THE EARLY STAGE FUNDING GAP

...AND HOW THE PIE FINANCE MICRO-INVESTMENT SOLUTION BRIDGES IT

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THE PROCESS

DEALING WITH INVESTOR OR SUPPLIER UNDERPERFORMANCE

YOUR POST-INVESTMENT COMMITMENTS

Raising early stage finance is probably one of the toughest challenges that an entrepreneur has to face. Typically, only 2% of submitted business plans successfully raise funding and many entrepreneurs lose hundreds or even thousands of pounds to unscrupulous, unregistered advisors and database sellers. The current early stage investor community of business angels (typically offering between £50,000 and £2m) and later stage venture capitalists (typically offering £2m upward) have a number of criteria that need to be met before they will consider a venture for investment...

• an experienced management team

• a developed product or service offering

• possibly forward orders

• potential for exponential growth.

For the many entrepreneurs and innovators who cannot meet these criteria, there is a 'funding gap' for which the current accepted funding solutions are 'friends and family' and 'sweat equity' (working for free). In this environment, many viable concepts and part-complete propositions never see the light of day. This is why we were so excited when we thought of the alternative...

The PIE Finance resource and capital micro-investment solution (international patents pending) significantly increase the chances of getting funding for ventures that do not yet meet the requirements of the current investor community by

•  pre-defining a plan with tangible resource requirements

• allowing micro-investments of £1 upward

• allowing real time tracking of invested resources against plan

• increasing the investor audience by including suppliers

More than just another bulletin board, our highly automated matching, fulfillment, reward sharing and tracking system could allow you to obtain the early stage resources required to inspire confidence in later stage micro-investors and simply get going.

Typically, instead of looking for one supplier to meet a £50,000 proof of concept requirement we would involve several 'part invested' suppliers - engineers to prove the technical solution, local micro-distributors to provide validated sales projections, patent attorneys to evaluate and file for protection as well as accountants to carry out due diligence.

The following are a list of constraints which you need to consider when deciding whether we will be able to help you.

Our Current Industry Sector Focus

manufactured product - web & software - the third sector - foodservice

We are building a strong supplier and investor base in the four sectors above. If your venture is not within one of the following sectors, it may be best to seek alternative routes to funding. Please do contact us to let us know which sector your ventures falls under and we may be able to give you an idea of when we are likely to expand into it.

Investor requirements

FINANCIAL: Angels and VCs are looking for growth potential of around 5 to 10 times invested capital in 3 years - if there is no sponsorship or participatory investment value in your proposition, then it needs to meet this growth requirement now.

SPONSORSHIP: If your venture generates positive PR and is likely to reach out to a sizeable audience, then you need to evaluate to whom that would be valuable. If a sponsor who has a target client base within your audience sees that being associated with your venture will generate interest that may lead to additional business, then you need to try and evaluate the value of that additional business (profit not revenue).

PARTICIPATORY: Some smaller investors may be looking to get involved in running a business in the same way as they may look at franchising opportunities. If you believe that your venture can offer dependable income once revenues have started flowing to a particular investor audience, then you need to evaluate the value of likely above 'employed' income that being a part of your venture will offer to the investor. In a similar way, if you believe that your venture has some sysnergy with a business and gives them something that they are looking for such as market share, more presence or spin off sales leads, then you need to determine the value of this benefit.

ETHICAL: Some investors are interested in ethical investment, but as the market is becoming increasing well served with developed (as opposed to pre-revenue startup) opportunities, it is best not to count upon the intangible draw of having an ethical proposition.

From discussion we have had with central government (elected and shadow cabinet), the solution needs to be proven in the private sector, evaluated by the public sector and then a competitive tender defined - estimated timescales are from 18 months onwards.

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Register your interest on our home page to receive a welcome pack containing the following...

(1) Tools to allow you to define your venture as revenue linked micro-investment propositions.

(2) A list of capital and resource investors generated by our automated matching to resource and capital investors, fulfillment and reward sharing engine.

(3) The facility to email offers to your chosen suppliers and investors.

(4) The generation of draft multi-party legal agreement content.

(5) Instruction on how to export the plan and agreements for investment tracking into selected ERP systems.

The process - From definition to investment

1

You may define your venture in as much or as little detail as you wish, but for it to stand a good chance of being funded, you will need to have defined your revenue streams and the resources required to trigger them. The tool will guide you to break down your pre-revenue expenditure down into rounds which can be met by suppliers and capital investors with different risk profiles. Similarly, obtaining multiple quotes for resources, projections or forward orders from local distributors, technical appraisals from qualified scientist or engineers are all significantly likely to increase the chances of getting investment. The cost of giving away some revenues to pay for these services may be offset by more interest and a better deal from investors.

2

After an initial submission to your chosen first round investors, they may identify gaps and want additional information from reputable sources.

3

Only when all of the requirements of a round are fulfilled by suppliers, individuals or capital investors, will we submit our fulfillment optimisation process. This will use your completed implementation plan to come up with the 1st, 2nd and 3rd most advantageous matching options. 

4

Following a 100% fulfillment that you and the other investors accept, we will email draft agreement* content detailing the plan and investments to you and all of the investors.

5

Prior to implementing the plan, investors may want it transferred to an Enterprise Resource Planning (ERP) system to enable them to monitor and track their investment from delivery to it's return or repayment along with deferred fees and profit shares. We can provide a list of potential ERP solutions, their costs (cost from £40 per month) together with instructions for defining your plan, revenue, micro-investments and investor accounts within them.

Your input

To maintain these low costs, we can only provide access to the solution elements listed above. You will need to find alternative prospective resource suppliers where the submitted ones have not responded to a 'part investment' proposition. As the part investment of usually just an portion of their profit inspires confidence in capital investors, it is very important to try and achieve it if there is a fulfillment shortfall.

Our Involvement

Pie Micro-Finance will generate separate commission payment agreements with each investor and remain as an uninvested party throughout the proceedings to allow use to comply with the FSMA regulations - see our terms and conditions for details.

Consultancy and support costs

Whilst we have provided comprehensive instructions, assistance in defining the implementation plan may be available through free business support advisors - please contact us to check. Later stage assistance in transferring the plan onto an ERP system is available from our network of trusted consultants. If you required us to carry out the data transfer and system set, we could provide consultancy assistance. The cost of this data transfer will vary depending upon the quantity and complexity of the data. We can provide quotations which should be included as a requirement from the outset if this task needs to be financed by investors.

If retained in the final agreement these clauses help safeguard your investment by discouraging supplier and investor default on preagreed commitments to provide products, services or capital.

Investors can make use of the PIE rights trading platform to find substitutes. buy and sell investment opportunities and trade rights to fund cashflow. All trades need to be completed outside the portal to allow us to comply with the FSMA regulations.

To see guideline terms (final terms to be determined by you in conjunction with capital and resource investors) - click here.

Whilst the final content of investor agreements will be tailored to the requirements of all of the parties involved, we have created a default set of terms that can be viewed here.

Automated valuation, matching and ERP based investment tracking - International Patents Pending