Rainbow Seed Fund FAQ

 

  1. What type of funding does Rainbow provide?
  2. What type of company is likely to be an attractive investment for RSF?
  3. What are the Fund’s investment criteria?
  4. How much venture capital investment can the Fund provide?
  5. Are there any sectors the Fund cannot invest in?
  6. Who makes the decision as to whether you will invest in my company?
  7. What are the timescales to investment?
  8. What can the Fund’s investment be used for?
  9. Is the Fund’s investment private capital?
  10. How does the fund work with our investors?

1. What type of funding does Rainbow provide?
Rainbow makes investments for a financial return. It does not provide grants and loans will generally be convertible into equity.

2. What type of company is likely to be an attractive investment for RSF?
The Fund aims to make a multiple of its investment over a period of 3-8 years, generally by an exit through a trade sale and therefore generally businesses should have high growth potential through serving large markets and establishing barriers to entry. However the Fund does not have a fixed life and is able to make investments between £25,000 and £500,000, so we have made investments in businesses which have modest capital requirements and market size but have a lower risk profile.

3. What are the Fund’s investment criteria?
The Fund only invests in projects and Small to Medium Enterprises (SME) based in the UK. Companies do not need a business plan, a management team which has sold several businesses before and revenues but they all help!

4. How much venture capital investment can the Fund provide?
The Fund can invest between £25,000 and £500,000 over the lifetime of the business or project

5. Are there any sectors the Fund cannot invest in?
No

6. Who makes the decision as to whether you will invest in my company?
Our advisory board Spectrum has a veto over any investment we make so we usually ask you to come and present to them, but the decision is made by Midven’s investment committee.

7. What are the timescales to investment?
This depends very much on how much we are investing and whether investment is needed from other sources. We have made investments in 4 weeks but investments with a large syndicate and where we are investing a few hundred thousand pounds inevitably take significantly longer.

8. What can the Fund’s investment be used for?
The Fund’s investment can be used for any purpose other than buying out existing shareholders.

9. Is the Fund’s investment private capital?
No, the Fund’s capital comes from government sources.

10. How does the fund work with our investors?
The fund actively seeks to syndicate its investments- we are happy to lead funding rounds and share due diligence, or to follow other investors so long as the Fund is making an important contribution.  The Fund invests at an early stage to help companies reach significant milestones which make them attractive to later stage investors. Our portfolio companies have raised from other investors 20 times the capital we have invested. We are always keen to engage with later stage investors to understand what companies are of interest and to put forward our companies as well-qualified  investment propositions.