Video: Business Growth Masterclass with Fundsquire
The MPA Innovate Lunch & Learn series brings our viewers bitesize thought leadership, opinions and discussion on key topics surrounding innovation and business.
At the Global Investment Summit this year, Chancellor Rishi Sunak spoke about how, with less than 1% of the world’s population, the UK has 4 of the world’s top 20 universities, is home to more tech unicorns than any country, bar China and the US and has more venture capital than France and Germany combined. So, it’s safe to say the UK is a real powerhouse for innovation and start-ups.
In this session, we were delighted to be joined by Tanja Bosnjak and Jack Sparkes from Fundsquire, to talk about their journey in supporting some of the UKs most ambitious and innovative entrepreneurs. They share some of the incredible stories of how their clients have grown, as well as some of the tools and insight businesses can use to scale effectively.
Tanja, Jack, would you mind introducing yourself?
Absolutely. Thank you very much for having us Talitha, a pleasure to be here.
My name is Jack Sparkes. I work at Fundsquire as Originations Manager. And together with Tanja who will come on to introduce herself, we lead the client and partner relationships at Fundsquire in the UK. Before I joined Fundsquire I worked at a large asset manager, a couple of large asset managers in London, where I was responsible for leading efforts related to raising capital for climate transition projects that were being taken on. I joined Fundsquire earlier this year as more of a direct way to get funds into companies that were doing some really amazing, amazing work.
Especially in the greentech space, which I just have a keen interest with myself. Tanja?
Yeah, Hi, everyone, and thanks Talitha for having us. My name is Tanja Bosnjak. And as Jack mentions together we are responsible for partner and client relations here at Fundsquire
I have quite a similar background to Jack and prior to joining Fundsquire I worked in investment management for six years and the first half of my career, I worked for a big, multinational, multi asset investment manager and then the second half of my career, I've worked for private real estate investment management, and in both roles sort of looking at clients, relationships and in product roles.
And also on the first lockdown, I co-founded a business which I ran next to my day job and that experience just got me super excited about the start-up world and in particular the funding landscape.
And yeah, that really for me, was a big driver to join Fundsquire, and not only to really get to understand the landscape, but at the same time, also help founders in the UK and help them to generate growth.
Brilliant, to quite a varied and relevant background for what you're doing at the moment.
So my first question really is, where did the idea behind Fundsquire come from, and what would you say is your why?
Yes, sure. So Fundsquire is a leading provider of growth capital, we've been around since 2016, and we got offices globally in Canada, Australia, and the UK. We’ve funded around 200 companies to date, and yeah, the reason we operate in these three countries, is, I mean they are all sort of hubs for innovation and start-ups. And how we came about is that essentially identified a challenge in a lot of founders have.
which is not only sourcing capital, but also having to give away equity. And so, yeah, we just really got excited about helping founders to retain their equity, while still being able to accelerate growth. And it really is, and has been our main, main purpose to date. And the main way we help founders and businesses by providing a advance funding against a company's R&D tax credit in the form of a loan. And this gives businesses the ability to access capital, quickly and efficiently throughout the year, and also empowering them really to make strategic assessment decisions, manage your cash flow, and accelerates development and commercialization as well. And recently rolled out a few other options for a non-dilutive capital as well, and for start-ups, we can talk about it another time.
Great. I must be so rewarding, helping businesses and that way, and it's actually very similar to some of the work that we do MPA.
So you said you helped founders on a global scale. How did you identify the need for this, particularly in the UK?
The UK really is our sort of home market, as we call it. There's a huge amount of innovation and a lot of government support for it as well. And to give you an example back in July the government announced
It’s ambition to increase the annual public investments on R&D to a record of £22 billion and such as the R&D Tax Scheme and also introduced new potential individual ... routes. And we hear at Fundsquire speak to huge number of start-ups, and scale ups that are both pre-profit and pre-revenue and just can’t secure a loan from traditional resources like banks, which gives us a great opportunity to help these companies secure capital and carry out to growth plans. We fund companies across all sorts of industries. And recently seen a huge growth in medtech and greentech.
We'll come onto some of the companies we funded in the UK later on.
Right, yeah. So, funding is often a huge challenge, The start-ups, I guess, in many cases, you're presenting them with an option or options that they didn't even know existed.
So, kind of speaking a bit more to the challenges, what do you think are some of it the biggest challenges that UK business owners are facing at the moment?
Yeah. I'll take that one.
I just want to, sort of quickly to Tanja’s point, and around your point actually, is around how companies see capital. And really, a big part of our mission is just the rates of presence.
Yeah, a lot of other companies and founders have traditionally seen equity as their only route to capital. We're not saying it's bad, but, you know, it does have a time and place.
And what we will do is offer founders the opportunity to raise capital from other sources. Not just in equity but offering loans in places of that so they have a non-dilutive option to compliment their equity needs as well.
But some of the challenges that we see, Tanja, mentioned that we speak to a large number of companies really on a daily basis. Yeah, there are some common themes across there that we do see.
The biggest one that we find is it's companies struggle to access the money in an efficient way. Or typically, there are a lot of companies out there that are offering capital.
But um, it isn't always the quickest process.
There are usually unforeseen things that slow things down. And being able to get hands on money, and knowing when those funds are going to be in your account is a really crucial part of being able to plan and overcome obstacles that all companies face.
So, having a funding partner, you can give you that timeframe. And work to it is hugely important, another big challenge that we see companies facing.
Also, another one that we see is, at the moment, you know, a lot of companies would be, like, turning back on the taps to get to sort of that offer of the lockdown period coming out of that in a really strong position.
Yeah, at the moment, finding talent, and being able to increase capacity through hiring is a real difficulty that we see companies facing, and often, companies just can't hire at the rate they want to, given the shortage in the labour market.
Then alternatively, a final thing that we see, which is the only thing that money can’t buy, unfortunately, is time.
Yeah, a lot companies, we see founders just don't have the time to get around to everything.
So we’ve been able to help companies with managing that, and make the most use of that time as well, it's a really important part of what we do.
Yeah, totally. I mean, a lot of the companies that we work with say, that they just don't have time to do everything.
So, it really is about prioritizing what's going to have the biggest impact on the business. And I think funding and finance often does have an impact that it can be quite tricky to navigate, and they don't always know all of the options.
And I'd say also, the talent point has come up a lot, recently, particularly in the engineering sector.
And so, yeah, absolutely agree with you on those.
Yeah, we’re seeing that with it, but some of the companies, some of our portfolio companies, that the biggest thing is capacity and being able to increase it. And it all comes back to being able to get the right people onboard and be able to mobilize it as soon as possible.
So, my next question is around how do you think businesses can position themselves to overcome some of these challenges?
Yeah, I suppose for the capital side of things.
It's about looking up alternatives. Yeah.
Equity investment in high growth companies is a well-established route, you know it steps a valuable role in a company's life cycle, but they aren't the only forms of funding that are out there.
And so, you know, real grassroots and really available to any company is grants. You know, it's, it's not something that should be sniffed at, you know, that is free, money, that is being offered by the government. Well, free in a sense - it does take time and effort to submit an application. And it's not always as straightforward, but if there’s a good case for it, then that's certainly something that should be looked at and taken advantage of, or, you know, speak with an advisor on that as well. Alternatively, what we offer is looking at R&D tax credit loans, and lending against companies accrued R&D asset.
Yeah. Really, as we mentioned earlier, sort of a big purpose around what we do is offering that that little diluted element of way to access capital. And then you also see, yes, revenue based, financing is also becoming an option for companies that are generating revenues. So, there are other options out there than just pure corrected, and certainly, you know.
They present really viable options to get funds in the account, and be able to progress the company.
Then, on the talent side, up, Fundsquire were fortunate enough to made light recently, and we continue to have to bring more people on.
And with companies that we funded, as well, what we find is, if there's a culture that's established, and, you know, everyone sort of put them behind that, then it's communicates it, then it really lends itself, getting the right people onboard. And, yeah, I've been able to build a team is then able to go on and carry out growth plans and so forth.
I think when you talk about the alternative sources of capital and the different options around, I guess that's something that you can really help businesses where you can kind of guide them through so they are a bit more aware of the options and what might suit them best.
Absolutely. I'd say it's something we're really keen to promote is if you're unsure then more than happy to have a compensation because it's not a straightforward landscape, and if anything's unclear or, if you're not sure that it's often than not, and so we’re happy to have a conversation with anybody if it’s of interest.
So, what combination of factors would you say are key to any successful business?
Yeah, amazingly the companies that, that we fund, as with the challenges that they face, there's also themes within the successes that really bring them forward.
And really it's a culmination of the right idea at the right time with the right team.
And being able to get funding in place through the partner or partners on the funding side, but I suppose if I was really to drill it down into its two elements.
The first is having a strategy that's really clearly defined.
And can be executed.
You know, what investors or future investors are already looking at is the ability to deliver on what you said while still being ambitious. So, yeah, we see needs to have very clearly defined and achievable goals as it’s something that relates to to how the company is perceived.
Uh, then, similarly is, secondly, sorry, is just, be really good at what you do, I know it sounds simple, but a lot of companies that we speak to sometimes are trying to do everything.
Everyone has to start somewhere.
And the idea is to be really good at that starting point, before moving on to new products and markets, and being able to solidify what it is you're in the market for before moving onto new markets.
Yeah. I mean. I think I agree with what you said about making sure you have kind of the right people on the right team as part of that strategy. And I guess if you get the right people then that's going to kind of underpin, making sure that you're good at what you do and, you know, you've got a strong foundation for building your business, I guess and growing.
It’s a cliche, but it's cliche for a reason that people make business and it really is amazing to see the speed at which companies can progress once they've got the right people on board.
If it’s hiring a new CFO, I think a lot of it, as well, is recognising where you just don't have the capabilities and being frank and honest enough to identify that, be able to go out into the market and find the right people. But absolutely, you know that people make it happen. So yeah, it's can't understate how important it is in the process.
So, I guess specifically, around seeking investment, Which factors do you think become more important to businesses when they are looking at that?
Yeah, there’s a lot. But, yeah, it's sort of condense them down. Yeah, I spoke with speaking, mainly in relation here to equity investment.
Just in terms of strategic capital. That goes on to the field. And that next stage of growth.
Yeah, I think you said earlier about sort of being thoughtful role in the life cycle of a company in the capital structure that companies have, but it, you know, it shouldn't be something that it's taken lightly.
So, the biggest factor in this is, it's, on my side is timing.
Timing relates to us both, the idea that you can maximize your valuation, because you clearly want to get as much money on board as possible for giving away as little as possible.
And timing, has a lot to do with that.
If a company is partway through developing their MVP, their minimal minimum viable product.
The valuation difference between raising capital halfway through that project versus at the end of the project, is huge, huge. So timing plays a real important role.
So it's more making sure that when you're raising equity, it's done for strategic reasons, because that's what allows you to go on and raise the highest valuation because you've got a clear direction of what that money might be used for against the product.
Secondly, it’s good planning, you know, it sounds simple, but don’t leave it until the last minute to start raising. Really get your ducks in a row And thirdly, what's really important is actually when you are getting investment. It's making sure you know who it is that's investing and what they will bring because a lot of these investors come onto the Board and what you want to know is that you’re going to have a supportive board member in order to really, you know, help with your growth.
Rather than perhaps someone who perhaps isn’t as engaged, and it does make it difficult further down the line if those directors aren’t as onboard as you want.
I mean, to the point about investors, if a business is looking for an investor, are there any kind of tips or things that you feel that they should be looking at to make sure that person is the right fit, kind of right from the beginning. Rather than maybe realizing later on that then they're not quite right for that role?
Yeah a lot of it is down to a lineman, have they been in the industry that you're into they have connections above and beyond just being upfront capital. Well, what can they bring on board from a commercialization perspective, that they have a network, are they able to open doors or come at things with different viewpoint? You know, and something that we saw or we see, which, is unfortunate, when we’re lending to companies.
We have to do KYC on company directors, and where we don't get that engagement we, unfortunately, KYC, and we can't fund so on a couple of occasions companies that have been looking at funding have found it difficult to get that KYC done by the directors of the business which presents a hurdle when they’re looking to raise investment from other funders as well.
OK, yeah, I think that's a really important point actually.
So, if a businesses is about to enter that first round of funding, is there any advice you would give specifically around that?
You know, the main thing with, with funding is that there are a lot of investors and, especially at the moment, there's a lot of cool, dry powder - cash that is available to companies.
Yet because there’s a lot of cash out there, a lot of investors too, something we highly recommend is to not taken that first offer that's on the table. Even if it's the right deal.
Yeah, it's worth holding or getting additional sort of term sheets or offers through because you just want to get a feel for what's out there, and not necessarily rush into a decision when there might be a different offer on the table.
And something we see quite commonly, which is where people come to us to take a loan
is to be able to show multiple sources of capital.
You know with that, I guess, what you’re able to show there, is this to other investors, is that, you know, you're not just putting all your eggs in one basket. And if need be, you can rely on other sources to keep you afloat and extend your runway by another 2 or 3 months, and that you don't need to rush into this decision.
And, you know, where we see companies use that blend of debt and equity, in order to get through their growth stage, are, generally speaking, companies that understand the value of equity
And that it generally could be used for strategic reasons, and not just for short-term growth. So, it's having that clearly defined idea before you enter fund raising, so what the fund raising is for, whether it's for strategic growth, making sure that you've got additional sources of capital to get you through what typically tends to be quite an elongated process. It never happens in the timeframe you know, we all want it to, so just make sure you've got other cash in the bank.
That's, that's really good advice. I bet actually, it is very tempting to jump at the first offer, maybe.
Particularly, if a business is ne funding and finance, and not quite sure what they're doing.
It happens all the time.
You know, it's, it's something that we get a lot of is people coming to us who are in a position where the cash balance is running low, but what they don't want to do is take, not necessarily jump at the one offer, they want to take their time, they’re going to want to garner deals that work best for them as a business. So, yeah, it's, it's hugely tempting, but, yeah, it's worth knowing.
OK, great, so, are any inspiring stories that you can share on businesses that you've seen or worked with that grew or scaled very quickly?
The one that really springs to mind, is, an in-home fitness device that was at pre commercialisation so hadn't quite got that finished product yet, and.
They'd been very successful to date, They'd raised approximately £8 million through seed equity and VC funding, and they approached us in June of 2020, so mid-pandemic But what they were wanting was to get some cash into the business in order to allow them to finish developing that MVP, which was a major milestone for their equity raise, that they were, they were also going through at the same time.
And so, we were able to provide them with a facility of £650,000.
And what that did is that was then that went towards that product development and allowed them to finish off that minimal minimum viable product.
And at that point, they then went back to equity investors to be able to say, look, you know, we finished the product
But as we said in our goals, and effectively, that allowed them to reach a milestone which, according to the founder, valued differential of about £5.5 million.
So there's a real monetary difference there in what they were able to raise from, from the equity investors on, the back of them being able to finish that minimum viable product, and have that when they went into discussions rather than be halfway through and go into ask for money to complete the project.
So, there's some real inspiring stories of how companies have been able to, leverage the loans and use it to their advantage.
Yeah, that's, that's an amazing story. It is amazing how these companies able to use, what’s a relatively small amount of money to extend the runway or bridge a gap.
I'm increasingly you know, getting evaluation, that impressive, is, yeah, really, really amazing. And I'm sure there's so many other stories like it.
Ways of using funding options, and helping businesses to do this.
I'm sure we'll have listeners as well as in similar positions. So I would definitely encourage them to speak to you and I'll include all your details.
Alongside this video.
So hopefully, you can help many, many more UK businesses.
Absolutely love to have a conversation with anybody that’s interested.
So, lastly I suppose continuing the theme of inspiring stories.
What's the most inspiring or innovative business that you've worked with, 18 months?
Yeah. There's one really comes to mind, and it's also an area I have a vested interest in, but it was in the green tech space, and we recently funded the company.
And it developed, a very first of its kind recycled carbon fiber.
And so, this whole idea of this circular economy. I love it. What these companies do is take use carbon fiber that is currently just being stored in warehouses and it's of no use to anybody – you can’t destroy it or take it to landfill.
So, it's to be kept and warehouses. And what they're doing is repurposing it so they can actually then go back in at the same level in the same grade as what the original carbon fiber was, so huge applications as well, just having a massive impact on the environment as well.
Yeah, it's, uh, amazing work, and a brilliant organization. So. yeah, as amazing companies that we have funded. That's one of many. As Tanja mentioned earlier, hundreds of companies that we’ve funded and looking forward to working with many more of them doing such an amazing job of providing an impact to the world that we live in.
Definitely. Now I really love hearing stories like that, and there are just so many of them. I completely agree.
You know, there's so much support, as well in place for these businesses to grow and succeed.
I think sometimes it is just a case of a bit of education and awareness, because there's almost too many options. And, like you said earlier, these companies sometimes don't have the time, or just don't know about, you know, which route is best for them.
Absolutely, Absolutely. And, you know, just to really hammer home your point, if anybody's, unsure what options are available to them, really happy to have discussion, and see if we can help point you on the right path.
Well, thank you so much for joining me today. It's been brilliant talking and hearing about the amazing work you do, and some of these businesses that you're helping as well. I really look forward to hearing more.
Thanks for having us. Thanks very much, Talitha.