Alternative investment: angels and assets

Alternative investment: angels and assets

Raising money really isn’t easy. Otherwise, I guess, we’d all be doing it!

Funding the funders we work with is the subject of another blog (and is something of a hot topic) but what I have found extraordinarily tricky in recent months is raising money for ventures. These aren’t hair brained schemes – well, not all of them anyway – but all good viable businesses with sound financial profiles and, in most cases, amazing IP/ideas. I’d buy them all up if I could (but being a lawyer I plead poverty….).

And so I am set the task of raising money: no, I’m not a commercial finance broker but I do seem to have the (un)enviable position of being between private lenders and entrepreneurs. So I try to matchmake. And what I have found is an extreme paucity of funding for ventures up to £1m. When I went to corporate finance firms I was reliably informed (like Linda Evangelista) that they wouldn’t get out of bed for a deal less then £5m. Which is crazy. Why is a punt at £5m more secure than a punt at £100k? In this internet-led market, isn’t the cost of start-up arguably lower?

So what is available? Well the bank of Mum/Dad/minor royalty/friends/bloke down the pub still exists but quite often they are all in the same boat as the rest of us. Then there are trade ‘friends’: people or investors in our business looking to participate. I am thinking of Countrywide’s recently announced Bellpenny or (on the conveyancing side) Harry Hill’s In-Deed. They are acquisitive, in the market and therefore (should be) everyone’s best friends.

Away from the comfort of ‘who you know’, however, lies the daunting land of angels and VCs. For amusement, I took one of my client prospects to an angel network. Be warned. Upfront fees, speed pitches and a sense of desperation amongst the entrepreneurs present: the business model obviously works, but particularly so in one way.

So this begs the question, if a client wants money to develop his (new or old) business where does he go? Interestingly, wonga.com launched into the SME sector seeing just this opportunity. Anybody else willing to stand up and build Britain?

Julian Sampson is a partner at solicitor’s firm, Wright & Wright LLP, who specialise in legal and risk advice to the specialist lending community