Micro funding

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Inventor, manager and investor each have a minimum of 30% of the shares in the business. Because nothing can be realised until a cash exit the management have a real incentive to work towards this goal as early and as profitably as possible.

The first step is for the manager, at his own time and reputation risk, to define a not-for-profit 'Proof of Concept' project to test and confirm that all the factors needed to realise commercial potential are there - protectable intellectual property, market, price points, manufacture, and so forth.

THE PROCESS IN DETAIL - FIRST STAGE

‘Concept’ created by Inventor and posted on secure website
‘Concept’ is identified as possibly having significant commercial potential by highly skilled and sector-experienced Manager
At his own time and reputation risk Manager specifies and costs ‘Proof of Concept’ project
‘Proof of Concept’ project paper written for posting for Investors and to act as project template
‘microFunding’ invited from Investors in units of £2500
If sufficient funds raised successfully, subscription agreements completed by solicitors. Investors have priority rights to subscribe to next stage
Company formed and IPR assigned
The Project is independently supervised, and audited by a firm of Chartered Accountants

THE PROCESS IN DETAIL- SECOND STAGE

If the concept is not proven, then:

Company and IPR are re-assigned back to the Inventor
Any residual funds returned pro-rata to Investors - it is very possible thatan opportunity will come up against a fatal flaw at an early stage, before all the enquiries have been completed and so before all funds have been committed
Auditor provides Certificate; Investors may be eligible to claim tax relief on losses

If the concept is proven, then:

A report of the investigations provides the basis for the future Business Plan, and is circulated to priority Investors
Investors decide whether or not to take up their right to subscribe further
Exactly 30% of equity is available: if the assessed valuation is less than equitable for the required funding (and the deal is nonetheless worth doing), then part of the funds raised will presumably be as loan. If the value is greater than would be equitable, 30% is still available, which is the quid pro quo for taking the early stage risk
If an Investor fails to take up his option to invest further, co-Investors have right of first refusal, and then the option is saleable on the open market, possibly for a significant gain in the right circumstances!
30% of the equity is for the Inventor
30% of the equity is retained by the manager for performance-related options
2.5% is retained by microFunding for fees; and 7.5% is retained for contingencies but this may not ultimately all be issued (if appropriate and required) EIS applied for Shareholder agreements completed by solicitors
Investors are guaranteed to be able to back the successful projects, or if they wish they can sell their rights to invest for an early, smaller, profit.

THE PROCESS IN DETAIL- THIRD STAGE

Once the business is funded:

The manager's role now starts in earnest. His main reward for succeeding in this process will be when he can sell his shares. This means that the Manager is very motivated to create a favourable exit in as short a time as is realistically possible for as high a value as possible

If you are interested in this concept you can register here

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