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Frequently Asked Questions
| ABOUT VIKING FUND | |
| 1 |
What is Viking Fund?
Viking Fund is one of Yorkshire’s leading risk investors, specialising in early-stage, fast-growing technology companies. Formed with a repayable grant from the DBERR's Small Business Service, Viking Fund expects to make around 40 investments of £50,000 in early-stage businesses in the next ten years, with a lower number of second-round investments of £150,000. |
| 2 |
How does the Viking Fund work?
Investments by Viking Fund must be at least matched by private sector investors on the same terms. For example, if a private investor invested £50,000 for a 10 per cent stake in a company, then Viking Fund could do the same. This means that a company can raise up to twice the capital that the private investor might wish to risk. Additionally, a private investor can reduce his or her risk by attracting a matching investment from the Fund. This means that a company can raise up to twice the capital that the private investor might wish to risk. Or, a private investor can reduce his or her risk by attracting a matching investment from the Fund. The Fund already has a set of standard legal documents designed to protect the company and all of its shareholders and this should save considerable costs and time in arranging an investment. More importantly it will help to address the natural concerns that founders and investors both have when considering such a partnership. Viking Fund will be able to act as an impartial referee with a direct interest in the future success of the business if ever the investors and founders disagree. |
| 3 |
What businesses will Viking Fund invest in?
The Fund will only invest in businesses based within the Yorkshire and Humber region. We also invest in businesses that operate outside of the region, provided their main base is in Yorkshire and Humberside. By this we mean that the key business decisions and board meetings take place in the region, and that the business is not simply creating a token presence in order to access the funding. We are open to applications from almost all industrial sectors, although there are a few prohibited sectors related to agriculture and fisheries. Businesses must be commercially viable and seeking capital to expand and must also be able to attract a matching private sector investment. Viking Fund is not able to invest in order to rescue failing businesses. Because the Fund can invest between £10,000 and £100,000 - which must be at least matched by a private investor - the scheme can provide total investments from £20,000 up to £250,000. This is well below the levels usually considered by venture capital funds. All the businesses will need to be limited companies so they can issue shares. |
| 4 |
Why does Viking Fund have to invest alongside private sector investors?
Funding must be provided at fully commercial rates under European "State Aid" rules to prevent giving businesses in one member state a commercial advantage over similar businesses elsewhere. Because there are very few commercial investors operating at this low level, there is no established market rate. By insisting that in every case at least half of the funding is provided by an independent private sector investor at the same price, the Fund can prove that it is investing at a price set by the commercial market. This is why finding a matching private sector investor is such a fundamental part of the way the Fund operates. |
| 5 |
Who are the managers of Viking Fund?
Viking Fund has four founding partners:
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| 6 |
Who owns Viking Fund and what happens to any profits it makes?
The capital was provided by the DTI through its Early Growth Fund Project. At the end of ten years the capital will have to be paid back, together with six per cent compound interest. If there is any surplus after that, it will be shared between the DTI and the management team. |
| 7 |
What makes Viking Fund different from others?
There are several major differences from the usual venture capital approach:
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| HOW CAN MY BUSINESS SEEK FUNDS? | |
| 1 |
How do I apply?
First check that your business meets the basic criteria:
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| 2 |
What do you expect to see in a business plan?
Your business plan should give sufficient information to enable us to understand your proposal and the investment opportunity it represents. We have prepared a guide to the contents of a business plan to help you, but the most important thing is that it is your plan, not something that was written for you. |
| 3 |
Can a bank loan be counted as matching funding?
No, our rules specifically prevent this, but it doesn't stop the business raising bank finance. In fact, it should make it easier to attract bank support because of the strengthened balance sheet. |
| 4 |
What return on investment is Viking Fund seeking?
In terms of individual investments, that depends on the level of risk involved but overall our portfolio has to allow for failures and losses and still be able to pay back the loan capital together with 6% compound interest. One of our main objectives is to prove that such a small fund can make attractive profits when compared with the stock market and other investments so that other sources of funds will enter the market. This will only happen if we are successful and profitable. |
| 5 |
Who draws up the contract?
The Fund already has a set of standard legal documents designed to protect the company and all of its shareholders. This should save considerable costs and time in arranging an investment. More importantly it will help to address the natural concerns that founders and investors both have when considering such a partnership. Viking Fund will be able to act as an impartial referee with a direct interest in the future success of the business if ever the investors and founders disagree. |
| 6 |
What return on investment is Viking Fund seeking?
In terms of individual investments, that depends on the level of risk involved but overall our portfolio has to allow for failures and losses and still be able to pay back the loan capital together with six per cent compound interest. One of our main objectives is to prove that such a small fund can make attractive profits when compared with the stock market and other investments, so that other sources of funds will enter the market. This will only happen if we are successful and profitable. |
| 7 |
Can Viking Fund make loans?
Yes, the Fund can be very flexible, but will always have to invest on terms that are at least as good as those given to the private sector investor. Sometimes private investors are interested in convertible loans rather than the tax relief that may be available from investing in new ordinary shares under the Enterprise Investment Scheme and we can accommodate that. Because the Fund is providing risk capital, it will always be looking for a way to share in any profits made as a result of its investment. That normally involves a share holding or an option to buy shares. |
| 8 |
How long does a decision take?
If you are “investment ready”, with a complete business plan and a private investor who has already agreed investment terms, we can make a decision within two weeks. The investment could be made within a further three to four weeks. If any key elements are missing, such as a private investor, this will cause delays and mean that the whole process could take several months. However we will always endeavour to speed up the investment process. |
| 9 |
How much will an investment cost in fees?
The Fund charges one per cent of total money raised (with a minimum charge of £1,000) towards the cost of all legal documentation. In addition, there is a small monthly monitoring fee of £300 towards the cost of a Fund-appointed, non-executive director. |
| 10 |
Will the Viking Fund want to get involved in my business?
We will not invest in your business unless we believe you and your team have the ability to run it yourselves. But when we do invest, we hope that you will think of the Fund as a partner. We would like to have the chance to help if you get into difficulties or find major new opportunities – the better you do, the better we do! We also hope that you will build a similar relationship with your private investors. |
| 11 |
Will I ever be able to get rid of the Fund?
The Viking Fund has a life of about 10 years. In the first five years we plan to make about 40 investments and during the remaining time we will be devoting our attention to finding an 'exit' so that we can pay back our own investor. You won’t have us for life! |
| 12 |
Can Viking Fund back MBIs and MBOs?
Yes, providing the matching private sector funding is from an independent investor on commercial terms. |
| POTENTIAL PRIVATE INVESTORS | |
| 10 |
Can I invest in Viking Fund?
There are no opportunities for investors to invest in the Fund itself, only to invest alongside it. In order to comply with the complex European "State Aid" rules and the Financial Services and Markets Act 2000, the Fund is entirely “public sector'' but must always achieve at least 50:50 private sector matching at the point of investment. It also must not give advice or act on behalf of any other investor. We have however, established the Viking Club to provide a vehicle for a limited number of private investors to co-invest alongside the Viking Fund. Visit www.vikingclub.co.uk for more details. |
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Links to other organisations
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| © Viking Fund 2006 |