Roadshow Points the Way Forward for SME Ventures; an Economic Report Last Week Highlighted the Very Low Take Up Levels of Venture Capital Funding in Northern Ireland. in the Republic, Things Are Not Much Better. but in the Last Few Weeks a Major Awareness Campaign Has Shown SMEs on the Island How Growth Can Be Accelerated and International Markets Successfully Targeted. PAUL MCKILLION Reports
GOVERNMENT grants for businesses are slowly drying up in a situation where Northern Ireland's economy needs more start ups and more companies exporting high value products.
SME owners will no doubt be aware of this. The Ledu adverts encouraging budding entrepreneurs to believe in themselves and the Economy Minister's calls to revive Belfast's proud history of innovation have formed the backdrop to the building of a framework which is intended to drive forward a more enterprising business culture.
This framework includes Invest NI's draft corporate plan outlining its intention to take equity stakes in companies, the work of the Viridian Growth Fund which is seeking to plug a gap in venture capital (VC) provision just about seed corn level, and InterTradeIreland's Equity Network programme.
InterTradeIreland (ITI), the north-south trade and business development body, sees increasing the take up of equity funding as a priority.
By providing an advisory and sign-posting service for SMEs eager to see business grow, it's work complements what the Government and economic development agencies on both sides of the border are doing separately. It's series of roadshows throughout the island feature a venture capital fund manager and someone who sought, and won, funding for their business.
Their stories are intended to dispel the myths of VC. Margaret Hearty, operations manager of Equity Network, said there was a need to educate SMEs why they may need it and what is involved.
"At the end of day, venture capitalists only invest in one-in-100 business plans they see. Unless you can hit them with something they want to invest in, they won't.
"Ultimately, they want a commercial return.''
If venture capital is invested, the business has to be competitive, says Ms Hearty. That means, first, having an `investor ready' project and then being prepared to give the investor or investors some control over the business.
"Businesses may have to go that little bit further to make themselves attractive to VCs.
"Maybe they haven't got their markets well defined. There is no point in coming to the market unless you have a product, a solution for a market problem.''
"Then there might be a weakness in the management team. That's where we think we can help very quickly by using a panel of non-executive directors on the island to find them the right person to come on to the board to accelerate growth. It also gives credibility and market knowledge to be able to attract venture capital.''
While VC is more associated with the hi-tech sectors - Lagan being the most recent example - throughout the roadshows there has been a ``reasonable proportion'' of the audience from the traditional sectors, says Margaret Hearty.
"Most are aware in the traditional sector you have to be doing something different. Whether its exporting or design led, something innovative.''
Dr Hugh Cormican, managing director of Andor Technology, was the `user' of VC at ITI's Equity Network event in Belfast last week.
Having secured two rounds of funding, in 1997 and 2001, he dismissed two common worries - that VC means surrendering control in the business and, secondly, the investors' sole mission of driving the businesses forward to the exit strategy and maximising their return.
The liquidity has powered Andor to double its business every two years and last year it recorded turnover of pounds 5.9m.
"Control is an illusory thing anyway. People think they have control but what real control you have is limited by your market, competitors, customers, suppliers and employees.''
He said the practice of venture capitalists to place a non-executive director on the board to provide guidance, and also to protect the investment, was a positive, but added that the relationship should be robust. …