Company founders need passion for what they have built in order to successfully secure funding – “and that comes across with storytelling”, says Robert Hornby, Investment Director of Mercia Ventures, which provided financial backing to ULEMCo, a high growth technology firm supported by Connected Places Catapult.
“They need to catch you with their story, and convince you why there is a problem, and why their solution is the solution.”Robert Hornby, Investment Director of Mercia Ventures
Founders also need “a very defined rationale that what they are doing makes sense, and why they're dedicating all their time to it”.
“Founders can't be half invested in this,” he adds. “They have to believe in what they do, and continue doing it on their worst days, by still turning up to work.”
ULEMCo’s Managing Director, Amanda Lyne (pictured with Robert) agrees with him that storytelling is important for founders to convince investors of their worth. She adds that small companies also need to “appreciate what investors are looking for” as well.
“I’m very commercial, and love what we do technically, but I have to remember that investors need to make a return on their investment,” she says. “I care about that almost as much as what I'm doing for myself. Investors wouldn't be there otherwise. I need to create confidence that their investment in our proposition will lead to the return they need.”
ULEMCo develops hydrogen solutions for transport applications. It was supported by Connected Places Catapult two years ago on the Transport Research and Innovation Grants (TRIG) programme, delivered on behalf of the Department for Transport, to convert a ground power unit to run on hydrogen.
The company also worked alongside the Tees Valley Hydrogen Transport Hub programme to create a zero emission tow tug for use airside; and the Hydrogen Innovation Initiative supported a demonstration of these at both Exeter and Cranfield airports.
Last year, the company completed a £5m funding round led by Mercia Ventures, which was investing from its own funds, and the first Northern Powerhouse Investment Fund. Funding also came from investors Equity Gap, the North West Fund and Scottish Enterprise.
Mercia decided to invest in ULEMCo because, Robert says, “we are confident that hydrogen will play a major role in this country’s energy transition,” he says.
“We really like that they have developed a solution based around hydrogen as a dual fuel with diesel, so the product can be sold now and the business can grow as hydrogen becomes more available. This is something you don't see a great deal, whereas there are lots of technologies that rely on one source of energy.”
Amanda points out that her company is “at a point where we're probably ahead of the market” and is developing applications beyond aviation that includes off-road construction vehicles that need charging in remote locations, such as project sites. “The investment is helping us sustain the skills base we have built up, and use it to create a roadmap of products, which will be ready to go full scale commercial as the hydrogen supply infrastructure grows.”
Amanda says that Connected Places Catapult’s support through the TRIG programme “has been fabulous and enabled us to collaborate with Cranfield University and be introduced to Exeter Airport”.
Robert underlines the importance of the Catapult “bringing companies and investors together to have conversations, rather than SMEs operating in isolation”.
From an investor’s point of view, Robert also says that grant funded programmes like TRIG provide good evidence that an SME is heading in the right direction. “Any source of funding that allows a business to make progress – particularly technical progress – is a massive positive for us,” he says.
“Trying to get investors to commit funding purely on research and development is not easy, because that requires a very deep understanding of what different technical milestones mean for the value of a business. So anything that can move an SME along technically, is just brilliant.”
The funding market in the UK today, he adds, “is incredibly tough, particularly for businesses in the early stages of commercialisation, for whom there isn't a lot of cash out there right now. The days of 2020 when there was more of a feeling of ‘spend at all costs to grow’ has disappeared”.
Amanda has the following advice for SMEs chasing investment: “Just take the money, whatever they're willing to pay for you. Investing in research and development that takes companies with a product through the Technology Readiness Levels is so important, especially in the hydrogen space where there’s very limited investment in R&D.”
Robert adds that investors need to be aware of the time horizons they're signing up to when backing an SME. “You're investing for the long term in something that might take a while, but in the hope that the return – when it comes through – is sufficient that it offsets the risk you've taken, and the time you've taken to do it.”
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