Frequently Asked Questions
Below is a list of our Frequently Asked Questions, along with answers. We hope you find them useful.
- What is the Advantage Growth Fund?
- Why was the Advantage Growth Fund established?
- What type of company is likely to be an attractive investment for the Fund?
- What is Advantage West Midlands' involvement?
- What are the Fund's investment criteria?
- How much venture capital investment can the Fund provide?
- Are there any sectors the Fund cannot invest in?
- How does a company apply to the Fund ?
- Is the information provided kept confidential?
- Is Midven regulated by the FSA?
- What are the timescales to investment?
- What form does the investment take?
- To what purpose can the company apply the investment?
- Is Midven independent of the Government?
- What returns is the fund looking for?
- What is the expected time period between investment and exit?
- Do I need a business plan?
- Who are the Fund investors?
- Where can I find co-investment?
1. What is the Advantage Growth Fund?
The Advantage Growth Fund has been set up with investment from the Small Business Service (Dti), the European Investment Fund, Barclays Bank, the Royal Bank of Scotland, HSBC, the Universities of Aston, Birmingham, Coventry, Warwick and Birmingham City and Midven Limited. The fund will invest in businesses that have the potential for rapid growth. The first investment in any one company will be limited up to £250k and the Fund can invest up to a further £250k in due course subject to a separate investment committee decision. Further investment can be provided beyond this provided it is alongside another larger investor.
2. Why was the Advantage Growth Fund established?
To provide venture capital investment to SMEs within the West Midlands region that are typically young well managed businesses with high growth potential.
3. What type of company is likely to be an attractive investment for the Fund?
Companies suitable for funding would ideally :
- be growing rapidly and /or serving a growth market.
- be capable of achieving sustainable growth in profitability and should have profit potential of £250,0000 pa.
- have a strong management team.
- have a defensible market position and be robust to economic downturn.
- be capable of achieving an exit, probably by trade sale, within 5-7 years.
4. What is Advantage West Midlands' involvement?
Advantage West Midlands is the Regional Development Agency for the West Midlands and as the sponsor of the Advantage Growth Fund has provided considerable assistance to help its establishment. The Fund and Midven, the manager of the Fund, are separate legal entities independent of Advantage West Midlands.
5. What are the Fund's investment criteria?
To qualify for consideration you should:
- be based in Warwickshire, Worcestershire, Herefordshire, Staffordshire, Shropshire or the Metropolitan Borough of the West Midlands (Birmingham, Coventry and the Black Country);
- be a small or medium sized business, which means up to 250 people employed, turnover not exceeding Euros 40 million and net assets of no more than Euros 27 million;
- be either an established business with growth potential, or a start up business with exceptional growth potential;
- have a strong management team;
- be capable of achieving a sustainable competitive advantage;
- have a business with a well defined strategy, capable of achieving capital growth and an exit for investors within 5 to 7 years;
- be in a growth rather than declining market;
- have a business which is robust to economic downturn;
- not fall within the DTI's excluded sectors. These are as follows:
- dealing in land, commodities, futures, shares, securities or other financial instruments;
- dealing in goods (other than in normal wholesale or retail trades);
- banking, insurance, money lending, debt factoring, hire-purchase financing and other financial activities;
- property development;
- farming, forestry or market gardening;
- operating or managing hotels or nursing or residential care homes;
- not fall within the definition of 'Restricted Sectors' referred to in Article 32 of the EC Treaty. These include, among others, certain agricultural and food related sectors and other sectors of which examples are synthetic fibres and yarns, motor vehicles and certain heavy industries.
6. How much venture capital investment can the Fund provide?
The initial investment will be up to a maximum of £250,000, subsequent investments up to £250,000 can be made at the end of each successive six month period providing the aggregate investment in any one company is limited to a maximum of £500,000. Further investment can be provided beyond this provided it is alongside another larger investor.
7. Are there any sectors the Fund cannot invest in?
Yes, the Department of Trade and Industry's excluded sectors, which are as follows:
- dealing in land, commodities, futures, shares, securities or other financial instruments;
- dealing in goods (other than in normal wholesale or retail trades);
- banking, insurance, money lending, debt factoring, hire-purchase financing and other financial activities;
- leasing or letting assets on hire, except in the case of certain ship chartering activities;
- providing legal or accountancy services;
- property development;
- farming, forestry or market gardening;
- operating or managing hotels or nursing or residential care homes.
It is also important that investments do not fall within the definition of 'Restricted Sectors' referred to in Article 32 of the EC Treaty. These include, among others, certain agricultural and food related sectors and other sectors of which examples are synthetic fibres and yarns, motor vehicles and certain heavy industries.
8. How does a company apply to the Fund ?
Contact us directly by phone on 0121 710 1990. We can give you initial feedback. However we are unable to process an application for finance until such time as you have prepared a business plan and provided the plan together with all other information we require.
9. Is the information provided kept confidential?
Yes. Midven are authorised and regulated by the Financial Services Authority (FSA) and are bound by all FSA confidentiality rules. However, we are happy to enter into most standard confidentiality agreements if you so wish.
10. Is Midven regulated by the FSA?
Yes. Midven Ltd is authorised and regulated by the Financial Services Authority. (reg no 148549)
11. What are the timescales to investment?
A typical process and timescale prior to investment is as follows:
- Initial Contact (Weeks 0-1)
Initial contact may be made via your business adviser or by telephoning us directly. Typically after the initial enquiry you will send us a business plan. - Assessment (Weeks 1-3)
If your business plan and application meets our criteria we will arrange a meeting with you and / or your business adviser. We will undertake initial due diligence. - Negotiating an investment (Weeks 3-5)
If we wish to proceed we will provide you with details of the terms of a possible investment. If you agree with these terms we will seek approval for an investment from our investment committee. - Formal Offer Letter (Weeks 5-6)
If the investment is approved we will make you a formal offer.
This will be subject to various terms and conditions that need to be satisfied prior to completion.
We will ask you also to complete an investment questionnaire which , in due course, will form part of the legal documentation. - Legal process (Weeks 6-10)
If you accept our offer we will put in place legal documentation including Shareholders Agreement, amendment to the Articles of Association and directors' service agreements. - Due diligence (Weeks 6-10)
We will undertake further due diligence including references, accounting investigation and obtaining market reports if appropriate. - Completion (Week 10)
Legal completion with funds invested.
No two investments are the same and some cases may take longer or shorter to complete than indicated. We will keep you informed as to where we are in our process. If at any stage we decide not to proceed then we will let you know as soon as is practicable.
12. What form does the investment take?
The Investment amount will typically be for a mixture of ordinary equity shares and either redeemable preference shares or subordinated loans. Venture capital is risk finance and therefore we will always take an equity stake in our investee companies with the aim of providing the Fund with a commensurate reward for the risk it is taking.
13. To what purpose can the company apply the investment ?
The investment can be applied for the purposes which have been agreed between us, details of which would be contained in the business plan.
14. Is Midven independent of the Government?
Yes. It is a limited company owned by its investment team.
15. What returns is the fund looking for?
We manage commercial funds, and when we invest in companies we are expecting that the investment will provide the Fund with a commensurate return for the risk taken. Returns include interest, dividends, capital repayments and the amount realised on selling the Fund's equity stake in the company.
16. What is the expected time period between investment and exit?
We would expect an exit at any time up to seven years from the date of investment and the terms of the exit will be agreed with you at the time we make the investment.
17. Do I need a business plan?
Yes. See the Business Plan section of our website for information that should be included in it.
18. Who are the Fund investors?
- Small Business Service
- European Investment Fund
- HSBC Bank
- Royal Bank of Scotland
- Barclays Bank
- Aston University
- Birmingham University
- Birmingham City University
- Coventry University
- Warwick University
- Millpoint West (a subsidiary of Midven)
19. Where can I find co-investment?
Advantage West Midlands has a range of grants, loans and venture capital initiatives which are listed on their website
