Sowing the seeds of a successful business
Businesses in the North-East have a new weapon to help them to continue growing. Martin Hulls, partner and head of corporate finance at Ward Hadaway, looks at the Finance for Business North East Fund.
SUCCESSFULLY growing a business may sound easy, but in practice it is anything but, especially in recent times. This is one of the many reasons why those in the 2010 Fastest 50 deserve the highest plaudits for their achievements so far.
Yet none of the companies in this year’s list will want to sit back on their laurels for too long – successful businesses know that standing still in today’s competitive world really means going backwards.
Attaining additional growth often means getting hold of additional finance since only the most fortunate of companies can afford to use all their own resources to fund expansion, particularly if rapid growth is the goal.
Banks have traditionally been a key source of funding for ambitious businesses keen to grow.
However, the well publicised travails of the banking sector in recent years has meant that access to such finance is more challenging than before and has risen in price.
There are deals out there and banks’ appetite for business lending is increasing, but for some companies, getting the right deal can be hard to find.
Venture capital funding has previously been some way behind bank loans as a way for companies to access growth finance, but the arrival of the £125m Finance for Business North East Fund (FBNEF) has transformed the perception of the sector for many businesses in the region.
The first fund of its kind in England, it has been set up by regional development agency One NorthEast with funding from the European Investment Bank, the European Regional Development Fund and the Agency.
It allows hundreds of businesses across the region to access investment backing and could end up supporting up to 5,000 jobs.
One of the beauties of the Finance for Business North East Fund is that it is actually six different funds in one, ensuring the widest variety of companies at a range of development stages can access finance to grow.
The Angel Match Fund is aimed at smaller, entrepreneurial businesses in early stages of development and can partner with business angels to provide matched funding for later stage deals.
The Technology Proof of Concept Fund invests in very early stage businesses in the technology sector and works with North-East universities, the region’s centres of excellence, start-ups and entrepreneurs.
The Seed Fund invests in companies and pre-start enterprises in any sector while the Growth Fund invests in more mature businesses looking for growth capital.
The Technology Fund invests in hi-tech businesses at any stage of their development and The Growth Fund 500 is for more mature businesses needing a cash injection to make a step-change in their enterprises.
The response to the Finance for Business North East Fund has been immediate and impressive – so far more than 700 applications for funding have been made since the Fund’s official launch in January.
Already, more than £12m worth of funding has been invested in more than 20 companies in a variety of fields.
This money is not being given away. Professional fund managers for each of the six funds scrutinise all applications and all the investments are carried out with full due diligence – at Ward Hadaway, we have been involved in advising on a large number of these investments, as we do on a regular basis for other venture capital and private equity investors as well as companies themselves.
The fact that of the £12m-plus funding invested so far, £7m has come from the private sector shows that FBNEF is attracting some seriously talented companies.
While FBNEF is no “magic bullet” to single-handedly revive the region’s economy, it is certainly beginning to conjure up interesting developments.
For more information on issues raised by this article, or on any other aspect of corporate finance, please contact Martin Hulls at martin.hulls@wardhadaway.com or on 0191 204 4215.
