News - Midlands
Show me the money
And I told this conference of growing businesses that venture capitalists will only invest in about one in a 100 proposals put to them," says Steve Walker of Aston Reinvest Trust (ART). "You could see the wave of shock that went through them."
If you go by the headlines we could be living in a golden age for investors who are willing to put their money into promising Midlands companies.
It is estimated there are some 600 sources of public and private funding available in the West Midlands and a similar amount in the East Midlands.
And those opportunities to access funds keep on growing. In the past few weeks alone Catapult has won a race to handle a public-private £330m Enterprise Capital Fund aimed at providing £3500,000 to £32m, mainly for Midlands firms. E-Synergy has been appointed by the East Midlands Development Agency (Emda) to run a £310m fund aimed at start-ups. And Birmingham's Advantage Business Angels has unveiled Seraphim - a £330m public-private fund, again aimed at that vital £3500,000 to £32m gap.
On top of a plethora of government grants, banks claim to have an ever-growing sophisticated and subtle array of lending tools - asset-based finance, invoice discounting, old fashioned overdrafts.
Yet entrepreneurs, particularly those in medium-sized firms, claim they find it increasingly hard to access whatever money is available, that they are too big for start up grants but too small for equity investors and big lenders.
There is obviously a disjoint: a few weeks ago Insider revealed that small and medium sized businesses in the West Midlands were failing miserably to take advantage of regional venture capital funds, with some £355m unspent in four major growth funds.
In the East Midlands, meanwhile, some £348m worth of investment is available through three funds controlled by Emda and the Department of Trade & Industry, including the E-Synergy scheme.
Exactly how much of that has been invested is impossible to say because pensions behind the biggest, worth £330m, do not want figures disclosed. However, that fund has a target to spend at least £321m by the end of next year, so putting the E-Synergy scheme aside, that would mean £324m out of £338m invested.
So why do venture capitalists seem so reluctant to invest? Ray Harris, of Catapult, says: "There is no lack of businesses looking for investment, but there is a real shortage of businesses that are investment ready.
"There's always something that needs improving - a business plan, changes in management - before it's ready for us to invest in. That's why venture capitalists are always complaining that deals take far longer to complete than they anticipated. If I knew why so many were not ready, I'd be a very rich man."
James Arrowsmith, of venture capitalist NVM, says: "With funding start-ups there's less rigour applied to investments. They're more about making opportunities available rather than returns.
"But when you're talking of investments of, say, £31m upwards, that imposes a load of extra disciplines and a rigour, which means you have to have better thought out business plans and structures.
"You have people who started from publicly funded seed capital and apply what they have done to the next phase. But often it's not enough and means they're not prepared for investment."
Emda's head of business development Jonathan Lowe says there is a view that there is no equity gap for small and medium businesses.
He says: "It's often forgotten that investors back jockeys and not horses. You can have a really successful business but if the entrepreneurial skills are not there then no one will back it."
Although Harris and Arrowsmith do not agree, many experts now incline to the view that businesses are not ready for investment because they cannot afford the professional advice needed to get them into shape.
Walker says: "The key issues are two-fold. One is raising awareness among businesses that funding is available, and making quality support and professional advice available to businesses that will get ready to access funds.
"The biggest issue with advice is quality support at a sensible cost. The Midlands has the country's fastest growing financial services sector but most business can't afford to pay £3500 an hour to access it. Expensive and quality service is good for the big boys but the middle range who want to grow can't afford them."
If you go by the headlines we could be living in a golden age for investors who are willing to put their money into promising Midlands companies.
It is estimated there are some 600 sources of public and private funding available in the West Midlands and a similar amount in the East Midlands.
And those opportunities to access funds keep on growing. In the past few weeks alone Catapult has won a race to handle a public-private £330m Enterprise Capital Fund aimed at providing £3500,000 to £32m, mainly for Midlands firms. E-Synergy has been appointed by the East Midlands Development Agency (Emda) to run a £310m fund aimed at start-ups. And Birmingham's Advantage Business Angels has unveiled Seraphim - a £330m public-private fund, again aimed at that vital £3500,000 to £32m gap.
On top of a plethora of government grants, banks claim to have an ever-growing sophisticated and subtle array of lending tools - asset-based finance, invoice discounting, old fashioned overdrafts.
Yet entrepreneurs, particularly those in medium-sized firms, claim they find it increasingly hard to access whatever money is available, that they are too big for start up grants but too small for equity investors and big lenders.
There is obviously a disjoint: a few weeks ago Insider revealed that small and medium sized businesses in the West Midlands were failing miserably to take advantage of regional venture capital funds, with some £355m unspent in four major growth funds.
In the East Midlands, meanwhile, some £348m worth of investment is available through three funds controlled by Emda and the Department of Trade & Industry, including the E-Synergy scheme.
Exactly how much of that has been invested is impossible to say because pensions behind the biggest, worth £330m, do not want figures disclosed. However, that fund has a target to spend at least £321m by the end of next year, so putting the E-Synergy scheme aside, that would mean £324m out of £338m invested.
So why do venture capitalists seem so reluctant to invest? Ray Harris, of Catapult, says: "There is no lack of businesses looking for investment, but there is a real shortage of businesses that are investment ready.
"There's always something that needs improving - a business plan, changes in management - before it's ready for us to invest in. That's why venture capitalists are always complaining that deals take far longer to complete than they anticipated. If I knew why so many were not ready, I'd be a very rich man."
James Arrowsmith, of venture capitalist NVM, says: "With funding start-ups there's less rigour applied to investments. They're more about making opportunities available rather than returns.
"But when you're talking of investments of, say, £31m upwards, that imposes a load of extra disciplines and a rigour, which means you have to have better thought out business plans and structures.
"You have people who started from publicly funded seed capital and apply what they have done to the next phase. But often it's not enough and means they're not prepared for investment."
Emda's head of business development Jonathan Lowe says there is a view that there is no equity gap for small and medium businesses.
He says: "It's often forgotten that investors back jockeys and not horses. You can have a really successful business but if the entrepreneurial skills are not there then no one will back it."
Although Harris and Arrowsmith do not agree, many experts now incline to the view that businesses are not ready for investment because they cannot afford the professional advice needed to get them into shape.
Walker says: "The key issues are two-fold. One is raising awareness among businesses that funding is available, and making quality support and professional advice available to businesses that will get ready to access funds.
"The biggest issue with advice is quality support at a sensible cost. The Midlands has the country's fastest growing financial services sector but most business can't afford to pay £3500 an hour to access it. Expensive and quality service is good for the big boys but the middle range who want to grow can't afford them."