EV Group to open offices in Liverpool and Kendal

Insider Media reported today that North West based Venture Capital firm, EV Group will open offices in Liverpool and Kendal to be closer to investment opportunities following its appointment to run the £30 m North West Venture Capital Fund.

GB Group wins top gaming Award and plans to move to AIM

Just discovered GB Group thanks to Insider Media, which reported that the company plans to move to AIM from the Main Market due to heavy transactional costs and administrative and regulatory burden experienced since flotation. Insider Media also reported that David Rashe from Yorkshire based SSP will join as Non Executive Director from September 1st. Company is run by Richard Law and recently won the "Fraud and compliance solution of the year" award at eGR B2B Awards which recognises achievement and innovation among egaming’s B2B companies and service providers.

Structure Vision launches

Structure Vision, which pitched for investment at our March Dragon's Lair event and based at the same location as Techcelerate (i.e. Daresbury Science and Innovation Campus) has launched its flagship product NuPlant, which allows cutting and packing of objects in nuclear plans during decommissioning to optimise the way in which the various components of the facility are packed for storage. According to Insider Media, Structure Vision received funding of £300,000 from NWDA to bring the product to market. Well done, Rob Rule.

Pro-Manchester lobbying for Entrepreneurs of Manchester

Insider Media is carrying a story today on two new initiatives by John Ashcroft's Pro-Manchester; a bank and venture capital fund for entrepreneurs. John plans to run a serious of meetings and consultations over the coming months to validate his ideas with the help of Deloitte, KPMG, Altium, Ford Campbell, Adam & Co, Manchester Business School and Zeus Private Equity.

YFM backs digital deal

Insider Media reports that Medical communications agency, Fishawack Communications, based in Knutsford, has made its second acquisition with backing from YFM, which Paul Gower hinted at our last event. The company, which went through a £6m management buyout in 2008, has bought High Wycombe’s Alpha-Plus Medical Communications. The deal follows Fishawack’s move into the US market with the deal to buy Philadelphia-based Nexus Communications in February.

NCC Group reports 18% rise in profits

Manchester based NCC Group reported today, strong financial results with 18% growth in profits.

Financial highlights

- Group revenue up by 15% to £53.7m (2009: £46.8m)
- Group adjusted operating profits* up by 16% to £14.8m (2009: £12.7m)
- Group adjusted pre-tax profits* up by 18% to £14.5m (2009: £12.3m)
- Adjusted fully diluted earnings per share* up 14% to 29.7p (2009: 26.1p)
- Total dividend up 16% to 10.75p (2009: 9.25p)
- Cash conversion ratio was 139% of operating profits (2009: 140%)

Operational highlights

- Group Escrow maintained strong revenue growth of 9%
- Escrow UK saw strong organic revenue growth of 8%

- Assurance strengthened position as UK’s largest independent information security business
- Two acquisitions completed to enhance position and widen capabilities

Outlook for 2010/2011:

- Group Escrow renewals forecast to be £15.2m (2009: £14.9m)
- Group Escrow verification order book £2.2m (2009: £2.0m)
- Assurance order book, including the acquisitions, £14.0m (2009: £9.4m)
- Site Confidence monitoring renewals forecast to be £4.3m (2009: £4.1m)

Thanks to Insider Media for the tip

Annual NW Business Pitch (Liverpool, UK)

Just returned to office from pitching both edocr.com and Techcelerate at the Annual NW Business Pitch on Digital, New Media & ICT sector at Liverpool Science Park. From more than 25 companies pitched, I noted four companies that could be considered as tech businesses, these being, edocr.com, Collabor8online, Mediatank from Skylab and bisTrack from Progressive Solutions International. Event was useful in terms of strengthening existing relationships (Skylab, STFC Innovations, How-Do, etc) and building new relationships (Liverpool Science Park, Hatimo Games, etc).

Ravensoft gaining traction with Tweets60

Crains Manchester Business reported today that Manchester based mobile software developer, Ravensoft has seen half-a-million downloads of its Tweets60 and Battery Extender apps during February and March 2010.

What would be interesting more than above statistic is to understand, how many of the downloaders, if any, decided to connect with me on Twitter simply because of the image on their website.

Ravensoft UK was established in 2007, as a subsidiary of Ravensoft OY and Nordic Software Solutions. 3 Directors; Andrew, Chris and Mark each owns 16.67 of shares.

Not sure why they want to display Google Ads on their website, if the UK company has the backing and resources of a larger, international organisation. Whilst it works for a product such as edocr.com, I am not convinced companies should add Google Ads to their websites for small revenues the adverts generate.

According to Crains Manchester Business,  Chris Byrne, managing director said: “We are delighted by the success of our applications. It’s rapidly becoming a crowded market out there in terms of mobile software, so it is pleasing to see tangible evidence of the demand for our products. We are currently working on several new applications, both in-house and third-party products. These new apps will be available on Nokia, Blackberry, Android and Apple platforms. As a result of our continued success, we are also looking to grow the business by taking on new staff towards the second half of the year.”

Thinking aloud, would Ravensoft attract the attention of Greater Manchester based 2ergo, which has appetite for acquisitions?

On 6th April, Dow Jones reported 41% increase in US venture capital fundraising, raising $4.1 billion across 34 funds in the first quarter of 2010.

The New York Times reported on 31st March 2010 (not quite last week!), Kleiner Perkins Caufield & Byers, who invested in Google and Amazon.com early on, has double its $100 million iFund set up in 2008 and managed by Matt Murphy for application development to $200 million to support iPad application development. The iFund has invested in 14 iPhone applications including

In a Budget that promised to support investment in growth and jobs, it is the north west’s emerging high-tech, digital and advanced manufacturing businesses that appear to be the main beneficiaries.

Support from the new UK Finance for Growth funding package targeted at plugging the funding gap for fast-growth SMEs plus the University Enterprise Capital Fund which aims to capitalise on the world leading research of our universities should go some way towards easing crucial access to finance.

Existing tax incentives supporting innovative businesses, such as the R&D tax credit and proposals for a new lower tax rate ‘patent box’ have been retained plus there is good news for our flourishing video gaming industry with the announcement of a new games tax break subject to EU State Aid approval. However, it is disappointing that the finer detail surrounding these potentially attractive new tax reliefs has yet to be fleshed out in any meaningful detail.

Proposals for a £2bn Green Investment Bank targeting clean-tech infrastructure investment are also welcomed although again this proposal is lacking specific detail plus it is a mere drop in the ocean compared to the estimated £400bn infrastructure investment required over the next decade.

In a continued effort to encourage investment in capital assets by businesses, the Annual Investment Allowance will be doubled to £100,000 with effect from April 1, 2010, for companies. This provides 100 per cent writing down allowances against taxable profits in the year of expenditure on qualifying items such as computer equipment, furniture etc - this should cover the majority of annual expenditure for most SME businesses which provides a welcome boost.

A further welcome relief for small businesses will be a temporary business rate holiday for one year from October 2010 for those businesses occupying premises with a rateable up to £6,000.

Overall, the Budget announcement appears to be good news for our fast-growth emerging technology and digital north west businesses.

A new EIS Fund available to sophisticated investors that breaks the mould

London, 12 March 2010 – Highgate Associates and Enterprise Corporate Finance today announces the availability of a new and distinctive EIS Fund (HG Tech Fund) that is designed to maximise value for investors and investee companies. The fund is open to sophisticated investors who have a minimum of £10K to invest and who are looking to enhance their investment portfolio with exposure to high growth UK High Tech businesses with the ‘famous five’ EIS tax breaks.

HG Tech Fund is different on two counts, one being that it reforms the way that fees are charged. Unlike most other EIS funds, the HG Tech Fund is designed to ensure that the full value of investor funds receives 100% EIS relief, as opposed to the standard industry procedure to net off initial charges plus a further 17.5% VAT which could add up to 8% or so of investors’ funds. Investors in the HG Tech Fund will obtain 100% tax relief on the value of their investment.

Secondly, Highgate and its principals have an established and successful track record of investing their own money, as well as that of co-investors - this team knows how to build profitable businesses, globally. The fund managers are experts in the technology field, with many years of successful high tech company experience. HG Tech Fund Managers have established, grown and exited a number of high tech businesses between them.

The HG Tech Fund also offers a completely different and more rewarding experience for the investee businesses, as well as the potential for better results for investors and companies alike. In addition to their expertise, the fund managers offer investee companies a helping hand with financial management, marketing and, where needed, senior level management to ensure that the investee companies grow and meet the financial targets using the funding that is provided to them to the maximum benefit. In short, the HG Tech Fund will help formative technology businesses with good ideas to realise their potential more quickly.

Highgate is prepared to put its money where its mouth is by way of its incentive to deliver strong performance to investors. Before the HG Tech Fund can take any profits itself, it will have had to deliver a minimum of 6% annualised return to investors. Fund Managers are themselves investing in the Fund, so putting their own money where they believe they can succeed. The fund will be managed completely transparently ensuring that Investors are kept informed about the performance of their investments regularly. And this is all in addition to the very attractive tax benefits offered by EIS investments.

Susan Phillips, Director General, EIS Association says “I am delighted to be working with the Highgate team in launching the HG Tech Fund. To my mind, the ethos of this Fund represents the intrinsic sentiment behind the Enterprise Investment Scheme, being to foster and encourage private sector investment into growing British companies... It is not just about spotting a winning technology but understanding its market and, above all, working with the management to get ahead of the competition, market the product successfully, drive the company forward, add in necessary skills where needed and keep the company on track.”

The HG Tech Fund is open now for new investment and has its initial close on 4th April 2010. The portfolio will aim for a spread across a number of investee companies and to be fully invested as quickly as possible so that investors can claim their EIS tax relief promptly. The Fund is looking to deliver a return to investors within a three to five year investment window, with a roll-over opportunity to maximise the IHT and CGT potential. The Fund is advised by Enterprise Corporate Finance, established in 1992 to advise EIS companies and with significant expertise in the sector.

The HG Tech Fund offers very competitive terms for investors and an excellent support infrastructure for investee companies alike, which means it breaks the mould of typical EIS Funds.

End

For further information please contact Andrew Muir on 07785 393583 or amuir@hgtechfund.com or visit www.hgtechfund.com

Highgate Associates

Highgate Associates was established in 2001 by Andrew Muir and Ken Nelson, each having over 25+ successful years dedicated to starting and building technology companies globally.

Andrew Muir and Ken Nelson co-chair the Fund Investment Committee and work closely with Enterprise in allocating EIS Funds to the investee companies and managing the Fund investments. Highgate’s senior Financial Director, Henk Nieuwenhuizen, oversees all investments made by the Fund to ensure proper accounting and disclosures.

Highgate deploys a very focused hands-on approach to the HG Tech Fund EIS investments, taking an active role in monitoring the performance of management teams within the investee companies in the form of reviews with the Investment Committee members as well as attending AGM and other general meetings to hear first hand from the management as to the progress of the company. Of particular interest is close scrutiny of the exit strategy and opportunities for returns to Investors that may arise during the company’s investment period. Highgate will take board positions and financial roles in the investee companies, as necessary. www.highgateassociates.com

Enterprise Corporate Finance Limited

Enterprise Corporate Finance Limited is an investment adviser specialising in and predominantly working with unquoted investments. Its principal, Susan Phillips, has a background in investment management and for 17 years has specialised in financing, advising and mentoring unquoted companies across a wide range of industries. Susan is a recognised leader in the EIS community and acts as Director General of the EIS Association. www.enterprisecf.com

Authorised and Regulated by the Financial Services Authority

Enterprise Corporate Finance Limited is authorised and regulated by the Financial Services Authority, 25 The North Colonnade, Canary Wharf, London E14 5HS. This information is communicated on the basis that participants in investments managed or advised by Enterprise Corporate Finance Limited should be sufficiently expert to understand the risks involved and understand that they may not be covered by the rules and regulations made for the protection of investors in the UK. Past performance may not necessarily be repeated and is no guarantee or projection of future results. This is not an invitation to invest. Any investment must be made on the application form and on the terms set out in the Investment Memorandum dated March 2010.

Your attention is drawn to the risk factors on page 21. Unquoted investments can be difficult to sell and it can be difficult to obtain accurate information as to their worth or risk profile. This communication is provided for informational purposes only and should not be construed as an invitation or offer to buy or sell any investments. No recommendation is made, positive or otherwise, regarding individual investments. Any decision to invest should be made only on the basis of the relevant documentation for each investment. No contracts may be concluded on behalf of Enterprise Corporate Finance Limited by means of email communications. This information in this document and any attachments is confidential and may be legally privileged. It is intended only for the individual or entity named.

Summary of benefits provided by the Enterprise Investment Scheme

20% Tax Relief.Up to £500,000 per individual may benefit from 20% income tax relief. For each £10,000 of investment, the actual cost is £8,000. Recent changes in legislation allow the whole of this allowance to be carried back to the previous tax year for offset against income tax i.e. a theoretical £1m could be invested of which £500,000 could be carried back to the last tax year. With increasing rates of tax and restrictions on pensions contributions from the 2010/11 tax year and beyond, this opportunity may be increasingly attractive for tax planning. Shares must be held for a minimum of 3 years from the date they are issued to the Investor for this relief to be available.

No Capital Gains Taxprovided the shares are held for a minimum of 3 years, there is no CGT due on the proceeds. However, the shares can be held for much longer, to realise the investment potential, thus continuing sheltering gains from CGT. Whilst the Fund intends to provide an exit to investors through the appropriate mechanism for each investee company, this relief should enable investors to shelter substantial capital gains.

Inheritance Taxhas been dubbed the ‘optional tax’ and many individuals today are exposed to potential IHT bills, largely because of relatively high property prices. However, high earners are potentially more exposed. After two years from the investment date, EIS qualifying companies generally fall outside the estate for IHT purposes, potentially allowing considerable assets to be preserved intact for dependants.

Loss Reliefapplies in the event a share were to become worthless, the loss could be offset against income tax. Using the same example, the £8,000 net cost could be offset against that year’s tax bill, or the previous tax year’s (assuming a 40% taxpayer) allowing £3,200 to be claimed back so the actual loss would be £4,800. In other words, 48p in the pound is the maximum exposure i.e. less than half the original outlay is at risk. For a 50% tax payer, the same relief mitigates downside exposure to 40p in the pound. Losses can also be offset against CGT at the prevailing rate, currently 18% in either the current tax year or subsequent tax years. In this case, the maximum exposure would be in the order of 66%.

CGT Deferral Reliefis also available in addition to the above and is not capped at £500,000. This allows up to three-year-old capital gains tax to be rolled over into EIS Qualifying Companies and potentially be further reduced by other tax allowances over a period of time, such as timing disposals in order to utilise annual CGT allowances and inter-spousal transfers to maximise tax efficiency.

Further details are set out in Appendix 1 of the HG Tech Fund information memorandum which can be downloaded from www.hgtechfund.com, however, tax reliefs do depend on individual circumstances and potential investors should consult their financial adviser.

Launch48 is an entrepreneurial event that brings people with a range of business, legal, finance, design, development, pr, branding, and marketing skills together to create a unique event focused on launching a new business idea, networking, and learning.

The goal of Launch48 is to select an idea (Friday night), develop the idea (Saturday and Sunday), and launch (Sunday night). Launch48 held 3 events in 2009 that were responsible for a number of successful startups including http://www.vouchacha.com and http://www.wraply.com to name just 2.

Launch48 mixes skills by having teams of up to 20 people to enable a huge amount of work to be completed in a short period of time. All attendees meet and work with lots of different people, and experienced mentors attend who can assist with guidance and brainstorming during the event.

To find out more about the event and participate in the Birmingham event on Friday the 26th to Sunday the 28th of March 2010 grab yourself a discounted early bird ticket (limited numbers available) from http://birmingham.launch48.com

I hope to see you there!

Ian Broom
Co-Founder

Next Generation Broadband Access - Building the Case for Regional Investment took place on 22nd Feb 2010 in Manchester, co-hosted by Techcelerate on behalf of DC-KTN. Click on the thumbnail to access event leaflet.

Event was chaired by Philip Hargrave, CEO DC-KTN

• Speaker 1: How to deliver 10Gbit/s...or perhaps not? by Ian Vance, Amazing Communications; Chair of the UK Government’s Photonics Leadership Group
• Speaker 2: United Digital City by Shaun Fensom, Chairman Manchester Digital and Consultant to Manchester City Council
• Speaker 3: "Rising the Alert" losing and making money, the opportunity for Next Generation Networks and the region by NWIX Group Ltd

Outcome of the 3 break-out sessions were summarised by:

• Demand and benefits - Richard Spragg of AIMES
• Commercial by David Ashmore, Chairman Metronet
• Performance by James Blessing of ISPA

All above videos were filmed by Flip Ultra HD camera (courtesy of salesforce.com). One film clip was corrupted, and the latter sessions were not fully filmed to preserve battery power, which eventually ran out before the event end.

Stardotstar create content, tools and toys that improve people's lives. Our user focused approach has led to agency work with BBC, Channel 4, 3i and local government.

As an IP developer, we have created a platform currently called StardotSite that offers end users the easiest way to update their websites - a demo of the system and it sells itself. It is also stable, scalable and extremely versatile. As well as being user focused at the client facing interface, under the bonnet it also allows agencies to effortlessly set up, manage, and maintain multiple numbers of websites, sharing functionality (or not) where appropriate. Through our agency work StardotSite has won £150k worth of projects, and currently earns us around £30k/year in license revenue. But, we want to make it bigger. A lot bigger.

Out of the many many directions we can take the platform there are two that we are particularly interested in:

* Offer it to agencies: if we can earn 150k work and 30k/year licenses then so can other people. This could be as a part hosted service, or as an Expression Engine style 'honesty box' - pay us if you use it.
* Offer it as a Software as a Service: create platforms for niches at the lower end of the market - the CMS for schools, for sole traders, for SMEs, for 3rd sector, for charities, for sports clubs. In other words, add a layer where my mum could create a good looking site by herself for her walking club, or my brother-in-law for his movie, or my neighbour for their choir… 1000 schools paying £20/month is worth £480k/year, 2000 charities paying £10/month is worth another £480k/year...

For either route, we will need investment in order to develop and improve the offering, and promote it to the appropriate sectors or resellers before we it pays for itself and moves into profit.

Gareth is about to head to San Francisco as part of a trade mission, and is taking part in a Dragons' Den style pitch to investors. So, your thoughts on the platform, routes to market, and advice before he heads to the Valley would be greatly appreciated!

When I launched my SaaS start-up, KashFlow I thought a SaaS business would be a relatively simple affair in terms of what the costs would be and where the income would come from. Things never pan out exactly as you expect.

So here I’m going to share some numbers with your from our performance for 2009 and some of our strategy.

If you’re starting or growing a SaaS business then it might be useful for you. If you're a customer or partner then it'll hopefully give you an insight into what we've been up to and what our plans are.

The 2008 numbers for comparison

In 2008 we turned over around £250k and made a very small profit. We were based in a cheap office in Essex and there were only around 4-5 staff. A quick look at my blog from the beginning of 2009 shows we started the year with 2,500 customers.

The 2009 headline numbers

We ended 2009 with well over 5,000 customers and turned over around £500k. So essentially the business doubled in size.

Despite the extra income, we didn’t make much more of a profit. There are now nearly 17 of us in the company and we’ve ditched the office in Essex and have a lovely place in central London.

Revenue split

Only 60% of our income in 2009 came direct from end-users that pay us monthly subscriptions for using the main accounting software.

The remaining 40% came from the partners that we work with via our Partner Programme. These are mainly accountants of which we now have over 220.

A few percentage points of the revenue is from our add-on automated PayPal accounting service.

Where’s the money gone?

Of the £500k we brought in throughout 2009, close to 60% went on salaries and sales commission, about 7% on rent and the remainder is made up of lots of little expenses like hardware, desks, staff training, utility bills and coffee – lots of coffee.

Our phone bill for the year was close to £8k. We have an 0800 number so we pay for all the inbound calls, but the bulk of this was actually outbound sales calls to accountancy practices.

What surprises me is how little we spent on marketing. Far less than 10% of our total expenditure. And a sizeable chunk of that was on a single exhibition.

Growing the eco-system

A big part of our strategy is growing an eco-system around our accounting API.  This has grown a lot in 2009. We started the year with less than 10 integrated applications and now have well over 20 with many more on the way.

Really Simple Systems CRM have just started beta testing their integration and we have some cool stuff in the works with Receipt Angel.

The only hiccup we've had is with our FreshBooks integration. They were understandably unimpressed with the orginal version of my blog post announcing the integration because it had a sentence that pointed out one of the obvious reasons for integrating - that you could migrate entirely from FreshBooks to KashFlow if you needed a full accounting system rather than just a great invoicing app. So they decided not to list us on their site with all of the other apps that are integrated with them.

Having other applications integrated with us brings a number of benefits. We get exposure to the customer base of the integrated app, our existing customers get more benefit and KashFlow becomes a more compelling offering for potential customers.

It also helps to ensure customers stay with us. We don't believe in vendor lock in so make it very easy for customers to leave us with all of their data  if they want to. If they're using a number of applications that all feed accounting data back to KashFlow then it's one less reason to leave us.

We''re continuing to add lots of new functions to our API so developers can deliver more usable products to their customers.

Our iPhone app is on the way very soon too. I promise!

White Label and Resellers

We’ve quietly launched a white-label version of KashFlow already and you’ll see a couple of well known names (including a FTSE100 firm) releasing web-based accounting software this year that is actually KashFlow under the hood. We’re also working hard on the reseller channel and getting some great (poncy buzzword alert!) synergistic partnerships up and running.

Resellers in other territories

We're not currently planning on actively marketing in other countries - there's still plenty  to do in the UK market. But we've been approached by many companies that want to resell KashFlow in all sorts of countries from Iran to UAE and the US, Canada, New Zealand and Australia.

It's something we originally shied away from. Localising an accounting package isn't fun. If you're planning a global SaaS business now go with CRM instead of accounting!

But with the necessary localisation work now done, we're about to finalise agreements  with resellers in two foreign territories.

Needless to say, we expect great things from these partnerships.

What I expect for 2010

We have a good office and plenty of room to grow in to. The expensive hiring of experienced people is done too. So I’m not expecting our fixed cost to increase by much. Although a lot of our new costs were only brought in towards the end of the year, so expenditure will increase in 2010.

We may need to increase our infrastructure costs if our user base continues to grow as it has for the last few months. We now average over 60 trial sign ups every day and we’re working hard on converting those into paying customers at higher and higher rates.

With everything we have going on, I’ll be disappointed if we don’t more than double our turnover to significantly > £1m this year.

So given I expect to double income and keep expenses relatively flat – what to do with the excess money?

We’ll probably start by hiring more developers. It’s important that we continue to innovate and add the new features our customers are asking for.

We’re also already on the look out for an addition to our support team. The vast majority of our new customers come from word of mouth referrals, and this is largely down to the great job the support guys do. So investing in support staff brings in more business.

We really should also be spending a lot more on marketing. People I speak to are always surprised at how little money we actually spend on marketing considering our relatively high profile in the accounting software space.

So it’s exciting to think what we could achieve with a solid marketing plan with some money behind it. The goal is to become the default choice when it comes to accounting software for small business and startups.

I hope that this was useful to someone besides the competitors that seem to be multiplying like rabbits!

___

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