FAQs
What do I need in place to obtain funding?
The minimum is just an idea or concept that will meet our investment criteria. The first round funding can be as low as £30,000 (via a Pathfinder investment) to fund the market research, patent protection or identify the executive team necessary to create or prove a technology concept. With this approach, we are successfully helping to create exciting new technology companies from ideas.
We do not expect the entrepreneur to arrive with a fully developed technology, management team, worldwide patent protection, route to market and exit strategy already in place.
Do I need a business plan?
A business plan would be useful but is not a requirement. We will often work with the team to introduce experienced executives to help develop the technology and its route to market plan.
Will RisingStars back "just an idea"?
RisingStars have backed several businesses on the basis of a good idea where a patent has yet to be filed, no prototype has been built and there is no permanent management. However we still require a market opportunity that is sufficiently compelling, and the prospect of building some effective Intellectual Property.
How do you help my business develop?
The RisingStars team has experience of dozens of similar businesses; they can help find the resources the company needs including people, funds, grants or customers. Our current failure rate is 10% after two years for start ups compared to the national average of greater than 40%.
Will you take a seat on the Board?
RisingStars Growth Fund is an active investor and assists its businesses to achieve significant growth. We do not normally take Board positions ourselves at the outset but introduce experienced Non-Executives or Executives who can provide the networks and knowledge in your specific markets.
The individuals we have introduced include the former European MD of a medical business, Directors of major Pharma businesses and the COO of FTSE250 software business. All of these individuals are passionate about making an early stage business a major player in its market.
How long will the investment process take?
The fastest we have completed an investment is fourteen days from first application to transfer of funds, but at the other extreme we have backed one university spin out more than a year since first presentation.
In practice, if there are no external factors to consider, most investments will complete within three months of application.
Will you fund businesses outside the North of England?
Whilst RisingStars' primary focus is investing in businesses located substantially in the North of England, we are also able to consider investing in companies based throughout the UK. In these cases, we would expect to invest alongside other early stage funders who could provide the necessary support locally to the business.
There are many advantages to a comany in having its investor close at hand. We can give more time and help more often. In addition, we have to hand a substantial body of specialist advisors who we know from experience understand the needs of an early-stage technology business, whether for recruiting staff, finding premises, protecting IP, or delivering technology.
If in due course the company needs further funding, we have excellent relationships with other investors in the region.
How much will you invest?
RisingStars has invested between £30,000 and £1.2m in individual early stage technology businesses.
Typically we'd provide around £200,000-400,000 as a first investment round, keeping additional cash to support further funding rounds, back further expansion, or to cope with setbacks.
In practice we usually tranche this investment (see below), with milestones that have been agreed with the company, and from time to time we may ask the management to present to the RisingStars investment team.
For example, we might invest £50,000 as a first tranche with the objective of quickly achieving a key event that helps guide the rest of the company's development. This could be product testing, a prototype, market research or filing key IP. Thereafter larger tranches, perhaps £100,000 to £250,000 can be provided against a broader range of milestones.
How do you structure investments?
VC's are usually looking to have their investment provide a substantial share in any major success, and also to provide them with at least some of their money back in the situation that the business scrapes through to a modest sale.
In practice RisingStars tends to invest a small amount initially for the same type of shares as the founders, providing a fair mechanism to share in any major success.
Subsequent rounds are provided as simple preference shares so that we can see the majority of our capital returned in a more modest exit.
We think this structure keeps things as simple and transparent as possible and keeps tax problems and legal costs for the founders to a minimum.
RisingStars' legal documents have evolved gradually. We believe that a simple standard set of documents is best - this means the legal part of our deals can take less than a week to conclude.
How do you work with the portfolio?
Usually you will work with the same investment manager from the start who will become part of the team and will come to know and understand your business well. The manager will attend your board meetings as well as help with meetings with other investors, licensees, specialists or others as appropriate to help the business.
Naturally at each drawdown there are agreed milestones that we will work together to consider.
We require all investees to have monthly board meetings and to report in the normal manner for a professionally run company with accounts produced promptly and accurately.
On a regular basis we hold investee seminars where all investee companies gather to compare notes and hear relevant speakers. In the past, these sessions have covered topics such as managing intellectual property, preparing for flotation, licensing strategies and management share option schemes.
We find these gatherings are invaluable opportunities to share contacts and information with companies trying to address similar but not competitive opportunities.
Will you replace me as CEO/CTO?
Our policy is to be as straightforward as possible, and we value a frank discussion before investment about the business' specific needs for management. We are very aware of companies where investors have insisted on substituting savvy and market-aware founders in favour of "corporate suits". We seek to encourage management teams to develop a blend of skills, and add in experienced management alongside.
How do I apply for funding?
Please click here to learn more about applying for funds.
Tips for a successful funding application
For further information on RisingStars and how to apply, please contact a member of the RisingStars Investment Team. We prefer that all business plans and resumes be sent to us via email.
To present your opportunity in the best way possible, make sure your company meets the criteria described on this site.
1. Review our portfolio - does your company aspire to similar sized market opportunities?
2. Know your competitive landscape really well. If you think there are no direct competitors, make sure you understand what the substitute products are.
3. Do you know people in our portfolio? If so, ask them to make an introduction.
Common reasons that plans are rejected
1. You have a good business, but does not have the size of opportunity we would be interested in or the ability to obtain an attractive exit.
2. Weak barriers to competitor entry - once you've shown the world the right way, is it too easy to replicate?
3. Conflict with existing portfolio company - RisingStars will not back two businesses tackling the same opportunity.
4. Money being raised and/or valuation does not fit our investment criteria or the RSGF mandate.
5. It's competitive, and we only have so much management time. From time to time we have to let slip some opportunities that we'd like to get involved in more heavily due to demands from the existing portfolio or other new deals.
How many term sheets do you issue?
There is a wide range of behaviour among VCs from those that send out many term sheets, but then back out from a high proportion, to those that wait until they are more committed.
RisingStars believes that we should make up our minds sooner and then follow through. To date (Jan 06) we have completed on 94% of the term sheets issued.
How should I present at an Assessment Day
1. Concentrate on the opportunity; it doesn't matter how great your team or plan if you can't persuade the investor that there is money to be made.
2. Keep it short; if you pique our interest in 10 minutes then the rest will come from questions.
3. Keep it simple; we prefer if you don't use PowerPoint- unless there is graphical information or a demo that can't be communicated on paper.
4. Show us the idea; we'd rather see a "Heath-Robinson" prototype than a polished artist's impression.
5. Feel free to pick our brains and see how we can help you.
Alternatively, click here to download the briefing note to find out more information.
Useful links
The internet is a good research tool for finding more information about venture capital . However, we have put together a few links that we believe are useful.
British Venture Capital Association - www.bvca.co.uk
European Venture Capital Association - www.evca.com
Techinvest - specialist business angel network for the North West - www.techinvest.org
Venture One - www.ventureone.com
Venture Economics - www.ventureeconomics.com
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