When a business applies for an innovation loan, the final step in the decision-making process is often a presentation from the management team to members of our credit committee. This is quite different from when a researcher writes a project application or when a consortium presents at an interview panel. It’s perhaps closer to pitching to an investor. Why do we do this and what are we looking for?
Why a management presentation?
When a small and medium sized enterprise has applied for an innovation loan, our process has considered:
- that the application is eligible and in the scope of the programme, with late-stage research and development (R&D) in the future economy areas of Innovate UK’s Plan for Action
- the quality and deliverability of the proposed R&D project, through independent assessment
- the suitability of the business to take on a significant long-term loan commitment, that may be for as much as £2 million over seven years, through our credit team. (And it’s worth looking at Pamela Bal’s blog for her ‘insider tips from a credit specialist’.)
The management presentation brings all these elements together and is a way for final questions to be answered. Allowing our credit committee to make a decision on whether or not to offer an innovation loan and what specific conditions may need to be included in the loan offer.
It’s also a chance to look the management team in the eye, visit the premises and see for ourselves how and where taxpayers’ money is being used to support growth.
What do the best management presentations cover?
Our credit specialist usually suggests the agenda for the presentation and highlights the important outstanding questions that the credit committee would like answered. It seems obvious, but the best management presentations actually do cover all these points. We really want to hear the story, with the main elements being:
- what is the value proposition?
- what is the market opportunity?
- who are the team, and do they have the necessary breadth, depth, expertise, experience, and resources to deliver growth?
- do the financials stack up, with an appreciation of the important sensitivities and risks?
- is an innovation loan right for the business and is the business right for an innovation loan? Does the business have a distinct technology development strategy, a compelling commercial strategy and a solid funding strategy that underpins these to deliver success?
The value proposition and market opportunities
We see lots of really clever technologies, of course we do, because we are the UK’s innovation agency. Our assessors have confirmed the quality of the proposed project. Now we want to confirm the answer to the “so what” question or more specifically to the “who’s going to buy this?” question.
We want to test the management’s understanding of their market, top-down and bottom-up, and get past the typically over-optimistic ‘hockey-stick’ revenue growth forecasts.
The team and resources
When Innovate UK provides funding for a collaborative R&D project, the project team from different members of the consortium needs to have the right people to deliver. When we provide an innovation loan to a small and medium sized enterprise, we need to know that the R&D project will be delivered.
Also, we need to know that the business is going to grow and be able to repay the loan over time. This means we want to meet the senior executives, including commercial, technical and financial leads, and see that they really work together as a team. Gaps are expected, so we want to hear the plan to fill those gaps over time.
This is a loan, so we naturally want to spend time examining and testing the numbers in detail. We want the applicant to show that they understand the numbers. My colleague Richard Reaney wrote a blog recently about the current economic challenges, so we know from our own portfolio that things will not go according to plan.
We want to discuss sensitivities and risks, so that the management team can show that they understand the financial impact of uncertainty. We will inevitably ask about capital raising, in fact I can almost guarantee that I will ask why the applicant isn’t raising more capital earlier!
What are the common pitfalls that we see or how do teams excel?
We have seen a few issues come up frequently when a management presentation goes wrong and a few examples that filled us with confidence in a management team:
- focus on the technology not the business is a common mistake. Forgetting this is a loan application that needs growth to repay
- skirting over the financials rather than demonstrating mastery of the numbers and the impact of them will never be good in a loan request. Having a full-time or part-time high-quality chief financial officer can make a real difference
- over-rehearsed or scripted presentations, although recently this concern was overcome when we got to questions and the entrepreneur’s passion, character and understanding shone through
- teams that have massive gaps (without a plan to fill them) or that clearly just don’t gel together do happen. We enjoy meeting a well-rounded team that has breadth and a clear ability to work together in their areas of expertise. (Perhaps bringing in an investor, too, to give confidence about capital-raising plans)
- lack of full disclosure is clearly a problem!
- teams that try to tell us what they think we want to hear rarely instill confidence. We were hugely impressed by a chief executive officer recently who told us all the things we needed to know. She answered all my questions even as I was writing them in my notebook during her presentation.
Attending management presentations really is the best part of my job. At a good one, I see a team with a solid story of how they can grow through innovation with our support. They inspire and involve and make me want to invest through an innovation loan.
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