What does the funding landscape look like for North East businesses?

Based across Maven’s Durham and Newcastle offices, David is responsible for new investments across the North East of England. In Maven’s latest blog we asked David, as an experienced Investment Banker and Corporate Advisor with over 15 years’ in a variety of finance roles, what the funding landscape looks like for local businesses and offers some top tips for raising finance in today’s market.

1. Please can you tell us a little bit about yourself – what’s your role at Maven?

I’m a North East boy originally but I left home at 18 to go to University and then stayed away to seek my fortune. After university I’ve spent pretty much my whole career in finance and banking and I’m lucky to have lived in many places including New York, London and Sydney doing this. I spent a large chunk of my time away at Barclays Corporate and Investment Bank in London, but 16 years later the pull of the North East took me back home to complete my MBA at Durham. Prior to joining Maven I’ve spent the last 3 years as a corporate finance adviser, assisting many mid-market businesses and SMEs in the region to raise debt and equity finance for a variety of means, or to sell themselves to financial and strategic buyers.

I joined Maven in September as an Investment Manager. My job role is to source and execute investments across the North East.  What this means in reality is that I’m looking for growing, ambitious businesses with scalable ideas who are looking for help to deliver their ambitions. I’m here to help ensure a successful future for our region and its businesses by providing the fuel for growth.

2. What do you think are the advantages to growing businesses operating in the North East?

First and foremost, the North East is a fantastic place to live, you will struggle to find a place with so much to offer on its doorstep (although it is a shame about the weather!). Secondly, the region has access to a fantastic pool of labour, with some of the country’s top universities clustered right here. House prices and general all-round costs of living also means the quality of life here is starting to convince many who once would fly the nest to stay. Thirdly, there is a growing body of infrastructure in the region to help businesses, from trade bodies right through large capital projects, which will reap returns in the long run. Finally, businesses in the region have access to many forms of capital assistance to help them grow, from the North East Fund through to PE and VC investments, there are many choices available. Good standards of living, access to skilled labour, improving infrastructure and availability of capital, why would you go elsewhere?

3. What would you say to a business that is put off by taking on investment and would prefer to grow their business organically?

I’d ask any entrepreneur how far it is they want to go, and what their end goal is. It wouldn’t be misleading for me to say that a good proportion of today’s high growth SMEs, and even established larger corporates will have, at some point, taken on finance to provide the fuel for growth. Whether it’s jumping the chasm, or rapidly scaling, if you have a solid plan and believe in your concept, then getting the financial and strategic support from an investor can be a no brainer to help achieve your ambitions.

4. What do you think are the main obstacles to accessing finance to grow that businesses face today?

For me, I think there’s two key challenges: - The first challenge most businesses face is the surprisingly not straight forward task of understanding the current funding landscape and the options they have available to them. Access to finance is much changed in recent years as many of the UK’s conventional lenders have understandably retrenched over the past 10 years, and within the SME market there has been a shift in focus by some institutions to provide fully secured/asset backed loans. This is a problem for a large part of the modern SME market, particularly newer businesses, as these tend to operate without large asset bases and as such find it harder to raise funds via traditional means. This has resulted in a perception in some parts of the market of there being a lack of available funds - recent studies suggest that over one third of business owners will abandon a fundraise if they are turned down by the first institution they approach.

The reality of the matter is that today, in the UK, there is an abundant availability of capital from a multitude of sources. Maven is one such source, and we look to provide a business with a wide variety of debt and equity funding structures to support everything from development capital through to buy outs. This point leads me to my second key challenge, which is understanding which method of finance is right and what an appropriate funding structure should look like. There are several misconceptions about funding and what it can and cannot be used for, so I would advise any business that is considering raising finance to have no preconceptions and start talking to funders/investors to structure a solution that works best for them.

5. What’s your top tip for a business that’s looking to raise funding?

It’s important to have a clear and succinct plan supported by a believable strategy. Developing an elevator pitch is good practice, you should be able to explain to any funder or investor in under two minutes what you do, what the problem you’re solving is, the size of the opportunity, what makes you unique and what your end goal is. You’ll often find you have a lot longer than two minutes to discuss this but keeping it brief is a good discipline when preparing for any meeting, and it can even help you understand a bit more about how others may view your own proposition.

6. As a national company, what other funding and support opportunities does Maven bring to the region?

We are one of the UK’s most active private equity firms and manage five Venture Capital Trusts. We have already invested in local companies through these funds, with names like hedgehog lab, Oak, honcho, Boiler Plan, Avid Technology and Hive HR being examples of recent investments. We are also very active in the property market where, as an example, we are the main equity investor in Hotel Indigo in Durham. We’re actively looking for businesses in the North East for our Private Equity and Venture Capital funds, and we can invest from £1 million to £20 million to support growth capital, buy and build strategies and MBOs. As a national business we also have access to a large strategic support network for our local investee businesses, giving them access to fellow portfolio businesses, trade events as well as the ability to work with our tried and tested non-executive network.