Bridges Ventures

As an entrepreneur unfamiliar with venture capital financing, what do I need to know?

• Venture capital provides patient, committed, risk sharing equity capital to help unquoted companies grow and compete
• It is generally regarded as expansion capital and aims to increase a company's value through the growth of revenues and profits
• In accepting venture capital financing, a company's owners are effectively selling some shares in their company to the venture capitalist, who may further seek a Board position and attend monthly Board meetings
• Venture capitalists will also look to leverage their knowledge networks and connections to assist with the growth of a company they have invested in
• Venture capitalists will look to exit their investment in a given time period, either through sale-back, sale to another investor, sale of the company, or through listing the company on a publicly traded exchange

What are the principal differences between debt and equity capital?

Equity capital:

• Long term in nature
• Means the venture capitalist becomes a partner in your business and shares in your success
• Flexible/tailored in its structure
• Doesn't usually require collateral
• Supported by the provision of experience, advice and connections to its recipients
• Focused on growth

Debt capital:

• Often shorter term in nature
• Provided by an outside party - i.e. the lender does not become a shareholder in your business
• Usually follows a fixed structure based on repayment of interest and principal
• Usually requires collateral
• Focused on repayment out of your business's cash flow. Not necessarily focused on growth appropriate for companies with stable revenues

What are the principal differences between grants and equity capital?

Equity capital:

• Take high degree of business risk and seek commensurately high financial returns
• Means the venture capitalist becomes a partner in your business and shares in your success
• Funded by investors who seek a financial return – out of their commercial funds

Grants:

• Are usually made for social, economic or charitable purposes and do not have to be repaid
• Grant-provider will want reports on the impact of the grant but is not directly involved and does not seek a financial return
• Come out of the “philanthropic” pocket or from government

Is venture capital appropriate for my company?

• Yes, if you have high growth ambitions for your company or are engaging in a transfer of ownership such as an MBO or MBI
• Yes, if you are willing to sell a stake in your company in order to be able to increase your stake's value to more than that of your original holding within a few years
• No, if you prefer to maintain the current level of your business or grow it slowly and wish to retain full ownership

If my company has other funding or grants, does this preclude me from applying to Bridges Ventures for an investment?

No. We do have to work within the constraints set by the European Commission on State Aid to the private sector but, in most cases, these will not be affected by other grant funding you may have received.