As part of the Access to Finance Strategy, Invest Northern Ireland has appointed Clarendon Fund Managers (“CFM”) to manage Co-Fund NI. The aim of the Fund is to ensure that businesses with growth aspirations can access equity finance to reach their potential.
What is Co-Fund NI?
The Co-Fund NI programme makes available £47.3 million to invest alongside private investors such as business angels or business angel syndicates (hereafter referred to as ‘private investors’ or ‘syndicates’) into eligible SME’s based in Northern Ireland. When matched 35% with 65% private investors on a deal-by-deal basis this will give an overall ‘fund’ size of £136.3 million.
How does the Fund Operate?
The Fund will, to the extent possible, follow the terms of the private investors including the structure and price of any investment.
Once invested the Fund will be able to make follow-on investments alongside syndicates in companies that are already within its portfolio.
The Fund will expect the private investors to lead investment rounds, with assistance and support from CFM where this is required or requested.
The Fund will typically only consider ‘new investments’ for the private investors, where they can demonstrate that they have carried out their own due diligence, and independent assessment of the investment opportunity.
The Fund expects to invest in rounds of between £150,000 and £1,000,000, and will invest at a ratio of up to a maximum of 50% of the investment round, but more typically aim for 35% of the round. The Fund may consider larger round sizes as long as its initial investment is no more than £250,000.
Investee companies must fall within the European Commission SME definition (headcount not exceeding 250, turnover not exceeding €50M and balance sheet assets not exceeding €43M) and be based in Northern Ireland.
Whilst it is anticipated that a higher proportion of beneficiaries may be earlier stage, high growth companies, SMEs at any stage of their lifecycle are eligible provided that they have the required minimum level of investment from a syndicate or private investors.
- Must be SME with operations substantially based in Northern Ireland
- Must not be in a prohibited EU sector (e.g. Defence, Tobacco, Gambling) and generally be in manufacturing or tradable services (Export-focused)
- Must have an identified funding gap in a proposed investment (Companies must have tried and been unable to raise all required funding from private sources)
- Funding is subject to ‘State Aid’ and therefore investment cannot breach State Aid Block exemption (must take account of other ‘State Aid’ receipts or offers such as grants)
- Where the investment is being led by business angels, there must be a minimum of three participating in the investment round
What we can do for companies
- Effect introductions to private investors but only to help Companies fill-out investment rounds
- Work with investee companies and investors going forward and plan for and expect follow on investment rounds
What we will NOT do for companies
- Source primary investors – For this we suggest you contact Halo, HBAN, other UK and ROI business angel networks or Corporate Finance, Legal, Accountancy and other Professional advisors
- Provide direct/formal investor readiness for companies – For this we suggest you contact InvestNI’s Propel Programme, Catalyst Connect, Entrepreneurial Spark, Techstart NI or the council led ‘Go for It’ programme
- Engage with companies before they have identified significant proportion of required private investment (must have tried to raise funding from private sources)
What we need to progress
- Completed application form and supporting documentation
- Introduction to private investors including contact details for lead private investor(s)
- Inclusion of standard Invest NI terms and conditions in any investment agreement (available on request once a specific deal is progressing)
- Pari passu investment terms with private investors ideally incorporated into a term sheet
- Standard legal and financial due diligence checklist as part of an investment process
- Standard information regarding FCA compliance including corporate identity verification and Directors Questionnaires (available on request once a specific deal is progressing)
The fund is not open to direct approaches from individual businesses. Those seeking investment should first secure the interest of private investors. However the fund does work with existing private investors and businesses where a substantial proportion of the required private sources of funding are in place, and they are working towards setting investment terms and filling out a round.
What we can do for investors
- Seek pre-qualification of investors and investor syndicates, but on a deal by deal basis initially, assessing investors as well as investments
- Engage with Investors as much as Companies, ideally it will be the investors making initial contact with the Fund
- Assist private investors where required for example with setting out term sheets, discussing valuation principles and providing guidance on due diligence and the investment process
What we will NOT do for investors
- Promote investment opportunities
- Co-Fund NI engaging with a Company should not be considered a validation or endorsement of it as an Investment opportunity
- Lead investment rounds or set the terms of investment
- Carry out independent due diligence (expect private investors to have carried out adequate DD and share outcomes with Co-Fund NI)
What we need to progress
- A proposed investment where the investor is seeking engagement from the Co-Fund NI
- Investor confirmations that they are a HNWI and/or Sophisticated Investor as set out the Financial Services and Markets Act 2000 (available on request once a specific deal is progressing)
- Signing up to a set of Terms and Conditions for engagement with Co-Fund NI for the investor, and any connected person investing alongside the investor (available on request once a specific deal is progressing)
- Ideally a term sheet which the Fund can adjoin (template available on request once a specific deal is progressing) setting out terms, any gap in funding and expected due diligence process
- Engagement in a structured and planned due diligence process and sharing of information with the Fund
This initiative is provided by Invest Northern Ireland and part-financed by the European Regional Development Fund under the Invest for Growth and Jobs Programme 2014-2020.