Part 2: WINNING INVESTMENT
THERE are three main ways to raise capital for fledgling eco firms: venture
capital, angel investors and the stock market.
The first thing to realise about venture capital is that private investors
usually want a lot for their cash. This typically includes a big stake in
your firm, board-level influence, and a healthy return over a relatively
short period – two to five years, say.
“Venture capital is the most expensive form of money,” said Dave Raval,
manager of TTP’s Carbon Trust Incubator programme (www.ttpgroup.com),
which invests in eco-businesses. “You can very quickly lose more than 50% of
your company and investors will want to see a healthy return quickly. So
think carefully before going down this route.”
There is also a growing number of “green investors” – the British Private
Equity and Venture Capital Association (www.bvca.co.uk)
says it has more than 17. They can offer greater understanding,
management expertise, networking and marketing opportunities.
If you don’t want to cede too much management control you could try business
angels, private wealthy investors working alone or in syndicates typically
looking to invest between £10,000 and £750,000. These are often friends and
family, but the British Business Angels Association (www.bbaa.org.uk)
has a useful directory listing 25 angel networks that could find you
suitable investors. Some run their own funds, such as E-Synergy’s £30m
Sustainable Technology fund (www.e-synergy.com).
The final option is listing your business on one of the junior stock markets,
such as Plus Markets (www.plusmarketsgroup.com),
which costs from £2,000 to join and £5,100 a year for firms with a market
value of £3m or less. Sharemark (www.sharemark.com)
is another similarly priced market for small firms.
AIM (www.londonstockexchange.com/AIM)
has over 1,500 firms on its books. Admission fees vary from £5,870 to
£66,250, depending on market value, and annual fees are £4,750. Though AIM
has proved a popular choice for clean-tech companies in the past few years,
many have recently opted to list instead on Euronext (www.euronext.com),
a group of rival exchanges to London, based in several European countries.
Next week we look at securing funding from the British government, the
European Union and non-governmental organisations.
