Fundraising

…in which I encounter London Stock Exchange Group

Written by gilahalleli

Every so often, generally after reading an article about Social Marketing and Why It Is So Important, I’ll go through a (blessedly brief) phase in which I spend a ridiculous amount of time on LinkedIn or Twitter in an attempt to increase my network.  At some point, it will kick in that, if I’m  honest with myself, all I’m really doing is finding another reason to blow time surfing the net. And so I dial it way back because, between you and me, I already spend far too much time online.

I’m guessing this doesn’t seem like too much of a lead-in to London Stock Exchange Group’s ELITE program, does it? But it is! You see, as part of my most recent forays into Twitter, I met James Clark, of London Stock Exchange Group.  I started to follow him because he is seriously funny,  snarky and fun to follow.  In any event, at some point we started chatting. When he learned I was in Israel, he suggested I come to LSEG’s conference being held in June. Of course, I happily accepted.

So I went and had the opportunity to meet James and to learn about London Stock Exchange Group and LSEG’s ELITE Program. I even had a sit-down with Tom Tyler, ELITE’s Global Head of Sales. (I feel like a real proper blogger now).

I was impressed!   And since this blog is for startups and this program may be a good fit for some of you now or in the future, as you grow, I thought “blog fodder”. And so here we are.

The proverbial nutshell

ELITE provides executive education and coaching to “ambitious private companies” with a long term goal of preparing them for the capital markets.  Companies should typically be bringing in at least £5M in annual revenue and be able to demonstrate progress to-date and potential for future growth. The program prides itself on being very selective.

The coaching is largely focused on practical areas (e.g. managing financial resources or staff) and the intent is to help the company to develop to a point that it can successfully raise the capital it needs to move to the next level.  ELITE offers support for the fundraising stage, such as an online “market” and offline networking opportunities.

Now, I could flesh all of the above out a bit, but the truth is that LSEG has put together a full website on the ELITE program with information written by people with an in-depth understanding of the program. A link to that and  a presentation  is going be more helpful than any summary I can put together.  However a few elements really struck me and those I will share.

Tachlis

In the interests of full disclosure, I must acknowledge that it’s hard to get a full view of the program from a conference or a website which, to be honest, is out to sell you on something.  But at least on paper, I love this program.  Why?  Because the impression I got is that, rather than focusing on fluff or buzzwords, ELITE wants you to help you to clean up and step up your act—in a very practical sense—so that you can raise money and build your company.   It focuses on the practical and I adore practical. That’s pretty much the entire purpose of my blog.

Take for example their education program. This includes areas such internationalization (learning when and how to expand), financial resource management, how to manage staff and how to work effectively with the board of directors.

And the reason for the above? Per Tom, the goal of the program is not just “find money”. Yes, of course, if you need to raise money, access to ELITE’s marketplace and networks can be a great thing.  Furthermore, I would be surprised if the average company is going to join ELITE (which isn’t free) just for the classes.  At the same time, the program approach comes across as refreshingly holistic. There is a lot of “how to develop your company into something investors will want to invest in” along with “how to develop your plan to get investors”. The investor deck appears to be one of the last stages in the ELITE journey, if you will, and not the first. Because the real goal is that once the company does raise the money, it be ready to use it well.

As such, first they want to make sure that the company is in good order, that all key processes are in place and functioning and (most importantly) plans that the company has for the money it wants to raise have some basis in reality.  That is, there has been thought applied, and relevant parameters have been considered.

It’s also worth noting that the program is very much a product of its environment.  A recurring theme throughout the conference was that, in contrast to the US, London is weighted much more heavily towards institutional investors than retail investors.  On the one hand, the listing process can be easier. On the other hand, institutions, unlike individuals, are much more likely to pay close attention to a company’s plans, whether the plans make any sense and/or appear to be achievable and ultimately, whether or not those plans are indeed achieved.

Variety

These days, when you hear about these types of programs, the default assumption is “hi-tech”.  However, per Tom, ELITE aims for a broad cross-section of companies, with industrial and consumer goods making up about 60% of the total. In short, this is no tech-world echo chamber.

This impact goes beyond modifying class materials to suit, say, both an Eastern European refrigerator manufacturer and an Israeli app developer. As executive education sessions are conducted face-to-face in London, participants have the opportunity to exchange ideas between industries.  As Tom noted, “you pass through the room during the break and you see a Serbian refrigerator manufacturer standing with an Israeli hi-tech type, and you cannot think what they have to discuss. But the next thing you know, they are having an animated discussion”.

Between you and me, I think any forum that exposes tech types to industries in which one is actually expected to sell stuff, make money and cover one’s expenses, is marvelous.

This is not goodbye

This item has perhaps less to do with ELITE than it does with Israel-centric issues.  In Israel, we are obsessed with exits.  It’s the national dream: you start something, you sell it after a couple years for millions, your IP is taken off to the US or Germany or wherever and you retire.  The problem with this approach—and this is something I’ve heard discussed both at this conference and in other forums—is that we then lose out on the benefits of growth companies, such as job creation, long-term tax revenue sources, ongoing technological development and so on.

This is decidedly not the approach of ELITE. In fact, a common theme running through both my discussion with Tom and through the various presentations and panels was that fundraising via ELITE or the London Stock Exchange is not an exit but rather fundraising in order to finance future growth. To return to a point listed above in my discussion of the education program, you will have to have a clear plan, ready for implementation, for what you are going to do with that money.  How are you going to achieve the growth you are promising?

To my eyes, encouraging more Israeli startups to look towards growth instead of an exit can offer our local economy a wealth of benefits.  Including an increased demand for CFO’s.  🙂

Due Diligence made easy

Aaaahhh… a topic near and dear to my heart.  Maybe “easy” is too optimistic, but still more streamlined and standardized.

One condition ELITE has for companies that wish to fundraise via its marketplace is that they fill out a series of due-diligence documents. These cover the company, its history and its plans.  These forms then have to be verified by an ELITE advisor.  In short, ELITE performs a due diligence process before the company even launches on the network.

Here are some advantages to this method:

  • One size fits all. This is something of an overstatement. But if a good chunk of the documentation is standardized, and investors accept these versions as a condition for their being listed on the market…that will save you time. You aren’t going to have to rework your corporate charts or equity schedules 10 times to meet the nitpicky requests of each potential investor
  • Getting your ducks in a row. Sitting down and preparing the lion’s share of the materials in advance means that you are reviewing items in advance. And that means that you are finding odd things …and investigating odd things…also in advance. And that means that you will have responses and any supporting documentation ready to go.
  • Speed + completion =credibility. I performed audits for 10 years. One thing I learned is that a client who is organized, who has all of their schedules and reports ready, who has solid explanations for odd things and/or changes and who is able to provide supporting documentation quickly will always be perceived by the audit team as more credible than one who is disorganized or makes up answers on the spot…even if the data they provide has equal levels of accuracy. In this case, most of what you need is going to be ready to go before you even start. If you are missing items, you have time to find them before the launch. No one need ever know that you didn’t have a copy of your Certificate of Incorporation, and had to ask your Delaware registered agent to request a copy!

For more information on LSEG’s ELITE Program in Israel, contact Justine Zwerling, Head of Primary Markts-Israel, at JZwerling@lseg.com.

And as a final note…if you are reading this, and you are British?  And you are disturbed by my American spelling?  Specifically “program” instead of “programme”?  I tried. Really.  I did.  I wrote this out with “programme” all over the place.  And then my writing senses started screaming in pain. So I changed it back. I love you dearly, British people, not the least of which because you are the home of Walkers Shortbread, which is second only to Oreos in my cookie affections. But y’all need to learn to spell.  🙂

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