Mark Lane seeks advice for small companies on securing venture capital finance, in conversation with Jane Reynolds MBE, business development manager with Northstar Ventures, which manages the £27m North East innovation Fund
For many small and growing businesses, access to finance is a make or break issue. Meanwhile, the funding landscape is broad and complex, and certainly not for the faint-hearted. Venture capital is one popular avenue – but what kind of businesses are venture capitalists looking to invest in?
“We make and manage investments into a wide range of scalable ventures,” Jane says. “We currently manage the £27m North East Innovation Fund, supported by the European Regional Development Fund, and have already invested over £6m of that in a wide variety of businesses across very different sectors in the North East.”
Many readers will no doubt be curious as to the best way of tapping into this kind of finance, which obviously differs from ordinary bank lending. Is the funding process as portrayed on Dragon’s Den? “While Dragon’s Den is great TV, in reality the investment journey is a lot more collaborative!” Jane replies.
I put this question to Jane Reynolds MBE, business development manager with Northstar Ventures (pictured right). This company has been supporting entrepreneurs since 2004 and is one of the leading early stage investors into businesses in the North East region and beyond.
“You do need to have a confident pitch however that covers the key issues, so in that sense watching the programme can give you some tips there.”
To offer an idea of the kind of criteria venture capitalists are looking at when supporting businesses, Jane highlights three local companies Northstar has invested in.
Setting the scene, she says, “We make investments anywhere from £10,000 to over half a million pounds. At the lower end of the scale, we support accelerator programmes like the one run here in the North East by Ignite; this gives the chance for entrepreneurs who may just be starting with their idea or very early stage.
“At the other end of the scale we may be part of a group of investors putting larger sums into scalable businesses.”
One recent recipient was incuto, a business which helps tackle the ‘poverty premium’. incuto, which has an office in Cramlington and works as a technology partner for credit unions and the community banking sector, received £100,000 from the North East Innovation Fund.
“The funding will help support incuto’s expansion plans for its software solutions that are aimed at helping everyone have access to low cost, high quality financial services, as well as levelling the playing field between credit unions and less ethical payday lenders,” Jane says.
Another recent client was Changing Health, a venture which was spun out of Newcastle University and Newcastle Hospitals NHS Foundation Trust in 2016 by professor Mike Trenell. The business provides digital, personalised support to patients wanting to make changes to a healthier lifestyle.
Says Jane: “Northstar provided further funding, from the North East Innovation Fund, along with Shift Invest, and Tate and Lyle Ventures. The total investment package of £3m will help the company develop new programmes and expand both in the UK and overseas.”
Emphasising the eclectic mix of businesses Jane and her colleagues have worked with is Wordnerds, a Gateshead- based business which recently received £650,000 investment from the North East Innovation Fund, as well as
from angel investors Paul and Gerard Callaghan, founders of The Leighton Group, Kevin Beales, founder and CEO of Refract, and Maurice Whittle.
Wordnerds combines cutting-edge AI and advanced linguistics to train computers to understand the huge volume of unstructured text that is currently invisible to most companies.
Northstar also manages the North East Social Investment Fund, with which it invests in regional social enterprises and charitable organisations. Investments range from £100,000 upwards and can be used for a wide range of purposes. “The fund’s aim is to increase or protect an organisation’s ability to deliver social impact,” says Jane.
Examples of the fund at work was a recent investment in Azure Charitable Enterprises, which provides care services across the North East and also runs a number of charitable businesses.
The funding will help the organisation continue to deliver and expand its services, providing new education, training and employment opportunities for people with a disability and those who want to pursue a career in care services.