Commercialisation How an accountant can assist Wednesday 5

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Commercialisation: How an accountant can assist Wednesday 5 December 2018

Commercialisation: How an accountant can assist Wednesday 5 December 2018

Stephen Slater Director

Stephen Slater Director

Who are RMT ? • • North East’s leading Independent accountancy practice 6 directors

Who are RMT ? • • North East’s leading Independent accountancy practice 6 directors & 70+ staff Started in 1954 National and international networks Full range of service “One-Stop Shop” Owner Managed Business Specialists

Commercialisation Lifecycle Strategy Dvpt Market Research Product Dvpt IP Protection Funding Package Idea Dvpt

Commercialisation Lifecycle Strategy Dvpt Market Research Product Dvpt IP Protection Funding Package Idea Dvpt Company Set Up Concept Research Business Plan Commercialisation Revenue Generation

What is a start up? New and Highly Entrepreneurial Has the Ability to Achieve

What is a start up? New and Highly Entrepreneurial Has the Ability to Achieve a Big Outcome (Exit / IPO) A distinct type of business with 5 key attributes Growth Focussed and Scalable Disruptive Technology Addressing an Unmet Need

Five Factors of a Fundable Business Strong Management Team Realistic Exit Opportunities Competitive Advantage:

Five Factors of a Fundable Business Strong Management Team Realistic Exit Opportunities Competitive Advantage: IP / Technology Large and Growing Market Sector Scalable and Capital Efficient Business Model

What is a scalable business? Businesses that scale are businesses with Operating Leverage %

What is a scalable business? Businesses that scale are businesses with Operating Leverage % Annual growth Revenue Operating Expenses Adding Operating Costs (Technology, Sales, Staff etc. ) at the same rate as which Revenue grows does not equal scale. Time / Years

What is a scalable business? What is a Scalable Business? Businesses that scale are

What is a scalable business? What is a Scalable Business? Businesses that scale are businesses with Operating Leverage % Annual growth Revenue Businesses that achieve exponential revenue growth with only small and incremental increases in operating costs are scalable businesses. Operating Expenses Time / Years

Articulating Product/Market Fit Describing your Start-Up’s “value zone” is about working out where the

Articulating Product/Market Fit Describing your Start-Up’s “value zone” is about working out where the 3 circles intersect: Your business plan should position your start-up here 1. Market Demand (What do your target customers want? ) 2. Competition (What unoccupied markets exist? ) 3. Product (What do you do best? What can you do best? )

Commercialisation Lifecycle Strategy Dvpt Market Research Product Dvpt IP Protection Funding Package Idea Dvpt

Commercialisation Lifecycle Strategy Dvpt Market Research Product Dvpt IP Protection Funding Package Idea Dvpt Company Set Up Concept Research Business Plan Commercialisation Revenue Generation

The Structure of an Investor Ready Business Plan Make up of an investor ready

The Structure of an Investor Ready Business Plan Make up of an investor ready business Executive Summary 1 Introduction 2 Product & Technology Overview 3 Business Model 4 Market and Competitor Analysis 5 Customer/User Acquisition Strategy 6 Product/Service Roadmap 7 Management Team 8 Financial Projections plan

Business Planning Considerations • What is your IP and can it be protected? What

Business Planning Considerations • What is your IP and can it be protected? What barriers are there? • What is so compelling about your product/service? Why will people want to buy it? • Who are the key competitors and how are you different? • How scalable is the business? • What is your market? • Do you have a clearly defined revenue model – how will your business make money? • What is your route to market? Can you add credibility to this? • Complete and robust financial projections – What profit will you make and how much cash do you need? • What are the risks? – SWOT and PESTLE • Skills in your management team – technical and non-technical. Are they incentivised? • Exit plan?

Typical Mistakes in Investor Ready Business Plans Nothing to Visualise the Product Too many

Typical Mistakes in Investor Ready Business Plans Nothing to Visualise the Product Too many Revenue Streams Next Round Required Before Company Hits Revenue High Burn Rate (Small Runway) Typical Mistakes in a Business Plan Seeking to Raise Finance No Slack in the Company's Operating Capital Limited Time Between Funding Rounds

…and the classic mistake “Start-Up X will achieve its projected revenues by taking just

…and the classic mistake “Start-Up X will achieve its projected revenues by taking just 1% of the £ 48 bn Global market”

Commercialisation Lifecycle Strategy Dvpt Market Research Product Dvpt IP Protection Funding Package Idea Dvpt

Commercialisation Lifecycle Strategy Dvpt Market Research Product Dvpt IP Protection Funding Package Idea Dvpt Company Set Up Concept Research Business Plan Commercialisation Revenue Generation

Structure Sole Trader Partnership Limited Liability Company Other

Structure Sole Trader Partnership Limited Liability Company Other

Structure Tax reasons Accounting requirements Perception Commercial protection

Structure Tax reasons Accounting requirements Perception Commercial protection

Holding Companies Investor A – 50% Investor B – 50% Holding Protection Company 100%

Holding Companies Investor A – 50% Investor B – 50% Holding Protection Company 100% Subsidiary 1 100% Subsidiary 2

Directors Responsibilities

Directors Responsibilities

UK Corporation Tax Rates Flat rate for companies of all sizes 19% from 1

UK Corporation Tax Rates Flat rate for companies of all sizes 19% from 1 April 2017 reducing to 17% from 1 April 2020

Research & Development Tax Relief Activities/projects which seek to: “extend overall knowledge/capability in the

Research & Development Tax Relief Activities/projects which seek to: “extend overall knowledge/capability in the field of science or technology” • Eligible expenditure: Wages and salaries, consumable materials, power, water, fuel, computer software • Tax Reliefs Enhanced deduction of 130% to 230% against profits from 1 April 2015 chargeable to corporation tax, or Repayable tax credit (up to 33 p per £ 1) if loss making

Commercialisation Lifecycle Strategy Dvpt Market Research Product Dvpt IP Protection Funding Package Idea Dvpt

Commercialisation Lifecycle Strategy Dvpt Market Research Product Dvpt IP Protection Funding Package Idea Dvpt Company Set Up Concept Research Business Plan Commercialisation Revenue Generation

Credibility Builders The most important word in raising early-stage funding is Credibility. This starts

Credibility Builders The most important word in raising early-stage funding is Credibility. This starts with the CEO. What impression do you think you are making with an investor? You can & will make it work at all costs (convincing) Demonstrated commercial savvy (not just technical) Track record with other technology startups (growth/exit) Growth ambitions that are also believable and pragmatic Deep subject matter expertise and/or industry knowledge Know your business plan and model inside out

Compromising your credibility Over. Claiming Vagueness – Lack of Clear Facts No Believability to

Compromising your credibility Over. Claiming Vagueness – Lack of Clear Facts No Believability to the Strategy Credibility Failures Not Delivering on Requests (Delays) Not Being Able to Explain the Business Plan Going too Early (Under. Developed Idea / Model)

The Investor Pitch Find out how long you have and who is attending. All

The Investor Pitch Find out how long you have and who is attending. All of your Management Team should attend. Address objections with specific data – build their investment case for them. Answer questions factually and to the point (don’t waffle) Be confident and show passion but explain what you do in English. Investors will not spend time trying to find out about your product. Investors see lots of presentations. You have to stand out. Treat objections as a sign of interest. Do not get defensive - investors will push you to test you. A bad presentation is a missed opportunity – you won’t get a second chance.

The Slide Deck Introduction (Including Elevator Pitch and Team Introductions (5 Minutes) Concisely say

The Slide Deck Introduction (Including Elevator Pitch and Team Introductions (5 Minutes) Concisely say who and what you are. Elevator Pitch and Team introductions. Problem Solution (Including Demo) Underlying Technology Business Model User Acquisition One Slide Each 5 Minutes Core of the Presentation: 15 -20 Minutes Team Headline Financials Timeline and Milestones Summary and Call to Action 2 Minutes

The Slide Deck Back Up Slides (After Your Final Slide): • Market Data •

The Slide Deck Back Up Slides (After Your Final Slide): • Market Data • Details of Technology • Financials • Competitors • Patent Applications • Customer Correspondence Do Not Present These but have them in reserve: Be ready with back up slides / materials on more detailed areas outside of what the slide deck covers in case you are asked. Use the relevant slide to then explain your point or answer. • Letters of Intent The Slide Deck should give a summary overview of the Business Plan

Tax Relief for Angel Investors EIS Income tax relief Reduction in tax bill of

Tax Relief for Angel Investors EIS Income tax relief Reduction in tax bill of 30% of investment (up to £ 1 m per tax year) CGT deferral relief On disposals one year before investment to three years after Seed EIS Effective for shares issued from 6 April 2012 Income tax relief Reduction in tax bill of 50% of investment (up to £ 150 k per company, max £ 100 k per investor) CGT relief CGT exemption 50% of gains made in the year reinvested (2013/14) CGT exemption If shares qualify for income tax relief no CGT on disposal Shares must be issued within 2 years of commencement of trade

Grants • NBSL www. nbsl. org. uk • RTC ww. rtcnorth. co. uk/programmes/designing-better-business. php

Grants • NBSL www. nbsl. org. uk • RTC ww. rtcnorth. co. uk/programmes/designing-better-business. php • BICC Innovation Programme www. ne-bic. co. uk • Local councils • Innovation / Research & Development Grants – www. innovateuk. org

Venture & Equity Funding • JEREMIE 2 – The North East Fund http: //www.

Venture & Equity Funding • JEREMIE 2 – The North East Fund http: //www. northeastfund. org/ • Business Angels – www. bbaa. org. uk • Private Sector Venture Capital – www. bvca. co. uk • NESTA – www. nesta. org. uk • Local Angel Groups – www. big-angels. co. uk investors. com www. gabriel-

Other Support/Websites https: //www. gov. uk/business-finance-support www. bipcnewcastle. co. uk/ www. j 4 bgrants.

Other Support/Websites https: //www. gov. uk/business-finance-support www. bipcnewcastle. co. uk/ www. j 4 bgrants. co. uk www. carbontrust. org

Crowdfunding • Finance Raising – Equity such as Crowdcube • Product Funding - Kickstarter

Crowdfunding • Finance Raising – Equity such as Crowdcube • Product Funding - Kickstarter

Useful links… www. gov. uk/browse/business www. r-m-t. co. uk

Useful links… www. gov. uk/browse/business www. r-m-t. co. uk

Thanks for listening! Any Questions?

Thanks for listening! Any Questions?

Contact details Stephen Slater Director RMT Accountants and Business Advisors Limited 0191 256 9500

Contact details Stephen Slater Director RMT Accountants and Business Advisors Limited 0191 256 9500 Stephen. slater@r-m-t. co. uk www. r-m-t. co. uk @cyberaccountant