Access-ICT Toolkit V5.Indd
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Written and designed by ACCESS-ICT on behalf of the ICT Finance Marketplace Access to Finance TOOLKIT for R&D ICT Innovations and early stage ICT SMEs The “ICT Finance MarketPlace” is an initiative delivered by 3 EU funded projects with the aim of improving access to fi nance for innovating ICT SMEs across Europe. ©THIS TOOLKIT IS ACCESS-ICT COPYRIGHT Cannot be reproduced or distributed In part or in whole without prior permission ACCESS-ICT is a member of ICT Finance Market Place, an initiative supported by DG Information Society and Media ICT Finance Marketplace Access to Finance Toolkit for R&D ICT Innovations and early stage ICT SMEs Table of Contents Foreword ........................................................................................................................ 4 Introducing ICT Finance Marketplace ..................................................................... 6 Policy Agenda ............................................................................................................... 8 Introduction ................................................................................................................... 9 Glossary ..................................................................................................................... 10 Prototype to Market ................................................................................................. 11 Business Plans ......................................................................................................... 17 Financials ................................................................................................................... 34 Build a Financial Model ............................................................................................... 34 Valuation ................................................................................................................... 36 2 Table of Contents Fundraising ................................................................................................................ 38 Business Angel Investment .......................................................................................... 42 Venture Capital ........................................................................................................... 46 The realities of raising equity fi nance from Business Angels or Venture Capital Investors ....... 49 Cross-border private equity investment ......................................................................... 51 Is your ICT proposition Investment Ready? ........................................................ 53 What do Investors look for in an ICT investment proposition? ...................... 56 How to successfully present and pitch your ICT Business to Investors ..... 61 Developing your PowerPoint Presentation ..................................................................... 61 Delivering your pitch to investors. ................................................................................ 64 The steps of the investment process, both legal and technical requirements ... 66 Deal Formalities in the investment process .................................................................. 67 Due Diligence Overview............................................................................................... 69 Protecting your Intellectual Property (IP) ....................................................................... 70 Key Legal Documents .................................................................................................. 75 What are the legal areas where specifi c attention is required in a cross-border syndicated Investment? .............................................................................................. 78 Legal Costs ............................................................................................................... 78 Exits ............................................................................................................................ 81 Other Sources of Finance for your ICT Business ............................................... 83 Acknowledgements .................................................................................................. 85 3 ICT Finance Marketplace Access to Finance Toolkit for R&D ICT Innovations and early stage ICT SMEs Foreword The European Commission, through its R&D ICT framework programmes, is supporting research and development into ICT. The ICT framework covers a range of different areas from digital content to programming; network and telecom services; smart devices and mobile apps; robotics; distribution and ICT services etc. Yet out of the vast range of R&D projects supported by EU fi nance, only a small number of projects and research teams go on to successfully attract external fi nance to successfully commercialise the results and capitalize on the EC investment. This means that many potentially very exciting new technologies, products and services never get to the market place- and never get to the equity community. A key issue for these research projects is how to become investment ready and to understand the investor requirements. Do the R&D results offer the potential for creating a scalable business in the market place? Does the research team have the capacity to become a business management team with capacity for running a growth business focused on marketing the innovative products and services? Is the IP protected and ownership clear? What is the strategy to approach the investment community and how to be investor attractive? On behalf of the European Investment community and as a member of ACCESS-ICT Project Steering group, I am delighted to present this information resource and tool kit to enable entrepreneurs and research teams to more fully understand how to become investment ready, the various steps to be taken and what changes may need to be taken to attract investment for their ICT R&D results. It’s a tough and challenging road for entrepreneurs and research teams to commercialise ICT R&D results, but I feel sure that the European investment community will welcome the opportunity to see more innovative investment ready propositions coming forward from the EU R&D framework programmes. So I strongly recommend you to use this guide and relevant online tools to strengthen your capacity for investment readiness and to increase your odds to successfully attract equity investment. I should also like to thank all of the private sector investors and expert organisations that have kindly offered their experience and expertise to provide key content for this guidebook. I wish you all success with bringing your innovations to market and accessing relevant investment. Kind regards, ANTHONY CLARKE, Director, Angel Capital Group Chair Emeritus EBAN Member of the ACCESS-ICT Steering group 4 Notes 5 ICT Finance Marketplace Access to Finance Toolkit for R&D ICT Innovations and early stage ICT SMEs Introducing ICT Finance Marketplace The Partners ICT Finance Marketplace is supported by a partnership between the ACCESS-ICT, ICT VENTUREGATE and YMIR projects which are all funded under the Information and Communication Technologies thematic programme of the European Commission 7th Framework Programme. For further information on the partners visit: www.ict-fi nance-marketplace.com Bridging the gap between technology and business The ICT Finance Marketplace consortium, directly responds to The European Commission‘s stated policy objectives and recognition of the importance of increased growth and competitiveness in Research and Development in the ICT sector across Europe. While technology advances at an ever growing pace, opening global markets to big industrial players, SMEs are often faced with important barriers to their fl ourishing and market access. In this light the ICT Finance Marketplace aims to facilitate the link between SME’s research results and the investors’ world. Notably, in its Communication and working paper “Raising the Game”, the Commission identifi ed the need to facilitate access for ICT innovators to venture capital, private equity and loans. It also recognises the opportunity to set up platforms for more intense dialogues between investors and ICT innovators across Europe. The ICT Finance Market Place consortium is therefore responding to these objectives through the establishment of a new pan-European platform to create access to knowledge about fi nancing opportunities and direct access to investment for ICT SMEs. This platform will also support the link between access to fi nance and access to new markets for areas such as health, energy and transport. 6 Introducing ICT Finance Marketplace The ICT Finance Marketplace is a single entry point for. • SMEs and Research Teams involved in ICT R&D Framework Programmes seeking to become investment ready and to meet venture capital investors • Business angels and other venture capital investors interested in accessing investment ready deal fl ow from innovative ICT projects ICT Finance Marketplace will provide the following services: Services to ICT SMEs and Research Teams • Awareness raising • Training support material • Access to Finance Manual for SMEs • E-training tools including webinars • One to one coaching/mentoring • Venture Academies for SMEs (coaching) • Pitching & matchmaking at investment events • Virtual Agency • Knowledge platform Services to ICT Investors • Awareness raising • Selection and coaching of “deal fl ow” from ICT SME pool(having benefi ted from FP6 and FP7 support