The Nexus Innovation Centre in Limerick have had a series of talks aimed at the startup community every month. This month the topic was startup funding.
They had three speakers –
- A representative from AIB, who are the event sponsors, spoke about the importance of a business plan and what the bank would be looking for in a loan application.
- Andrea Linehan from Grid Finance gave a talk on peer-to-peer lending, which is the crowdfunding of the lending world, and how it can help with startup funding.
- Aidan O’Driscoll, a director with Irrus Investments and part of Cork BIC, spoke about what investors are looking for in a pitch.
Grid Finance on Peer-to-Peer Lending
Some of the more interesting points that Andrea made were:
- Credit ratings – do you know your credit rating? Its easy to find out, and you need to be aware of how it can impact your ability to borrow. Did you know that late filing of accounts can affect you credit rating?
- Banks are still turning away 80% of applicants so peer-to-peer lending is becoming more popular.
- There are two types – public (for more established companies) and private (for startups).
- Public – the company is evaluated and given a credit rating. Lenders bid a certain amount at a certain interest rate. Bids at the lowest interest rates are chosen and the borrower pays a weighted average of the various bids, which make up one loan.
- Private – in this case the company can’t be evaluated. It is up to the company to find the lenders themselves as it is not published. Startups get most initial funding from friends and family, and this gives more structure and assurances to both parties. A relative may be reluctant to hand you €10k in an informal arrangement, but, if it goes through a third party with an official contract and repayment terms, it may begin to seem a lot more attractive.
- Their average interest rate is 7%, compared to 5% quoted by AIB.
- Grid Finance are an Enterprise Ireland High Performance Startup Unit (HPSU) company.
Aidan O’Driscoll from Irrus Investments and Cork BIC
Aidan listed the 5 elements most important to investors as:
- The management team.
- The value proposition.
- Ability to scale.
- IP – not always patents, it can be a unique idea that is first to market.
- Being able to articulate your exit – how you plan to sell the company and how the investor will make money.
Some other interesting points he made on startup funding were:
- Don’t let accountants take over your financials – you must know and understand them. Be realistic in your financial projections – avoid the hockey stick effect.
- There are 4 BICs in Ireland – Cork, Galway, Waterford and Dublin. They help startups put together business plans to get into the Enterprise Ireland HPSU program and to secure angel investor funding. They are funded by Enterprise Ireland and their services are free.
- Good seed capital investors shouldn’t want to take more than 26% of your company.
- Most angels can give valuable advice and be on your board.
- In your first funding round, look for finance that will cover you for 18 to 24 months because it typically takes a startup about 3 years to become profitable. If you have to go looking for more funding, your time can become consumed with looking for funding at the expense of developing your business, and you can end up having to give away more of your company than you would have liked.
- Be aware of the cost of the legals involved in a funding round – always agree costs in advance with your solicitors.
- Go and talk to other people who have raised finance.
- Not every entrepreneur is a CEO – recognize when you need to bring in extra people.
Ireland’s Slide Deck Master
I also bumped into Ed Fidgeon-Kavanagh, who has been called Ireland’s Slide Deck Master – he has helped tech companies looking for startup funding to raise over €11M so far by creating the right presentations and pitches with them.
The next Startup Mania event takes place in the Nexus Innovation Centre in University of Limerick on May 8th from 10am to 1pm. This time the topic is digital marketing.