Finding ideal funder is an art

Gaining access to capital support is critical to the evolution of businesses.

Gaining access to capital support is critical to the evolution of businesses. Malcolm Page explains how the regional development agency is helping firms find finance.

THE right type of funding can help accelerate the development of innovative businesses, but selecting and accessing the appropriate form of finance can often be a complex and time-consuming task.

Progressing from a business start-up into a well established company often requires a continuum of finance throughout a firm’s development. It is vital that businesses receive the right financial support to reach their full potential and a number of funds have been put in place to help these growing businesses.

Both early stage and more established businesses can find funds through One NorthEast experts and a number of fund management companies in the region. We work closely with these partners to ensure firms receive the relevant financial support to meet their individual business needs.

Early stage companies often require financial support to get initial business ideas off the ground, from developing product ideas to testing the marketplace, and there are a variety of funds designed to meet this need.

The Proof of Concept (POC) Fund, run by North Star Equity Investors (NSEI) and supported by European Development Fund (ERDF) funding, provides investment at the earliest stages of business creation and aims to stimulate the growth of young companies, which may need equity capital to finance the development of new technologies.

The £10m fund has made 131 investments to date and has been so successful that discussions are under way to extend the life of the fund. It is always interesting to hear about the work being carried out by high technology companies tapping into this funding and I was fascinated to read about chemist Dr Andy Whiting, who received a £90,000 POC investment towards developing a new additive for paint called HESS.

This technology could replace the use of solvents and really has the potential to create a new generation of more environmentally-friendly paints, coatings and adhesives, greatly reducing their damaging impact on the environment and health of users.

Another important fund in the region is the Regional Enterprise Loan Fund, formally known as the Microloan Fund, which provides loans of up to £25,000 that can be tied into mentoring services for entrepreneurs and businesses in their formative years of trading. This £2.25m pot will be allocated over the next three years by Entrust from April.

The creative industry is the largest and fastest growing part of the UK economy and firms in the North East can tap into the £1.8m NStar Design & Creative Fund, which aims to support and develop regionally-based early stage ideas and projects into attractive business prospects.

NStar is also responsible for delivering the £1.9m Three Pillars Investment Fund, which provides investments of up to £125,000 designed specifically for early stage businesses in three of the region’s vital industries – termed the three pillars in the Regional Economic Strategy – energy, healthcare and health sciences and process industries.

One NorthEast administers the DTI’s Selective Finance for Investment grants – and last year awarded more than 110 companies £19.8m to help them grow, which has the potential to create 3,719 jobs and protect 1,469. This grant programme has been a tremendous success and provides support to the region’s indigenous businesses and inward investors.

Loans are another option for businesses and the £30m North East Investment Fund, delivered by NEL Fund Managers and supported by ERDF funding, offers unsecured loans ranging from £5,000 to £250,000, which have the option to convert into equity. The NEL Growth Fund is a £5m equity fund supported by ERDF funding that can invest between £50,000 and £350,000 and can provide further rounds of investment subject to a maximum of £500,000 being invested in any one business.

Equity capital is finance invested in a business for the medium to long term in return for a share in the ownership of the firm, which means investors have a real incentive to make the deal work. Businesses looking for finance need to review all their options and often find equity is a suitable route for their business to develop.

The North East Co-Investment Fund is delivered by NSEI and supported by ERDF funding. It provides venture capital in partnership with public or private sector investors to create significant investment deals. This £23m fund has been designed to co-invest with a consortium of investors and increase the amount of capital offered to regional companies.

To date, it has supported the development of 23 groundbreaking companies in high technology sectors such as biotechnology, energy, pharmaceuticals and IT.

One of these businesses is Newcastle TV technology company, Quick TV Limited, which received £500,000 from the COIF fund and a further £350,000 from private individuals and the Business Investors Group. This will be used to pioneer an interactive platform allowing broadcasters to integrate response-based TV without having to rely on highly discredited premium rate texts and phone calls.

Economic regeneration is closely linked with business development, as outlined in the Regional Economic Strategy, and so it is essential that ambitious growing companies such as QTV are able to unlock their potential by finding the appropriate finance for growth.

Anyone looking for more information on any of these options should contact the fund management companies:

NStar: (0191) 211-2300.

North Star Equity Investors: (0191) 211-2315.

Entrust: (0191) 244-4000.

NEL Fund Managers: 0845 111-1850.

Companies can also contact Neil McGuinness at One NorthEast on (0191) 229-6585.

Malcolm Page is One NorthEast assistant chief executive (resources).

Journalists

David Whetstone
Culture Editor
Graeme Whitfield
Business Editor
Mark Douglas
Newcastle United Editor
Stuart Rayner
Sports Writer