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15/09/2005
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A great idea on its own is never enough - taking an idea from concept to commercial reality requires serious money. Dean Palmer seeks advice from an inventor and a venture capitalist
One source of accessing funds for developing new technologies is the DTI's Research & Development Grants which replaced the DTI Smart Awards. The problem is, there seems to be less money in the pot, the application process is strict and if you happen to be awarded a grant, the DTI keeps a careful, watchful eye on how you spend the money.
Chris Stimpson, MD of Pedalite, a start-up company based in Kingston whose new product, the 'Pedalite' bicycle pedal that was featured on the cover of Eureka's July issue, has strong views when it comes to seeking DTI R&D grants: "We managed to secure a DTI R&D grant on two separate occasions, amounting to around £100,000. We followed the application form to the letter, did not deviate in any way and ensured that we laid out all the problems we needed to solve to make Pedalite a successful product. Good, clear management accounting is key here."
Stimpson also made sure that the problems listed in the application were then answered by a project plan which matched the list of problems. "We wanted to make it very clear where the funding was needed and where the project was heading. The DTI doesn't want to be seen as a venture capitalist or a bank, it wants to be seen as a problem-solver."
Stimpson also believes that "mad-hat ideas" need to be eked out of the DTI grant system and that the application form should be "challenging" to complete. Fortunately, Stimpson used to work for Citibank as a project manager so he has plenty of experience writing project plans and management accounts, but most lone inventors do not.
The key to winning an R&D grant, says Stimpson, is proving in your application that your idea will benefit the UK economy. Impact on the environment is one area that can help your application. Market research is also crucial and even if the idea is good, if you haven't done your market research thoroughly, the application is likely to be rejected. "Then you have to ensure your accounts are in order, cashflow projections, profit and loss accounts, and so on," explains Stimpson.
"Above all, you have to stick to the DTI script. After all, they are grants so you have to earn them. I've had nothing but good, honest feedback from the DTI and they've even visited our offices."
But aside from R&D grants, Stimpson concedes that at some stage of the development, venture capital (VC) or investment funding will be required. Pedalite managed to secure VC funds through various channels, including business associates and friends, but this is an area where inventors can often struggle.
Boyd Mulvey is MD of Create, a Cambridge-based investment funding group that is behind 'Run the Gauntlet' a competition for £1 million of funds organized by the East of England Development Agency, featured in the July issue of Eureka. He offers some tips for entrepreneurs and inventors that are seeking funds for a new technology:
* Build a credible team (management is everything and a VC is more likely to back a strong management team with an unproven product than a 'hot' product/concept with a weak management team)
* Research your market thoroughly
* Develop a product that is unique with demonstrable demand
* Operate in a market place that is sizeable/growing
* Make sure you can defend your position (ie. Patents)
* Do your homework. Choose your investor or VC carefully
* Never cold call an investor
* Do not approach an investor if you have not addressed all the issues above
* Use 'The Gauntlet' (www.the-gauntlet.com) to test your investment-readiness BEFORE you approach investors
* Be tenacious - if you believe in your idea and can prove its worth, your energy will be infectious
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Author
Tom Shelley
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