Ofex , the National Business Angels Network and AngelBourse have jointly committed to new service and technical standards they hope will broaden investment opportunities for those interested in private equity financing.
Single Pathway To Market (SPTM) it intended to become a “credible platform” offering reasonable costs for companies and investors wanting to take part in equity funding processes, they say.
Businesses should benefit from a less painful transition from start-up phase, through additional rounds of financing, and an exit route through Ofex, before tapping investors through the Alternative Investment Market and lastly a main listing on the London Stock Exchange.
And investors should benefit by a commitment to standards and FSA regulation, which should improve quality as well as quantity of opportunities, SPTM’s founders add.
Fewer than 2% of companies that could benefit from equity financing are actually able to secure such funding in the current disjointed and fragmented approach, industry figures suggest.
Unlike, for example, the US, Hong Kong and Australia, most businesses in the UK looking for between £100,000 to about £5m are turning to banks for financing based on debt.
Informal discussions on SPTM have been going on for some two years, says Ofex joint managing director Jonathan Jenkins, and the need to introduce efficiencies in the private capital and lower-tier stock markets have never been greater.“What Pathway brings is clarity,” Jenkins says.
”We’re not saying it’s a funding escalator. You don’t have to be a company targeting the FTSE 100 to take part. 80% of businesses trying to join Ofex are too small, but we would like to be able to refer them to other services for equity funding.”
The UK churns out about 180,000 new start-ups every year, which means equity investors are currently missing out on a huge opportunity to take part in the wealth created by thousands of successful small businesses.
By requiring organisations or companies working under the SPTM banner to adhere to a formalised structure of common standards, such as for documentation needed at various stages of a company’s development, Ofex, NBA and AngelBourse hope to attract more participants.
A major change from previous efforts to increase interest in private equity programmes is a commitment to regulation under the FSA.
With the Pathway in place, the participants are promising “aggressive initiatives” to bring more investors into the market for early and subsequent rounds of financing.
By creating a more transparent and efficient route for companies and investors from seeding through to exit via a stock market, SPTM’s backers eventually hope to link in the Alternative Investment Market and even the main market of the London Stock Exchange.IFAonline
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