Angels need matchmakers too

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The Independent Online
BANKERS, civil servants and organisations involved in financing small businesses will tomorrow hold an informal investment workshop in London that could boost a sector that is constantly starved of funds.

Discussion will centre on matchmaking, with particular attention being given to exploring the scope for a national network putting entrepreneurs and 'angels' - private investors prepared to take a risk - in touch with each other.

The roll-call of participants is impressive. It includes representatives from the Bank of England, the Treasury, the Confederation of British Industry, the Department of Trade and Industry, the British Venture Capital Association and two Training and Enterprise Councils who successfully matched local companies with investors outside their own areas.

The idea sprung from a two-year scheme backed by the Government, under which five TECs received pounds 40,000 tomatchmake angels and companies. The two that won investment outside their own patches were South and East Cheshire and Devon and Cornwall. Supporters of the need for a national network believe that their success can be built upon.

Techinvest, a Cheshire- based programme, has brokered six deals worth pounds 500,000 since it was launched in February, attracting outside investors through its contact with Venture Capital Report, a newsletter launched in 1978, and LINC, a 'marriage bureau' run by enterprise agencies.

Techinvest also runs an investment club, where businesses seeking cash present proposals to would-be investors. For those with the cash, there are workshops on structuring deals and forming syndicates, while entrepreneurs are advised on presenting deals.

Vivienne Upcott Gill, who is Techinvest's manager, says the combination of heavy local exposure and access to wider networks yields results. 'It means that businesses can get in front of several hundred potential investors. At the end of the day it comes down to personal chemistry, like any marriage really.' Local links are important for one angel who built his own business and then sold it on. In a mixed portfolio of investments, he is prepared to put up to pounds 150,000 into local businesses. So far, he has invested pounds 9,000 in a company launching a cartoon series with an environmental focus, which has already notched up sales at the Cannes film festival. 'It could be seen as a high-risk investment, but I've got faith in it. If it takes off there will be merchandising spin-offs.'

Richard Cavanagh, managing director and co-founder of Specialist Imaging, which makes customised electronic filing systems, is very happy with the fruits of Techinvest's networking. The company has raised pounds 10,000 from a chartered accountant based in the City, thanks to Techinvest's contacts with LINC. The investor, who has an option on a further pounds 15,000 stake, also acts as financial consultant. 'The banks have got their fingers burnt so much that they seem frightened of investing in business,' Mr Cavanagh said. 'Venture capital companies aren't interested unless you are seeking more than pounds 250,000. So linking up with private investors seemed the best solution.'

Next year the company will seek a further tranche of investment to develop products.

The advice from Techinvest in drafting business plans and making presentations proved invaluable - equivalent to a costly management consultancy, according to Mr Cavanagh. 'Just preparing for presentations helped us to focus and become a better company.'

Fiona Conoley, general manager of LINC, senses a quickening in the market: 27 deals were brokered last year compared with 12 the year before. There is a growing tendency for TECs to seek investment outside their borders.

Since Techinvest joined the network 18 months ago, another TEC has joined and one more is about to sign up. 'There is certainly a case for arguing that you will be more successful if you network outside the region,' Ms Conoley said.

Lucius Cary, editor of Venture Capital Report, is enthusiastic about a national network. He has helped train advisers at Techinvest and will be at tomorrow's meeting. 'There are a number of latent business angels out there - not just individuals, but companies. In innovative businesses, the risks and rewards are much higher. Rigorous vetting of entrepreneurs seeking investors is vital.'

When the Business Expansion Scheme, which gives tax breaks to equity investors, ends in December, more people with money could consider becoming angels. A national network from which the sure-fire duds have been weeded out could give fledgling companies that the banks will not touch a better chance of thriving.

(Photograph omitted)