The Patenters - חברה לרישום פטנטים

Getting the Right Investor on Board at Right Time

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Originally published June 9th 2016

Working for over 6 years in a firm that had a title comprising “…Financial Services”, I often thought I ought to know something more about the financial aspects of IP,  I had there many meetings with inventors and IP owners/investors that needed financial advice, and felt my advice was too limited.

 

That is one of the reasons that I have taken courses in setting up a business and marketing on social networks; beyond getting professional advice on how to set up shop, I want to be able to be more involved in a client’s activities, so that when he/she walks out of my office I can keep in touch and contribute rather than do drafting/prosecution and ignore and be ignorant about the rest.  While the courses did discuss various options to fund, including groups that do not fund themselves but considerably help you obtain the funding from elsewhere, I felt that more training was needed, and that a workshop overseas was needed to see how it is done outside Israel.

 

The workshop, “How to Attract the Right Investors”, took place at the British Library in London on May 20th, 2016 as part of a series of IP workshops at a great value, so it seems.

 

The two speakers were Colin Coghlan, an angel investor, and Paul Grant, a business funding expert. Colin was very inspiring.  I didn’t realize that most of the investments that angel investors make fail. That leads to their need for an entrepreneur in whom they invest to make a quick exit with a very high ROI.

 

Colin is part of a group of 8-9 angel investors who take turns in reviewing projects.  He particularly looks at whether the project has the right people behind it and if the 5-year project business plan as presented in a paragraph or so in the Executive Summary is engaging and with an exit forecast, then rather quickly makes up his mind whether he votes in favour of investing.  Thereafter he carefully monitors the progress of the project in view of how much the plan is stuck to.    The best way to get such an investor on board is to be at a stage wherein you already have a client base, revenues, achievements/milestones, and above all, growing pains.  For him in particular, business-to-business targeting is preferred to business to client targeting, I assume that is not necessarily generally true regarding angel investors.

 

Apparently many angel investors consult with patent attorneys before deciding whether to invest.  

 

Often one of the conditions of investment is the investors have at least one of them on the board of the entrepreneur’s company and that the entrepreneur become an employee.  The major benefit for an entrepreneur to bring on board an angel investor rather than a VC investor is that the angels very rarely fire the entrepreneur, whereas the VC funds usually do under conditions that are usually terrible for the entrepreneur, basically forcing an exit with little coming the entrepreneur’s way.

 

An interesting viewpoint raised at the session was that the entrepreneur needs to ask why the angels think they are a fit…do they have experience in the field of the project? How much experience to they have in investing? Are they looking to be mentors?

 

Some investments in UK receive tax breaks.  The EIS and SEIS government schemes are reviewed here: http://www.whatinvestment.co.uk/investment-decisions/isas-and-tax-planning/2381293/eis-and-seis-tax-breaks-explained.thtml

 

Paul presented nuggets of his experience which includes years of entrepreneurship.  He advised that getting your invention tested by a major company is a great way to get investments.  The stock market is presently not a good option for an exit, but rather a trade sale is the usual way.  There are some good local pitching groups such as Oxford Investment Network that can help you with obtaining the investment.

  

Paul, as opposed to Colin, thinks crowd funding is a great way to get investment…for the investor there is no due diligence, but for the entrepreneur the shareholder is very much in the background. You can learn more about crowdfunding from Paul here:

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