What are investing Non-Executive Directors?
One or more Non-Execs are recruited by a company to bring in additional skills, experience and contacts to an existing Board or Management team. For instance a Board without a qualified accountant may want an experienced former CFO/FD to join as a Non-Exec/NED; or Directors that have never before raised institutional VC money might want a Chairman who has; or a company that is targeting a certain vertical sector might want a Non Exec with inside knowledge of, and contacts in, that specific sector; or a young management team might simply want a successful entrepreneur to advise them on how to grow a company through to a successful exit.
As well as working for the company for between 1 and 4 days a month, the investing NEDs also invest in it, where possible benefitting from SEIS and EIS tax breaks. Typical investments are between £25,000 and £75,000 per NED with the most popular investment level being around £50,000.
Companies can also leverage the direct ‘smart money’ investment of the NED to attract further funds from matching grants, crowd sourced funding, angels, Venture Capital and Private Equity firms and other sources. The company should be more investable with a NED on the Board who is independent of the management team but who has ’skin in the game’ and whose interests are aligned with all the shareholders. In fact, several PE firms like the Business Growth Fund will only invest in a company if they can find a well-qualified, independent Chairman or NED who will invest alongside them.
Like any other investor, the investing NEDs will seek a return on their investment, but they are also working NEDs and Chairs who will expect a reward for their time and expertise as well. If the company is small and growing fast, this reward may be in additional sweat equity rather than cash. First Flight can advise companies on what they should offer Investing NEDs - and what they should expect from the NEDs in return.
What sorts of companies recruit investing NEDs?
Generally there are two kinds of companies: larger, PE and VC-backed companies whose PE and VC investors want NEDs and Chairmen aligned with their interests who will invest on the same terms as them; and smaller management-owned growth companies who want to strengthen both their Board and their Balance Sheet.
First Flight works with both kinds of companies (and others) and we also work directly for VC and PE firms.
Smaller companies that are interested in our service should have achieved ‘proof of concept' which will mean they have a product, a customer and some revenues. They must also be able to provide us with a clear, detailed Business Plan, up to date trading history or management accounts, historic annual accounts, and (if relevant) their EIS and SEIS certifications.
How can First Flight help?
First Flight was the first recruitment company to recruit investing NEDs and we have helped dozens of companies in this way – full references available on request.
Approximately two thirds of the 8,000 + NED candidates on our database have stated a willingness to invest in the companies they join as a Non-Exec. We also use advertising and specialist search to maximise our clients’ choice of high calibre, board-ready, candidates.
We are experts in helping companies decide what skills and experience they need in their Non Execs and finding NEDs who fit these exacting profiles.
First Flight is discerning on what clients they are prepared to take on when they are looking for investing Non Execs. We seek assurance that the specific qualities and benefits of a Non Exec are more important than their investment.
We charge for our service but our fees are affordable and the majority of our fees are only collected after the successful candidate has joined and invested in our client’s company.