Page last updated at 22:10 GMT, Wednesday, 24 September 2008 23:10 UK

Looking for money? Ask the locals

By Anthony Reuben
Business reporter, BBC News

Sick of seeing share prices tumbling in London, New York and Tokyo? Perhaps you should be looking closer to home.

Teamworks Karting
Teamworks Karting needed to raise money to open a new site in Reading

"Local people like to back local companies," says Sue Summers, who runs InvestBX, Birmingham's very own stock exchange. "I can say that with absolute confidence now."

It's still early days for InvestBX. The exchange had its first flotation in February and as yet no shares in that company have been bought or sold.

But at least that means it is one of the only stock exchanges in the world that can say that none of its share prices have fallen in the past few weeks.

The first company to list on the Birmingham exchange is enthusiastic about the experience.

Teamworks Karting operates indoor go-kart tracks and organises events for corporate entertainment and team-building.

It had a track in the middle of Birmingham and wanted to raise 500,000 to 1m to open a new track in Reading.

'Best goodwill'

It started looking at ways of raising the money 18 months ago, when private equity and venture capital were viable options in the pre-credit crunch environment.

But it rejected both in favour of becoming a Birmingham plc.

Simone Schehtman

I think there's a concept of gravitas... you are immediately a more serious player

Simone Schehtman, co-founder, Teamworks Karting

"We looked at the opportunity to be the very first player on a new trading platform both from a marketing perspective and in generating the best goodwill in the West Midlands," says Teamworks co-founder Simone Schehtman.

InvestBX was set up with a 3m government grant to plug a perceived gap in the market for companies needing funding of between 500,000 and 2m. One of the benefits of the trading platform is that it can provide an exit strategy for wealthy individuals known as angels, who invest in small startup companies.

"You're at a stage when you've outgrown your family, friends and bank debt, if you can secure that, and you've probably had some business angel funding," says Ms Summers.

"This platform provides an intermediate step before the senior markets or a trade sale, providing investors with a formal exit strategy should they want one."

Lower charges

Regional stock markets are not a new idea, in fact there used to be exchanges all over the country up until 1973 when 11 regional exchanges were amalgamated with the London Stock Exchange (LSE).

Birmingham's old stock exchange building
Birmingham's old Stock Exchange building is in Margaret Street

InvestBX is not trying to compete with the LSE - it is hoping to bring on board companies looking for smaller amounts of money who are deterred by the amount it would cost to list even on London's junior Aim market.

"If you raise 2m on InvestBX you're looking at a total cost of about 10%," says Ms Summers, which she says compares with an amount closer to 25% on Aim.

But Teamworks is still entitled to refer to itself as a public limited company or plc and its founder says the requirements it has had to meet will help if it ever decides to go for a listing on one of the senior markets.

"The infrastructure, which we have now established within the company in terms of things like corporate governance and auditing, is so well set up now that the launch into the next market if we require new finance through a bigger listing is quite straightforward," says Ms Schehtman.

Sue Summers
It was quite unfortunate that we had the start of the credit crunch and we were just taking a company to investors
Sue Summers, InvestBX

InvestBX is confident it will be able to announce its second flotation in the next few weeks, which will apparently be from a more traditional West Midlands industry.

It aims eventually to be listing between five and 10 new companies per year and it is hoped that having more companies listed will encourage some trades and create liquidity in the market.

The timing of the launch of InvestBX has not been ideal, with many companies delaying plans to float on the bigger markets.

"It was quite unfortunate that we had the start of the credit crunch and we were just taking a company to investors," says Ms Summers.

"But we did it and we will continue to do it - it's just tougher because of the market conditions."

Online auctions

InvestBX does not operate in the same way as the LSE.

If you want to buy or sell some shares you go onto the online system and register how many you want and at what price.

Every so often they have an auction - there have been two so far - at which any buyers are matched with sellers.

"We would have liked to have seen trades and significant liquidity," says Ms Schehtman.

"As it is there hasn't been, but there's only so much we can do to stimulate that."

'Concept of gravitas'

The regional stock exchange model is being considered throughout the world.

Places from Lancaster, Pennsylvania to the Welsh capital Cardiff have commissioned studies into whether they should open their own exchanges.

"As a concept everyone's very supportive, but they're looking to see how InvestBX fares," says Ms Summers.

Meanwhile, Teamworks is benefiting from fringe benefits to being a plc.

"I think there's a concept of gravitas," says Ms Schehtman.

"If you go into finance or landlord property negotiations you are immediately a more serious player. You've had to be in order to get there."


SEE ALSO
Regional stock exchange set for 2004
27 Aug 03 |  West Midlands
Call for local exchanges
14 Jun 03 |  Business

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