Several years back, KPMG and others used to provide corporate finance advice to Early Stage Businesses (ESBs) who could not afford to pay the fees demanded by the them. In these cases, they settled for a combination of equity and cash. Enron and other events resulted in clamp down of these practices, and the Big Four got cold feet and became unaccessible to ESBs. I am happy to report that thinking within KPMG is changing.
As you probably know, I am very keen on creating environments for ESBs to network with Investment Community and Deal Makers. I was promoting this theme last night at a TiE Manchester event to both KPMG and Lloyds TSB. As you know, KPMG sponsored canapes and drinks at our inaugural NW StartUp 2.0 event. Whilst they did sponsor the event, they could not justify Return On Investment (ROI) as their Corporate Finance team very rarely worked with ESBs.
To my amazement, KPMG is now thinking of taking a serious look at ESBs and willing to provide corporate finance advice for equity in the businesses. Wow! Great news as ebdex certainly can do with bit of advice.
Here is an extract of a recent exchange of e-mails…
Our current position on this is we will take equity stakes in certain circumstances. The position with start-ups is very difficult, as is the case with early stage deals and, to date, we have not taken any equity stakes in those situations and are unlikely to do so in the current environment.
OK. So I was too optimistic. And perhaps it was the wine! But there is hope for ESBs. We just need to make our case strong.