Characteristics of a Typical Investee Company

1.  An experienced and committed management team.

It is highly preferred if the management team demonstrate their commitment to the business financially as well as in terms of their ambition, competence and enthusiasm.
 

SEGF invests in companies that we believe will grow significantly following our investment. By taking an equity stake in such companies we ensure that we maximize returns to our investors.

Growth potential is usually demonstrated by the existence of a combination of barriers to entry for competitors such as intellectual property protection, unique selling propositions (USPs), previous revenue growth and a management team with a track record of success.

SEGF looks to make investments from which we can exit in the medium term, typically 3 to 5 years post-investment. Essentially we realize the major component of our return on investments by selling our stake in the business. Though we will consider selling back our stake to management shareholders in exceptional circumstances, such a strategy would be inappropriate at the outset.

Typical Business Plan Structure

In order for us to consider a company for investment we require a Business Plan. A typical business plan would not exceed 30 pages and would follow a similar structure to the following:

(i)  Executive Summary

This should consist of 1 to 3 pages of text that summarise key aspects of the plan.

An overview of the company’s products and services, what stage the company is at and how the company intends to move forward.

An explanation of who the companies are that you will be competing with, what they do and what your strategy for competing with them is. 

An overview of the intended team structure and the CVs of all executive and non-executive directors either here or in the Appendices.

This should give an overview of the company’s finances and future requirements. This section should contain the following information:

Summarised Balance Sheet Information

This need not be in the form of a detailed financial statement but should clearly explain what assets and liabilities the company has and the source of previous funding in the business.  By way of example if the company’s funding has come from directors it is important to know whether this is in the form of equity or debt and whether the investment was financial or in the form of “sweat capital” (e.g. it should be made clear if directors have converted foregone salaries into director’s loans and/or have capitalised technical development). It should also be made clear what the pre-SEGF investment equity split is amongst all owners.

The latest audited Balance Sheet statement should be included in the Appendices

• Summarised Profit and Loss

It is useful to have a very high-level profit and loss statement for the previous operating years (if applicable) and yearly forecasts for the next 3 years. This need only include the following information:

Net Sales, Cost of Sales, Gross Profit, Operating Expenses, PBIT.

A more detailed P&L statement and forecast should be provided in the Appendices

• Summarised Cash Flow

A summary of the company’s cash flow requirements for the next 3 years. A monthly breakdown for year one and at least a quarterly breakdown for subsequent years should also be included in the Appendices.

• Use of funds

A brief overview of how the investment from SEGF will be used.

South East Growth Fund is managed by West Midlands Enterprise Ltd. West Midlands Enterprise Ltd is a company registered in England No 1616121, registered office: Wellington House, 31-34 Waterloo St, Birmingham, B2 5TJ. Authorised and regulated by the Financial Services Authority in the conduct of its designated investment business.