AIM-listed Marlowe Plc has acquired wastewater treatment and compliance services provider WPL Limited for an enterprise value of £10 million. With headquarters in Waterlooville, Hampshire, WPL…
By Andrew James
Published earlier this week, “Dream Bigger: Funding ambition” is a report by Smith and Williamson based on the findings from a survey of the founders of 501 scale-up companies, and 540 non-scale-up SMEs, in August 2018. Research house Atomik conducted the survey with a nationally representative sample of businesses in the UK.
Scale ups are defined as, “UK’s turbo-charged companies, undergoing rapid growth”.
Some of the findings are summarised below into two categories:
Awareness of the different finance options
- Nine out of ten (91%) firms that have raised finance successfully have used equity at some point, making it by the far the most popular route
- 70% of businesses don’t know how to approach venture capital or private equity investors
- Fewer than half (45%) are confident about accessing equity from angel investors
- Many businesses start with funding from friends or family, as this will often be the cheapest and easiest route to gaining early stage finance
- Scale ups are more than twice as likely to have added an equity investor to their board (19% vs 8%) and almost three times as likely (27% vs 11%) to have added someone to their management team on the recommendation of investors
- In spite of the rise of peer-to-peer lending platforms in recent years, the vast majority (83%) of businesses were unsure how to access them
- Only one in six (16%) businesses are confident in applying for R&D tax credits, just one in five (19%) know how to apply for grant funding, and only the same small proportion are confident in using their assets to raise loan capital.
Success in raising finance
- Unsuccessful fundraising attempts happen all the time and of the founders in our study, 70% had tried and failed at least once, while two in five (39%) had clocked up at least three failed attempts
- Scale up firms tend to have more success and proportionally three times as many (45% vs 16%) have never failed in a fundraising attempt
- Of those businesses that have successfully raised external finance, scale ups are far more likely to:
- Have had a business plan ready (52% vs 29%) and a suitable management team in place to execute it (41% vs 18%)
- Know from the outset exactly how much money they need to raise (39% vs 24%) and the route they want to pursue (39% vs 23%)
- By far the most common explanation for failed attempts given by founders is that their management team wasn’t strong enough (45%), exceeding the number of firms where the business model was an issue (27%)
- Two in five (43%) businesses waste time and resources approaching the wrong type of investor, while 40% of those who failed say they were unable to meet investors’ criteria
- One in seven (14%) founders claiming that their company’s performance suffered during fundraising attempts because of the time they spent away from the core operation of the business
- Just a fifth of businesses would consult a corporate adviser beforehand.
As the report itself says, “Perhaps most important of all is having a good understanding of the different routes available. When we asked founders what advice they would give to others, the overwhelming sentiment was to do more research on the options and take your time before getting into bed with an investor or lender.”
As I hope you have seen from the blogs and factsheets that I and others have written on sources of funding, we at PKF Francis Clark have knowledge across the board and work with others e.g. Capitalise where appropriate to expedite the fund raising process. Colleagues in Corporate Finance team have knowledge and expertise in working with clients to raise funds from private equity investors and I, and others, have knowledge and expertise in peer to peer funding and the wider ‘alternative finance’ market. Therefore, please do not hesitate to contact your usual PKF Francis Clark contact to discuss your options when looking to raise expansion capital.
Also, if you based in, or thinking of relocating to Cornwall and Isles of Scilly, I would suggest you check out an event we are pulling together – Finance in Cornwall 2019. It features presentations from a range of financiers (covering the broad spectrum referred into the report) and also presentations/participation from a host of business support organisations active in the region.