Quality information helps make best funding decisions
Taking any game-changing decision on the strength of incomplete or flawed information is a recipe for disaster. When the decisions are being made in a business context, their outcome could have far-reaching impact across the organisation, from the employment prospects of the staff to the security of the entrepreneurs and their creditors. Under those circumstances, the downside of taking the wrong decisions increases by an order of magnitude.
Selecting the most appropriate combination of funds for a venture probably ranks at the top end of the business risk profile. Get it wrong, and the business owners can easily find themselves saddled with loans at usurious rates which they cannot afford to repay, or with effective control of their business ceded to equity investors. And all because those involved in the decision-making process could not access the full range of options open to them.
Informed Funding was launched into the financial arena to increase knowledge and awareness of what is on offer from across the spectrum of funders. This covers everything from crowd-funded equity, through the alternative banking sector and private equity, to peer-to-peer lending and more specialised trade finance institutions. It was established as a channel readily accessible to the smaller business community which has the greatest demand for quality information. They have the most to gain from obtaining finance ‘tuned’ to their requirements and are the demographic most often held back by lack of access to those funds.
There is already a raft of finance brokers able to make commission-driven introductions to sources of finance. Given that intermediaries are involved, these are rarely deals on the best terms for the borrower. But Informed Funding is not a broker: it is an independent resource of information which charges no introductory fees or commission on the deals which may subsequently be reached between funders and the companies which take up finance. It is a level playing field on which sources of finance can set out their stall cost-effectively to the widest possible audience.
Many similarities with research companies
Informed Funding has many similarities with the research companies which publish analyses of different business sectors. They typically draw together industry-wide knowledge of the subject area either for major clients who have commissioned the work or reports for sale ‘off the shelf’ to the public.
Closer examination of the organisation provides an indication of Informed Funding’s pedigree in research. Its founder Chris Dines is a chartered accountant, and a successful entrepreneur in the smaller business sector. He was CEO of Ovum Ltd, an independent analyst and consultancy firm headquartered in London, and which specialises in global coverage of the IT and telecommunications industries. Since its inception in 1985, Ovum had built a reputation for high quality research.
Dines had guided Ovum through a critical phase in its development after the consolidation of international communications prompted a re-shaping of the research house genre; certainly so far as this particular sector was concerned. He led the company through a listing on AIM and its subsequent acquisition by Datamonitor, an international market intelligence and data analysis organisation. Datamonitor was subsequently purchased by Informa, regarded as one of the world’s leading business intelligence, academic publishing, knowledge and events businesses.
The research model of which Chris Dines had gained extensive experience at a commercial level led him to explore new ways of working in the research sector. As he observed, “Peer group research supported by collaborative networking amongst players seemed the obvious way to move forward in the financial sector. It was clear that there would be significant benefit in high-grade peer-to-peer knowledge sharing.”
The subsequent formation of Knowledge Peers created more than an academic think tank, however. It established a client base for its research services. An early customer was The Workspace Group, which was keen to see how Knowledge Peers’ style of operation could benefit its own customer base. Workspace is a real estate investment trust which emerged when the property assets of the former Greater London Council were privatised in the late ‘80s. The company, now listed in the FTSE 250 Index, lets office, industrial and workshop space to small and medium-sized enterprises.
Tailored version of Knowledge Peers for 5,000 businesses
Chris Dines’ team created a tailored version of Knowledge Peers for the close-on 5,000 tenants of Workspace. Access to the research resources would give the entrepreneurs who run them a commercial advantage. The Business Insight Programme looks at all aspects of business growth which was created to deliver that value-adding intelligence delivers through events which Knowledge Partners operates (and which provides another uncontroversial source of revenue).
Chris Dines took up the story: “Research showed that funding is the number one challenge for SMEs. There has always been a focus on finance as funding challenges are high on the agenda for Workspace tenants – and, indeed, for SMEs in general. Workspace has supported the development of Informed Funding from the outset, and will remain a very key supporter going forward.”
While Informed Funding is important to Workspace tenants, it was launched with a catchment beyond the property group’s office and business unit tenants. As Chris Dines noted, “We had a sizeable SME following through Knowledge Peers. We have also attracted other key partners including Greater London Enterprise.
“As part of the Knowledge Partners brief, we had been monitoring the emergence of early alternative funding players. Our understanding of the potential marketplace for alternative funding was confirmed by Andy Davis, who had just left the Financial Times as editor of FT Weekend, and was researching new entrants to the alternative finance market.”
Though there was apparent interest in the concept of non-bank finance, the volume of transactions was low. The team decided that there was mileage in alternative finance and continued to track that funding space.
The Alternative Funding Network (AFN), as this division of Knowledge Peers came to be known, has attracted more than 600 specialists in finance who share their knowledge and experience of the evolving sector. According to Dines, half of those involved are senior executives in funders. All of the networking platforms are represented, for example. “Joining the alternative finance marketplace is now proving difficult as increased regulation is a barrier to entry. But there are currently more than 1000 financial ‘suppliers’ of all kinds.”
If AFN is a ‘supply side’ organisation, Informed Funding (IF) is the mechanism for communicating the knowledge base to those who are looking to raise funds. IF is not a finance platform matching borrowers to lenders, but a medium for information and education. With its pure research-based approach, IF lists all of the finance sources it can identify. Funders who require more comprehensive exposure take up a paid-for micro-site within the Informed Funding website.
IF provides a comprehensive tool kit which enables the SME to work out what might work for their own enterprise, with a check list that helps ensure that only businesses which are likely to benefit from a particular type of finance – and stand a realistic chance of having their application considered seriously – will make their case to a funder.
Chris Dines put the opportunities for funding into perspective. “Despite the 1000+ players giving the impression that the marketplace is huge, achieving what a business requires is not easy: there is a 95% rejection rate, for example, for applications to one of the prominent peer-to-peer lenders.”
TAEFL will raise profile of Informed Funding in Midlands
Given the degree of linkage between the Knowledge Peers divisions, The Workspace group and Greater London Enterprise, it is inevitable that the organisation’s ‘centre of gravity’ is the South East: it is where Chris Dines and his team run a range of finance seminars for SMEs as well as much larger ‘Funding Fairs’. With its operating base at Aston, in the Midlands, Trade & Export Finance (TAEFL) is planning a series of its own successful industry events which will raise the profile of Informed Funding in the region.
Mark Runiewicz, the company’s CEO, sees many areas of interest and practice in common with IF. “One of the key factors in our own growth over the past six years has been our ability to identify appropriate sources of funding and work with our clients to achieve an optimised solution.
“The research undertaken by Knowledge Peers further increases our understanding of the funders and will help us achieve an even closer fit for the SME community outside the M25. We are firmly of the belief that quality information well applied reduces risk in the interests of both funder and entrepreneur.”