FAQ
- What technologies will the Three Pillars Fund invest in? Are there limits?
- What can Three Pillars Fund investment be used for?
- What stage of technology business can be funded?
- What aspects of business cannot be funded?
- Who can apply?
- How long does the application for investment take?
- How is the investment decision made?
- How much can the Three Pillars Fund invest?
- What form does the investment take?
- What are the fees or charges associated with investment?
- Is the Fund a grant scheme?
- What are the advantages of the equity route?
- What happens if the project succeeds in generating a new business?
- What rate of interest applies to the convertible loans made?
- What happens if the project does not succeed?
- Will I retain ownership of my Intellectual Property?
- Is my invention disclosed during the application process?
- What are the restricted sectors?
- Ineligible Expenditure
What technologies will the Three Pillars Fund invest in? Are there limits?
The Three Pillars Fund invests in propositions with clear, strong commercial potential in the three technology fields of:
- Energy & Environment
- Healthcare & Health Sciences
- Emerging & Process Technologies
These technology fields are the three pillars identified for long term investment in North East England, as set out in its Regional Economic Strategy.
There are some restricted sectors that the Fund cannot support. Please refer to Excluded Sectors.
What can Three Pillars Fund investment be used for?
Investment from Three Pillars Fund can be used fund any project that develops a three pillars science or technology business or underpinning technology towards commercialisation, such as:
- Technology development in terms of feasibility studies, prototyping and patent exemplification
- Funding for product and service development, time limited specific projects, or for the purchase of fixed assets or working capital
- Recruitment or deployment of specific personnel
- Investor readiness
What stage of technology business can be funded?
The Fund invests in Three Pillars technologies at the Development to Pre-Seed stage.
What aspects of business cannot be funded?
The Fund is not a "lender of last resort" for high-risk, low-return propositions. Similarly, it cannot be used to re-finance existing activities, to support or supplement normal operational costs or for certain excluded items.
Who can apply?
Applicants must either be Small Medium Enterprises (SME), or pre-start enterprises. Applicant must be incorporated before any investment is made.
Previous applicants to and recipients of funding from NSEI Proof of Concept or Co-Investment Fund may apply; further investment is subject to the acceptance criteria of the Fund. In cases where Three Pillars Fund investment follows an earlier investment from a public source, maximum investment is capped to comply with state aid rules.
Existing, trading companies can apply, but the application must be based around a major product diversification with the potential for a step change in the business, preferably via spin-off.
Applicants must be based the North East of England ERDF Objective 2 regions. Check your postcode at: http://www.europeanfundingne.co.uk/postcodes/index.cfm
How long does the application for investment take?
The application process, from the date we acknowledge that your application has entered our review process, to the date we inform you of our decision, typically takes no more that 5-6 weeks. However, this can vary, depending on our due diligence requirements and also on the applicant responding to our questions and providing any additional information we require in a timely manner.
How is the investment decision made?
We make investment decisions on a commercial basis. Even though investments are made at an early stage in technology development we look for a good potential commercial opportunity, good management team and a disruptive technology. Applicants have the opportunity to convince us that their technology and business opportunity are good investments for the Fund and can use the services of Sponsors to support them.
How much can the Three Pillars Fund invest?
Investments are permitted up to £125,000. Although the maximum single investment is £125,000, each application will be considered on its own merits. In cases where investment follows an earlier investment from a public source, maximum investment is capped to comply with state aid rules.
What form does the investment take?
The Fund invests in the form of either a convertible loan or in equity.
What are the fees or charges associated with investment?
There are no fees charged for applications to the Fund.
The Fund charges a monitoring fee, which is payable before investment is made.
Additional fees will apply for non-standard investments.
Is the Fund a grant scheme?
No. The Fund looks to realise a commercial return on its investment and so makes investment as either a loan convertible into equity, or in equity.
What are the advantages of the equity route?
For a small business without strong cash flow, or with long product development timescales before generating sales, equity finance has the big advantage over debt finance that it doesn’t take any cash out of the business to service the debt. It can strengthen the company balance sheet and add credibility when seeking further investment. The stake taken by the Fund will not affect the control or direction of the business.
For further guidance on the relative merits of debt and equity there are useful downloadable guides available at:
http://www.nstarfinanceandbusiness.com/finance-guides.php
What happens if the project succeeds in generating a new business?
If a loan-based investment project proceeds to become a cash generating business or secures further venture investment, the Fund may choose to convert the loan to an equity holding, on terms agreed on investment. The stake taken by the Fund will not affect the control or direction of the business. Alternatively, the Fund will agree a repayment schedule with the investee.
What rate of interest applies to the convertible loans made?
Investments will be made at an interest rate of the EC UK Reference rate + 400 basis points (4%). The rate is liable to a discount if there are assets against which we can secure the loan. There will be no need to pay interest for the first eighteen months of the loan, however interest will be charged and compounded annually from the start of the investment. The interest rate will be re-calibrated annually when the UK reference rate is applied.
For example:
Interest accruing on a loan of £10,000 at a rate of 9.9% would be:
- Year 1: £990
- Year 2: £1,088
What happens if the project does not succeed?
Investments in projects that do not develop either to cash-generating businesses or to secure further venture investment will be written-off to avoid unserviceable debt being levied on funded SMEs or institutions.
Will I retain ownership of my Intellectual Property?
Yes, the Fund makes no claims to Intellectual Property ownership, either to existing IP or to any new IP generated by the Fund investment. The Fund will, in line with normal equity investing, expect relevant IP rights to be exclusively licensed or fully assigned to any potential business in which it invests.
Is my invention disclosed during the application process?
Applications are confidential.
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