29th June 2017
Financial Instruments (FIs) provide non-grant support for business investments via loans, guarantees and equity. As an investor in the company, the Fund Manager takes a proactive role at an early stage of development of ideas and products helping new and entrepreneurial companies navigate financial investment in parallel with proactive assistance with building the business.
This case study explains how a typical relationship between the FI Fund Manager and investee company develops.
The Fund Manager
Pentech Ventures is an Edinburgh based technology venture capital fund management business operating since 2001 which established a Belfast office to manage dedicated NI Funds.
Under the Investment for Growth and Jobs Programme 2014-2020, Pentech Ventures has been awarded a £20m mandate to manage an integrated suite of products focused on startup and early stage companies in Northern Ireland – branded ‘techstart ni’. techstart ni includes the provision of advice via an Investment Awareness Programme, proof of concept grants managed as 5 year contracts for services between Invest NI and Pentech Ventures and seed capital which is delivered via 10 Year Limited Partnership structures.
The Investee Company
A local Northern Ireland company was interested in cognitive decline caused by dementia and impact sports. They believed they would be able to transform the ability to detect disease related cognitive decline at the very earliest stages of development.
The Stages of Fund Manager Relationship
- Proof of Concept Grant awarded
The company was awarded a £40k Proof of Concept (PoC) grant in early 2015 to refine the product design and to produce early prototypes. techstart ni worked with the company to establish the best business model to pursue and introduced the company to others in GB with experience of the cognitive health market.
- Initial ERDF Equity Investment
The company’s thesis captured interest but progress was needed to demonstrate that the idea was viable and the company had the capability to deliver early iterations of its proposed solution. techstart ni invested £250k in March 2016 believing that further funding could be attracted as the business progressed.
- Investment Round Extension
techstart ni worked proactively with the company between March and October 2016 to identify and close a further £275k of investment. They also made introductions between the company and a number of GB based health professionals and a NI based executive who led the British Business Bank’s Angel CoFund investment into the company as part of this round of investment.
- Business Assistance by techstart
Crucially, techstart ni was able to introduce the company to a variety of companies to help address challenges they faced.
More specifically, they introduced the company to a Northern Ireland SME which could manufacture the product, and also established a relationship with a recruiter who successfully found personnel for what had been hard to fill positions within the company. techstart ni also introduced the company to a finance manager who looks after all financial aspects of the business as well as introductions to potential partners and customers. In addition, they provided CEO coaching and support and corporate governance advice.
- Follow on Round Assistance
A £2m funding round is currently underway. Introductions have been made to potential new investors based across the UK. The techstart ni team also continue to provide support as the investment round progresses.
Time Committed to the Company
techstart ni have helped at multiple levels in the business with practical support, which continues.
During the Proof of Concept (PoC) phase, there were regular update meetings on progress and the business model. Post PoC and prior to equity investment, further meetings were held to discuss and refine how much funding would be required to achieve meaningful business progress.
After the initial investment and before a round extension there were again multiple meetings to discuss additional third party investment. This support has continued after the equity investment with bi weekly meetings and monthly board meetings, as well as techstart ni using their network within NI and further afield to help the company seek new investors and potential partners and customers.