accelerator.  See the news item for details, and please take the time to read through this blog and the rest of the Qi3 Accelerator web site before sending us your proposals.

By continuing to use the site, you agree to the use of cookies. more information

This web site uses cookies to improve your experience. By viewing our content, you are accepting the use of cookies. To find out more and change your cookie settings, please view our cookie policy. Please note that we don’t collect your personal information via our web site.

Close