Secure up to £250,000 through the Co-investment fund
Fund criteria and investment Policy
Investment policy
The East of England Co-Investment Fund (COIN) has been created to support the sustainable growth of SMEs which will benefit the most deprived economies of the East of England (“Objective 2” and “transitional” areas).
It is managed by IQ Capital Partners LLP and administered by East of England Business Links Limited.
The commercial aims of the fund are to optimise the long-term impact of the fund on the O2 area economies rather than just the pursuit of capital gain.
The investment strategy of the fund is to rely upon the commercial judgement of independent private sector investors and to co-invest on terms which are most likely to result in successful growth of the applicant business and lead to a viable realisation.
Applicants will need to meet the following essential eligibility criteria:
1) The applicant must demonstrate that the investment will be of benefit
to the economy of an East of England Objective 2 area. The following factors will be taken into account in making such assessment:
a) Applicant’s domicile within an O2 area,
b) Trading base within an O2 area,
c) Significant part of workforce drawn from an O2 area,
d) Direct and focussed other economic benefit to O2 area (to be justified).
2) The venture must have had an offer of equity investment for at least 40% of the proposed round from an arms length private sector investor (“arms length” is commercially independent of the applicant company and free to make an objective and unbiased investment decision in that company).
Relationships affecting ‘arms length’ status include but are not limited to the following:
a) Close family relationship with the majority shareholder(s),
b) Prior contractual or other commercial relationships with the
applicant company and/or its majority shareholders,
c) Shareholding in the applicant company prior to this investment round.
3) The offer of private sector investment must be genuine, expressed in writing and be for an investment of at least £25,000 for the purchase of equity in the venture.
4) Small and Medium Sized Enterprise status. SMEs are independently owned enterprises with fewer than 250 employees, with an annual turnover not exceeding £25 million and an annual balance sheet total of less than £16.5 million (subsidiaries with over 25% parent ownership are assessed as part of the overall group).
Investment criteria
The Fund is looking for businesses with a compelling business proposition, a competent management team, and the potential to deliver investment returns. The Fund Manager will also take the following into account:
1)There must be a well-argued potential to achieve financial sustainability before running out of funds invested in this round, or to demonstrate realistic potential for securing follow-on funding, which would take the investee to the break-even point.
2)The valuation on which the private investment will be matched must be judged to be reasonable and in line with accepted industry norms.
Investment size and terms
1) The Fund will initially invest between £25,000 and £250,000 (the overall deal size is unlimited). The Fund can also make follow-on investments, but only up to an overall €750,000 per investee. Any follow on investment will be subject to the same rules as the initial investment.
2) The arms length private sector investment must represent a minimum of 40% of the total monies to be invested and wherever possible should represent a higher percentage. ‘Private investment’ includes individual, corporate or institutional investors who do not have capital funding from public sources.
3) Investments will be by means of equity, preference shares, unsecured loan stock, convertible and secured loans. The exact mix of investments will be tailored to meet the circumstances of each individual deal.
4) There will be no subordination of investment returns, and the Fund will not take a “first loss” position on any investment.
5) If any other equity investees are deemed to be “State aided” (over the de minimis limit in the previous three years), the combined investment at the time will not exceed €750,000.
6) Investment will not be used for rescues where, at best, the likelihood is that the investment will merely defer the eventual demise of the business.
7) Investments will only be made in projects which are legal, moral and ethical.
8) Applications will be considered from all eligible sectors. However,businesses from the East of England’s priority sectors and clusters will be particularly encouraged. Reasonable steps will also be taken to secure that investments are made compatibly with the ERDF crosscutting themes concerning Equal Opportunities, Environmental Sustainability and Information and Communication Technology.
9) It must be noted that the Fund is fully discretionary, with the authority to accept or reject investments applications within the remit as it sees fit.
Post investment
As an investor in the applicant company, the Fund, represented by the Fund Manager, will participate in the development of the investee which will generally require appointment of a Non-Executive director representing the Fund. The Fund will also require comprehensive monthly, quarterly and annual reporting to be put in place.
As the investee grows, there may be need for a further investment round, in which the Fund can participate as set out above. In agreement with all investors, the fund will actively review options for realisation of the fund’s investment and, as appropriate, assist with development and execution of the exit strategy.
NB. Whilst every effort is made to assist companies in obtaining investment, no guarantee can be made that any funding will made available until any application has been fully considered and agreed.
Subjects covered in this guide
- Introduction
- Companies looking for finance
- Looking to invest?
- Intermediaries
- Fund criteria and investment Policy
- The stages of the investment process
