Sourcing Funds for a hitech startup

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Sourcing Funds(for a hi-tech startup)

• David Moore
• Investment Executive
• QUBIS Ltd

QUBIS Ltd - Turning Research into Wealth
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Overview

• Why raise external funds?
• Investment opportunity.
• Typical sources.
• Amounts and Timescales.

QUBIS Ltd - Turning Research into Wealth
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Why do you need funding?

• Product Development, primarily salaries
• Plant, machinery and equipment
• Working Capital
• Early stage Fund Raising is difficult and time
  consuming!

QUBIS Ltd - Turning Research into Wealth
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Investment Opportunity

• Very high risk!!!
• Trust an unproven management team to develop,
  produce and then sell a product, or service, that
  doesnt exist yet!!!
• Wait 5-10 years for a return!!!

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Investment Decision

• Man - team, experience, skills, contacts etc
• Market - growth potential, competition, channels,
  knowledge etc
• Money - funding requirement, sources of funds,
  break even etc

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Sources of Funds

• Self, personal savings
• Sweat Equity
• 3Fs - Friends/Family/Fools
• Free equity to obtain staff
• Customers
• InvestNI, PoC, SMART
• Private Investors, Business Angels
• Seed funding, QUBIS Ltd, UCF
• Venture Capital

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Bootstrapping

• Possibly the ideal funding mechanism for
  start-ups in todays investment climate.
• Using your ingenuity to raise funds from whatever
  sources are available.
• Investors are not interested in investing before
  a revenue stream is established.

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Bank

• Banks provide loan capital.
• Overdraft, short term, payable on demand.
• Business Loan, fixed term.
• SFLGS, reduces risk to bank
• Key issues Security, interest capital
  repayment i.e. not suitable for hi-tech start-up
  ventures, little security and no early cashflow.
  

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Government Agencies

• InvestNI, provides grant and/or repayable
  support.
• Business Development
• RD, Proof of Concept, SMART, COMPETE
• Key issues Additionality, Admissibility,
  percentage contribution, export focus.

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Business Angels

• Business Angels provide risk capital seeking a
  return over 5-10 years.
• High net worth individual
• Probably exited from previous venture
• Brings skills, expertise and cash.
• Key issues lt100k, hands-on role, capital
  growth.

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Venture Capital

• Investment fund of risk capital, which will seek
  a return in circa 5 years.
• May bring sectoral expertise, contacts and
  experience of similar ventures.
• Relatively high investment threshold, high fixed
  costs.
• Key issue gt400k, capital growth, Board seat,
  focus.

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QUBIS Ltd

• Wholly owned by QUB
• Aim, create wealth through the commercialisation
  of university research.
• Invest cash and IPR in return for an equity
  stake, Seed Capital.
• Typical investment size below 25k.
• www.qubis.co.uk for more info

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UCF (NI)

• Overall fund size 2.75m
• Commercialisation of research from both QUB and
  UU
• Typical investment size larger, up to 50k
• Nearing fully invested position
• www.ucfni.org for more info

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Return on Investment

• Investors, whether business angels, venture
  capitalists, banks will all be looking for a
  return on their investment.
• The size of that return and the cost of their
  money is governed by the risk of the project.

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Typical Returns

• Business Angels, Seed Capital Venture Capital
  all seek capital growth. Returns sought 20-50
  per annum.
• Banks seek a 1-3 return on their money, they do
  not want to lose any of their capital.

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Funding Round 1

• InvestNI PoC 100,000
• Total 100,000
• Prove technology in lab, pre company.

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Funding Round 2

• Founders (4x1k) 4,000
• QUBIS Ltd 1,000 IP
• UCF 10,000
• InvestNI SMART 45,000
• Total 61,000
• Develop pre production prototype within NewCo

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Funding Round 3

• UCF 25,000
• Private Investors 25,000
• Internal Funds 20,000
• InvestNI (Bus Dev) 50,000
• Total 120,000
• Launch product, build initial sales revenues.

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Funding Round 4

• Internal Funds 50,000
• InvestNI (Bus Dev) 45,000
• Bank (SFLGS) 100,000
• Total 85,000
• Continue to grow sales revenues, strengthen team.

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Funding Round 5

• Internal Funds 50,000
• InvestNI COMPETE 100,000
• Bank (SFLGS) 150,000
• Total 300,000
• Major new product development, substantial sales
  and marketing .

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Funding Round 6

• Internal Funds 100,000
• InvestNI (Bus Dev) 50,000
• InvestNI Equity 100,000
• VC Investment 350,000
• Total 600,000
• Major growth phase, management team, new product
  development, substantial sales and marketing

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Funding Summary

• Round 1 100,000
• Round 2 61,000
• Round 3 120,000
• Round 4 85,000
• Round 5 300,000
• Round 6 600,000
• Total 1,266,000

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Funding Summary

• Round 1 100,000 Nov04
• Round 2 61,000 Aug06
• Round 3 120,000 Apr08
• Round 4 85,000 Mar10
• Round 5 300,000 Dec11
• Round 6 600,000 Dec13
• Total 1,266,000

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