Angel syndicates from Cambridge and London have helped East of England companies raise more than £6 million to take new businesses to market.
The angels have put VCs, banks and grant allocators to shame by advancing over two-thirds of the total – around £4.6m. Banks have contributed £1m and the balance comes from grants.
But with the guillotine about to fall on the Understanding Finance For Business (UF4B) project, its organisers have called for a renewed effort to do more to plug a clear funding gap for early stage UK companies.
David Gill, director of St John’s Innovation Centre, which delivers the scheme for EEDA, said the current scheme would finish in January following EEDA’s phase-out.
He confided that St John’s was in the vanguard of a strong Oxbridge consortium bidding for a similar role in a new coaching programme funded by the Government’s Department for Business Innovation & Skills, which starts pretty much as UF4B finishes.
UF4B was officially on £5.8m when Gill spoke to Business Weekly but he revealed: “Within a day or two that figure will be up to £6m, bolstered by deals in the pipeline about to be sealed. It’s a fantastic effort by the team.”
The scheme has helped over 1,000 businesses across the East of England secure the funding they need to grow, develop new products and conquer markets.
Gill said: “I was slightly surprised that such a high percentage of the money raised has come through equity – mainly angel syndicates. We see very little VC capital.
“It is also encouraging that these syndicates are not exclusively East of England based. We have had good support from London angel syndicates, too. They have tended to be serial entrepreneurs that can afford to back slightly larger deals.
“They don’t just provide money but have contributed crucial mentoring skills and have put a lot of effort into helping our companies grow. They have passion and experience and this is just as important as investing cash.
“I think these angel syndicates are proving less risk averse than the VC funds and they also have more flexibility. If they know when they invest initially that they will be able to commit to a follow-on round then their investment is ringfenced to a large extent if VCs should start showing interest in later rounds.”
UF4B has been running a parallel Coaching for Growth programme, adding mentoring and tech transfer skills to the funding equation. Some of the region’s top entrepreneurs have helped out. Angels and seasoned technology influencers Paul Anson and Peter Cowley have been particularly supportive.
Now Gill’s team have tendered for the new BIS coaching for Growth Scheme as part of a consortium also boasting Oxford Innovation, PERA – the European innovation network – Winning Pitch, the business enhancement specialist, and Grant Thornton. A decision is expected in October for launch early next year.
Gill says it is crucial to maintain momentum. He said: “Early stage funding is still sufficiently rare that recipients cannot afford to waste it. If they obtain funding they must be able to put it to use from the get-go by having a clear set of objectives; you’ve got the business plan and the cash but have you got the people who can deliver on it? You should have that in place at the time you are bidding for funding.
“First-time entrepreneurs don’t know what they don’t know. This is why the coaching we also offer is so vital. The coaches ask difficult questions and it forces the companies they are mentoring to focus their minds on what is needed to commercialise their business and become sustainable.
“We are confident that due to our parallel initiatives the £6m raised will be put to effective use – in fact that is already happening. Companies we have supported are already recruiting staff and developing new products.”
Out of 100 available coaching slots and with more coaching workshops to go – including one for Life Sciences on July 13 – 90 have already been swallowed up. “It is encouraging because it shows people realise that they need this extra advice,” said Gill.
The vibrancy of a region’s startup community is often a good indication of the health of its economy and Gill says that in this regard “Cambridge is as good as unique in the UK.”
But the scale of that success had to be kept in perspective, he said. “Cambridge is doing very well by this measure if we go by European standards. But we have a long way to go to match Asia and the US.
“We have a huge plus in that there must now be two generations of entrepreneurs in Cambridge acting as role models to new businesses. And we have inspirational beacon bearers on the world stage like ARM, Autonomy, Red Gate and, most recently, Ubisense – whose share price went from 180p on its IPO last week to 240p in less than four days of trading.
“But successful as Cambridge is, we are a small place with a population of around 109,000 and we have to recognise the difference in scale. It is a lot tougher raising capital here than on the West Coast of America.
“Having said that the startup community in Cambridge is buzzing and the economy locally is better than it was two years ago. Also, we are seeing Japanese and American companies stepping up corporate venturing locally as the business community becomes increasingly international.
“The companies we have helped in UF4B have covered a broad range of business sectors, not just technology. But we recognise the region’s strengths. The reason the Cambridge economy has been spared the downturn experienced by other regions is probably the vibrancy of the tech Cluster.
“This is healthy so long as there is a spread of different technologies in the Cluster; if 50 per cent of the companies solely came from nanotech, for example, or another single tech sector we might have to worry but the diversity of business spares us from the ‘eggs in one basket’ syndrome.
“The companies we have helped through our programmes cover the whole region and every business sector you could think of – traditional companies in areas in which this region has always been strong, from agribusiness to training and even physiotherapy. While we give praise to the local tech sector it is also important that we don’t lose sight of these other, diverse business segments that are also producing some good growth opportunities – it’s not all about apps and the internet.”
Registrations for the remaining coaching network events are open at www.stjohns.co.uk/finance, but places are limited.
Case studies on companies backed by the St John’s Innovation Centre initiatives: