Lee Parry was 17 when he wrote his first business plan for a recording studio. It took him one year but he raised no finance. Four years later, after labouring jobs interspersed with social security, he came up with another plan to design a new SCSI digital data storage capacity for the music industry. He needed £60,000 to take an office lease, refine prototypes and hire two staff.
His first step was an unusual one: he exchanged 40% of the company for advice alone. Two well-connected businessmen contributed time and professional skills to ensure the idea worked. Parry then researched every possible source of finance and networked with anyone who would give him time. The result: £7,500 from the Prince's Youth Business Trust in June 1996, followed by an LGS loan of £11,000 from Barclays Bank, £22,000 from the Merseyside Special Investment Fund and £20,000 in lots of between £1,000 and £3,000 from numerous other investors and special funds. 'No amount of money was too small for me to bother with. From £250 to £25,000, I went after it all,' says Parry. By mid-1996, Parry had his £60,000.
Orpheus Electronics has shot from a 1996 turnover of £20,000 to £350,000 in the first four months of 1998. Parry reckons turnover could hit £48 million by 2000 because the product is two years ahead of any competition and the market is enormous. But the fund-raising is not over. 'We are ploughing back money into R&D and infrastructure to lay the base for the future,' explains Parry. 'I am always pursuing money. I have just used a prize for product innovation to hire KPMG to write a new business plan to take to the banks and venture capitalists, for example, to raise our second round of finance.'
Sarah Gracie is a senior writer at Venture Capital Report.Columnists.