On the face of it, there’s a lot of money for NI companies. No, honestly there is!
In terms of equity, we have a seed fund, two local VCs, an angel network and a whole army of private investors. And when you get up to larger funding rounds, say above £2m then we have a number of very active private equity houses who specialise in fund raising for growth.
It isn’t all a bed of roses of course, but it’s a lot better than it was eight years ago.
I chose 8 years as that’s when I first came in as Director of Halo, the NI angel network. Since then the Halo angels have ploughed over £12m of their own cash in local companies.
However it’s all change at Halo, as the operation of the network has been handed over to Invest NI for an interim period as they reorganise and tender probably for an all island angel network. This is a good direction to be headed in, if perhaps a slightly brave decision in the light of recent times. The larger scale afforded by an all island network is certainly a prize for which it is worth facing a few difficulties.
This may come as a surprise to some, as Halo was synonymous with the Northern Ireland Science Park, later Catalyst Inc. However, in reality, we were always running it on behalf of Invest NI and Intertrade Ireland even though Catalyst Inc covered a significant part of the running cost.
So, while wishing Halo all the best, the question of course arose of what Catalyst Inc should be doing in this space, if anything? A thorough stakeholder consultation and design thinking workshop revealed that there is fact an interesting gap.
Proof of concept, local funds and angels are great for the smaller funding requirements, and private equity organisations can do the big stuff. However, while the latter occasionally dip below £2m sized deals, it is rarely an economically viable proposition.
Essentially the amount of work for a fund raiser is the same for a £500k deal as for a £2m+ deal. So the fees on a smaller deal need to be proportionately much higher.
The gap our research identified is for deals above the normal first angel level and below £2m. And so into this gap now steps the new service from Catalyst Inc -Capital Match.
The really neat thing about this is that Connect, also as part of Catalyst Inc, already run the highly successful Springboard programme, which is preparing high potential companies with the drive and ambition to succeed. And guess what they are going to need to secure their first funding of around £500k to £2m. Seems like a plan….
Many people already know Springboard. This isn’t surprising as it’s powered by a huge team of highly skilled volunteers. In fact there is a pool of over 400 subject matter experts and 75 entrepreneurs in residence.
These are the experienced entrepreneurs, business people and professionals who – without charging – challenge and coach the most promising companies to maximise opportunity and reduce go to market risk. And the evidence shows it works, with 90% of Springboard graduates having successfully raised capital of over £27m.
Capital Match is not a business angel network. It operates by building trusted relationships with many, mostly non-NI, funding sources, and then matching each company to a very few funders - but only where the match is just right for both parties. It is very selective and focused in how it does this matching.
So Capital Match is open for business and the most promising of Northern Ireland’s growth potential companies are set to benefit and grow more rapidly.
The gap is being well minded.
Alan Watts is the Director of Capital Match at Catalyst Inc (formerly the NI Science Park).
More information about Capital Match or to contact Alan, go to capitalmatch.catalyst-inc.org