Interview: Ayan Mitra, CEO of Code Investing on alternative finance for small businesses
Since launching as one of the UK’s very first crowd-funding sites in 2013, Code Investing (previously CrowdBnk) has come on leaps and bounds, helping huge brands such as Innis and Gunn and the Cotswold Distillery to achieve their funding targets.
“One of the reasons we chose the new name Code Investing is because it reflects the relationship we have with small businesses”
Of course, supporting startups and SMEs is still the name of the game for Code Investing. However, sporting a new name much more suited to an ever diversifying offering we had a chat with CEO, Ayan Mitra, to find out where they’ve come and how now, they might be able to help even more small businesses to succeed.
TechSPARK: Why the pivot from CrowdBnk to Code Investing?
Ayan Mitra: One of the reasons we chose the new name Code Investing is because it reflects the relationship we have with small businesses. Investment, both in terms of money and the continued support we give to SMEs is at the heart of what we do, and now it is an integral part of our name.
As the company has evolved and our focus shifted towards debt financing for £1m plus raises, we felt there was a mismatch with our old name.
We have never been a bank and neither do we wish to emulate their position. Banks are just one source of capital for SMEs amongst a diverse pool of sources we are able to tap into, ranging from individuals to institutions.
TS: How would you describe debt financing to someone who has never heard of it before?
AM: Debt financing is another tool in the box when it comes to financing operations. The advantage is that it does not dilute owners as equity would and interest is tax deductible (taxes come at profit level post interest payment), hence they offer financial leverage.
“Tech companies by their very nature tend to be at the forefront of change, which can make it difficult when approaching more traditional routes for funding”
Having a mixture of debt and equity can give flexibility to a business. Depending on the level of risk, debt can be a more economical option than equity for a high growth established businesses, as equity holders normally require a much higher level of return to invest.
TS: How will this financing method help tech companies?
AM: Tech companies face a lot of the same challenges that small businesses in other sectors face in terms of getting the funds they need in order to grow. Tech companies by their very nature tend to be at the forefront of change, which can make it difficult when approaching more traditional routes for funding.
Our investors are more interested in the lower risk perceived in debt financing (compared to equity investments). Having a broad network of investors ranging from private individuals to institutional investors and banks means it’s easier for us to match investor profiles with growing businesses.
Champagne PIAFF (pictured left) dubbed ‘The Champagne House of the Digital Age’ at New York Champagne Week 2015 for their direct to consumer app, are currently raising funds with Code Investing, using debt financing.
TS: How would a tech company go about applying for finance through Code Investing?
AM: The application process is very simple, our online form means business owners can complete their application within minutes.
“We continue to invest alongside investors and we champion the value that investment brings to small businesses”
In terms of what stage the business should be at before applying, the most important thing is liquidity. The company must have free cash flow i.e. the cash that comes out of a business’s operations after all the fixed obligations are paid.
TS: Ultimately, what do you hope your rebrand will achieve?
AM: The rebrand is about clarifying what Code Investing do, that we are not a crowd-funding company or a bank. We are an alternative finance marketplace that offers high growth businesses a platform with which to raise finance.
The new name reflects our position as facilitators, enabling institutions and individual investors to co-invest in debt and equity alongside Code Investing. We continue to invest alongside investors and we champion the value that investment brings to small businesses.
TS: Have you supported any South West tech, digital or creative businesses or do you have any plans to in the near future?
AM: Up until now, we haven’t supported any companies in the South West, but we are about to go live with a new raise in a few weeks time with a South West based company involved in property development. Their raise should go live this month.