Venture capital's land of plenty
Article Date: May 26 2006
Attracting support
As with attracting any investor, securing an overseas backer requires a business to do the basics well. After all, as Kennet’s Carratt says of his own pan-European fund, ‘We don’t look for deals geographically; it’s about whether the business is an attractive opportunity.’
This means, even with all this international cash available to invest in your business, you still need a strong proposition, an inspiring management team and the ability to prove your potential and make a good first impression. ‘There wasn’t a huge differentiation in terms of what people wanted from us,’ says Bartlett. ‘[Both UK and US investors] wanted a strong management team, a good story and some good numbers, although I think the US investors are maybe more comfortable about backing businesses at an earlier stage.’
In the end, IGA garnered support from a brace of US investors (Easton Capital and Morgenthaler Ventures) together with DN Capital in the UK – $12 million in total. However, it seems likely that the group’s existing US interests played a significant role.
‘It was clear early on that North America was going to be a key market for us,’ Bartlett continues, ‘and I think it’s fair to say that was one of the things that attracted them to us.’
Having a head start helps
A quick glance at some of the UK firms to have secured overseas backing last year adds weight to Bartlett’s assertion that having an international focus as a business is beneficial to securing overseas support.
Take IGA, for example. The company’s technology offers video game developers the opportunity to place tailored advertisements into their releases – a market reckoned to hold global potential. Polypipe is one of the largest businesses of its kind in Europe. Children’s car-safety-seat producer Britax Childcare, meanwhile – which was acquired by US private equity giant Carlyle last summer for £230 million – is already established on both sides of the Atlantic and commands a 60 per cent share of the Australian market.
IGA’s Bartlett also advises pragmatism. ‘We initially drew up a list of everyone we intended to approach, but then appointed advisers on both sides of the Atlantic to help us. I think that’s important as it gives a business added credibility. Besides, cross-border investors get so many one-page funding pitches landing on their desks that having someone in your corner that they’ve dealt with before really can help.’
How to get cash from overseas
• Don’t look on raising cash from overseas investors as an easy route to financing. As with any UK investor you need a compelling story and to be well prepared• Ensure there is a genuinely international aspect to your story. Your product or service needs to have potential in several markets and you need to be ready to address these markets sooner rather than later
• Do your research. Identify potential backers both in the UK and overseas and draw up a list of those with a likely interest in your product/service
• Don’t be afraid to seek advice. Consulting an adviser in the UK and/or elsewhere can help load things in your favour, not least because they may have existing contacts with potential backers
• Once you’ve identified a possible investor, do your own due diligence. Most venture capital funds will be willing to put you in touch with companies they’ve previously backed and this will give you an insight into their likely demands as an investor
• Keep your eyes and ears open. Occasionally investors will request that you relocate your company or move into particular markets. If they expect this, you must be prepared to act accordingly
