NEW BUSINESS: The Irish Times' business angel case study this month, we see that securing venture capital backing, far from being the finish, is in fact only the start of the your race for funding.
CLEVAMAMA
Founders of baby products company Clevamama, Suzanne Browne and Martina Delaney (pictured right), are hoping to have funding from a potential business angel investor wrapped up very soon. "We are just a few weeks off finishing that up," says Delaney.
The process is the advanced stage of due diligence and, barring any last minute issues, the company should receive cash which Delaney says is essential to exploiting the export potential of the company.
Just returned from a major international trade fair in Germany, Delaney says the company's products have generated a lot of interest from distributors and retailers in Europe and the US.
"It went extremely well. We've signed distribution deals in various countries around Europe," she says.
"A number of big name retailers such as Next and Mothercare in the UK and Target in the US have expressed an interest in Clevamama's products.
"We have had interest from some very substantial companies. The export market is really opening up for us," says Delaney.
TECHNOLOGY FROM IDEAS
Commercialisation company Technology From Ideas is closing in on sealing a deal which will see it receive funding from a syndicate of angel investors.
The company is now in the advanced stages of due diligence with the syndicate and also its existing investors, according to managing director Dan Richardson (pictured right).
The company is in the unusual position of already having raised €500,000 in the past from Enterprise Ireland and VC firm 4th Level Ventures. Unless there is a last minute hitch, the company should be receiving investment in the coming weeks.
It has been a lengthy process since the pitch was first made, concedes Richardson who says the due diligence is proving to be quite forensic in the level of detail.
"That is only right and proper as they are investing in your company. Even for a small and new company like ours, there is a lot of information to compile and forward," he says, including all the details of its agreements with universities.
The company specialises in conducting proof of concept development on early stage ideas submitted by academic researchers.
The intellectual property is evaluated, protected and developed further in its own laboratories before being sold through its industry partners, who specialise in product development.
DIGITALJET
The company which is aiming to cash in on the growing digital media download and distribution market is having ongoing discussions with two angels and a number of VC firms who have expressed interest.
"At this point it is important that we find the right partner who can give us the support required to build our infrastructure and meet the challenges of the market head on," said Niall O'Neill (pictured right) who heads the firm. "We have been boosted by the fact that we have built our supply chain and the foundation of our distribution network. One of our main competitors has undertaken a very aggressive marketing strategy and will be headline sponsoring the MTV European Music Awards," he says.
While this may indicate that the competitors have very deep pockets, O'Neill believes it is also very positive for Digital Jet as this validates the company's strategy.
"We also believe our product offering and business model is considerably superior to that offered by any competitors," he says.
"Our focus now is on closing this round of funding and moving to our next stage of development. "We are actively pursuing key management and working closely with a number of strategic partners to assist in building our infrastructure.
"Our aim is to take advantage of our first mover status and seize the opportunity at hand," he says.
We continue our series on companies seeking to raise cash through the Business Angel Partnership. This month, we revisit Digital Jet, Clevamama and Technology From Ideas to look at their various investors are progressing.
Ask any marathon runner and they'll tell you the finishing line is the best sight they've ever seen. After 26 gruelling miles and a few hundred feet, to cross that line - whether you stumble, crawl or sprint through it - you feel you have achieved one of life's great goals.
Entrepreneurs securing angel investing probably feel the same way.
After the nerve-wracking initial pitch to sceptical and hard-nosed investors, through the sometimes exhausting post-pitch discussions and negotiations, due diligence and legal advice, to finally get your hands on that much-needed cash injection must seem like nirvana.
But it would be a mistake to look at angel investment as the end of the funding process, according to Michael Culligan, who heads up the Business Angel Partnership, the joint initiative between Enterprise Ireland, InterTrade Ireland and the Irish business and innovation centres.
"The whole thing is to see the angel investor as a catalyst to bring on other funding, to enable an initial seed round of funding and therefore to open the route to taking on another round later, subject to the company continuing to perform. It's very much to see the larger picture than angel funding as an end in itself," says Culligan.
The ideal scenario sees a start-up taking on funding from the likes of Enterprise Ireland, various seed funds, the Business Expansion Scheme and business angels, with the angels acting as the vehicle to attract these other sources of funds.
Companies that have already attracted business angel investment are often regarded as a good bet - it has already been proven that they have a good idea, a good business, an investor-ready plan, the company has been analysed and due diligence has been already done. "They would probably have a team in place and have a good proposition," says Culligan. And, crucially, many will also be able to leverage the experience and expertise that business angels often bring along with their cash.
"The angels that are involved here are not just people with money, but (equally as important) they have a high level of expertise, usually with domain knowledge in the particular field. Either they have been through setting up companies and selling them on or have worked for large multinationals. Not only do they bring money, they bring business acumen in the area. That is certainly reassuring for early stage seed funding or Enterprise Ireland."
Many of these start-ups operating in the internationally traded services arena or manufacturing sectors qualify for support from Enterprise Ireland via its High Potential Start-up Unit.
Investment from Enterprise Ireland on behalf of the State is usually on the basis of matching private funds. Hence the importance of angel investment for attracting this funding.
Enterprise Ireland funding will usually need to be matched by private investment from, for example, company promoters, a Business Expansion Scheme or venture capital fund, the State agency says. "They use the market as a validator," says Culligan.
Funding is up to 50/50 grant to equity, with Enterprise Ireland taking up to a maximum of 10 per cent of the company's ordinary share capital.
If Enterprise Ireland's equity investment reaches 10 per cent of the ordinary share capital, further equity will then be in the form of repayable preference shares. The agency will fund no more than 50 per cent of the cost of any project, excluding working capital.
Other sources of funding for early stage start-ups include seed funds, such as the recently established €30 million AIB Seed Capital Fund. It was set up in July of this year to provide venture capital for companies at the seed and early stages of development across a range of sectors throughout the Republic of Ireland.
The fund, part of Enterprise Ireland's €175 million Seed and Venture Capital Scheme 2007-2012, is managed by experienced managers with extensive expertise in making seed and early stage investments, who are empowered to make seed investments of up to approximately €500,000.
Angel funding will also open up start-ups to bank funding which is often difficult for them to access. "Banks, by their nature, have certain risk profiles that they have to adhere to, but equally, the banks are keen to support within whatever restrictions exist in their world," says Culligan.
"Something like this gives them a model where they can actually support companies more directly with loans."
At the end of the day, it's not a marathon - it's much longer than that.
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