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Last Updated: Friday, 14 March, 2003, 13:11 GMT
Lunch Lesson Nine - Raising finance
Making soup needs one main ingredient - finance

Charlie Marshall and Sebastiano Petrilli set up Primal Soup to produce soup made from simple recipes.

They use seasonal ingredients that they sell to sandwich shops and coffee bars including some of the well-known chains.

But like many new businesses, while what was coming out was fine, what was going in needed attention.

"We set up the company three years ago and we funded it ourselves," says Charlie.

"But we were undercapitalised and we needed new finance in the company to help us push the brand and move premises."

Last December they managed to raise 350,000 through a combination of backers including the London Seed Capital Fund - a state-backed investment project - the Small Firms Loan Guarantee Scheme and financing from Business Angels.


The main investor was business angel Michael Prokop, who put in 100,000.

A business angel is someone who invests in small unquoted companies to help them expand.

Michael says: "Angel implies some altruism on my part but I'm not doing this out of the kindness of my heart.

"I expect to get my money back eventually and get a very good return which reflects the risk that I'm taking."

Significant growth

The success of flavours like Thai chicken, spicy tomato and red pepper, and lentil and herbs has helped the company increase its turnover by 100% a year - and it's poised for significant further growth.

You don't invest in the hardware - you invest in the people.
Michael Prokop
All of which should help Michael Prokop reach his expected return on his money of 50% or 60% a year.

As well as catering size packs, Primal Soup has recently moved into single serving pots, which can be found for sale on the Eurostar.

They're also experimenting with sandwich fillings to add to their range, which now includes jacket potato fillings and sauces.

Michael Prokop has become so involved with the company that he spends most days there, giving Sebastian and Charlie the benefit of his years of experience in business and his financial knowledge.

It also means he's not sitting at home worrying about his money; he's involved with how it's being spent.

The company has bought new equipment with part of the finance raised and is on the lookout for new premises.

Securing funding frees Sebastian and Charlie to get on with what they do best - coming up with new ideas and trying to sell them.

Student Guide
Charlie Marshall and Sebastiano Petrilli were looking for finance to develop their business.

Primal Soup had already become established as a quality supplier of soups, stews and sauces to the catering market but there was more to do.

Michael Prokop has lots of experience of running businesses as he's built and sold several.

This has provided him with resources that he wants to put to work - and an eye for an opportunity.

Michael spotted Charlie and Sebastiano at a One London meeting. These events provide a platform for young businesses in search of funding.

People like Michael come along looking for likely winners.

Just think...

Brainstorm - what do you think Michael was looking for when he went to the One London meeting?

Why be an angel?

People like Michael are known as business angels.

They are rather special people who are happy to take a risk by putting money into businesses which want to grow.

They don't charge interest on their loans. Their gain comes from the growth and profitability of the business - so they have to trust their judgement.


Many have made their money by running businesses themselves so they often have lots of wisdom to help their chosen business.

Some want to get involved, others don't.

Michael does and it's almost become a full-time job. He likes to know what's happening to his money!

Michael's commitment to Primal Soup helped in other ways too. His hands -on approach meant that other lenders were happy to come on board as well.

Just think...

What sort of advice do you think Michael can give to Primal Soup?

Why were other lenders happy to come on board because Michael was involved?

In search of an angel

Many businesses have difficulty in finding funding for expansion.

Banks often view them as too risky - after all, a bank cannot give the hands-on help that Michael offers.

  • The upside of an angel is that there is money and help.
  • The downside may mean giving up control.

    Many angels expect to take their money out after a while and this often means the business has to be sold.

    This might mean becoming a public company and selling shares to the public.

    Some entrepreneurs may be happy to sell the business as they can take their cut of the sale.

    Others really don't want to part with their "baby".

    When you've started something from scratch it can be hard to part with it.

    Just think...

    Why can becoming a public company mean losing control?

    Why do you think some entrepreneurs don't want to part with their businesses?

    Michael has started businesses several times and then sold them. What do you think has led to his success?

    Encouraging angels

    Not everyone wants to take the risk that Michael took when he put money into Primal Soup - but many businesses need angels.

    The government has made it easier by setting up a scheme which offers tax relief to people who put money into venture capital trusts.

    A trust invests in a range of small companies and shares in the trust can be bought and sold.

    Just think...

    Why are people who are more cautious than Michael more likely to invest in a trust than in one business?

    Why is it important to encourage people to invest in small businesses?

    Find out about other ways in which small businesses can raise funds.

    The BBC's Simon Gompertz
    "It all started with a bright idea and a few cooking pots"

    Funding a new business
    26 Apr 02  |  Business
    Meet the new angels
    29 Jan 02  |  Rob on the road

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