Investing time instead of money in order to get equity? Sounds like a good plan to me. If things go wrong, I've not lost any money. Or is it a good plan? What are the pitfalls for the sweat equity provider, future investor and the entrepreneur? What questions should they ask each other and what should they be aware of?
The other week I caught up with Chris Jennings of Chrysalis VCT. It’s nearly a year since I met him when he was opening the Bristol office of this London based Venture Capital Trust. By all accounts Chris has been working hard to find companies in the South West that meet the criteria of requiring between £250K and £1M for a deal involving debt and equity. (An aside: they are offering 6-10% fixed rate interest and debt repayment – that’s a good rate by anyone’s standards).
This deal was sourced by a colleague who rungs Peagsus Funding: Alan Cottle. Alan is based in the South West and provides excellent help and advice to a few, select companies that he feels will be successful in raising finance from his Business Angel and Venture Capital contacts. In this case he prepared the company for investment and developed a robust financial model.
So what was the deal?
Chrysalis VCT invested in a telecoms infrastructure services company called AerialCell based near Aldershot. This funding will provide development capital to drive business growth in the installation, decommissioning, optimisation and maintenance of telecoms antenna and transmission equipment.
Chris is currently working on other deals although the next one has been held off for a couple of months to allow the management team to concentrate on their company… Congratulations to all involved in getting a successful investment. I’m looking forward to hearing about the exit!