Coronavirus Business Interruption Loan Scheme (CBILS)  

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As part of our guest content series, we speak to Lloyd Brina, Senior Manager for Cornwall and Isles of Scilly UK Network at British Business Bank (BBB), to find out how innovation is generated through a crisis.

The new normal is driving the rapid adoption of new business models. We’ve seen technology actively embraced with flexibility and adaptation becoming key mantras. Working as part of the UK network team at the  British Business Bank – as the Senior Manager here in Cornwall – it’s been a privilege to be part of a team collaborating around the launch of four national schemes.  Working to tight timescales, whilst all operating effectively and efficiently from home spaces, we’re working hard to support smaller businesses through this crisis.

Data Duopoly – conducting trials at the Eden Project to provide visitors with an App to help them navigate away from queues and access special offers.

Businesses very rarely see challenges on this scale and some, sadly, will be diminished, or forced to close. Challenge though has always been a key driver of innovation – many aspects of our changing work and life practices will now be accelerated. Business will need to identify, understand and respond to these changing practices without a crystal ball. Current circumstances reminded me of the adoption of the cashpoint, or ATM – Automated Teller Machine, which was first trialled in the UK in 1967. Citibank invested heavily, bravely installing them across New York in the mid ‘70’s only to find that customers were wary, few used them (as they failed to see the benefit) and there were even well-founded reports of technical glitches. Then in February 1978 a severe blizzard paralysed the whole city, banks remained closed, cash quickly ran out and customers were driven to try the machines. The rest is history, ATMs were rolled out everywhere, Citibank grew and even developed it’s iconic ‘the Citi never sleeps’ slogan on the back of their entrepreneurial strategy. It just shows that understanding customer needs (perhaps before they do) coupled with timing is everything when innovating. Judging how the ‘new normal’ will manifest itself will be key.

Smaller businesses looking to innovate in the current environment in Cornwall face similar challenges. Local case studies show that innovative Cornish businesses need to have a deep understanding of what drives their customers’ decision-making, be good at deducing whether the market is ready and have developed plans for accessing the required finance. None of these are easy but all are key to success. Customer decision-making has been upended by the crisis, markets have been catapulted forward by necessity, but it is not known if or when they will retrench or reset and accessing finance appears at times to be an impossible ask in a time of rising business debt.

Accessing Finance

Well run, organised businesses with an innovative mindset should still be able to access capital though. Yes, some investors may choose to hold onto their cash at this time but the exponential rise in personal share dealing during lockdown shows that many understand that crisis breeds opportunity. So where to look?

Financial Service operators be they banks, finance platforms, responsible lenders, Crowdfunders, Venture Funds, Asset and Invoice financiers are all still looking for customers. Of course, it is more challenging for them too but they are all looking for ways to find, engage and fund good businesses. The popularity of the BBB’s new investor led Future Fund provides some evidence that there is a clear desire on the part of investors to ‘follow their money’ and to continue investing in future growth.

In Cornwall the Cornwall and Isles of Scilly Investment Fund (CIOSIF) provides  debt and equity finance to smaller businesses.

Commenting on recent activity CIOSIF Fund Manager Ralph Singleton said “Despite working remotely we’ve been busier than ever, as we come out of the Covid-19 crisis we will inevitably be funding more good quality businesses that need help investing for growth. The CIOSIF funding solutions look set to become a very compelling driver of business innovation in the county”.

Historically Cornwall has seen extremely low levels of equity investment activity. Whilst both CIOSIF and Falmouth University’s Launchpad initiative were starting to improve matters a potential legacy of the economic crisis could be much higher levels of equity activity in Cornwall.

Cornish Innovators

In May CIOSIF made a £300,000 investment into Service Robotics. With their friendly robot pioneering the provision of elements of personal care for the elderly they face all the challenges highlighted above. Thanks to the fund and others their finances are in place to fund their initial growth phase. Understanding their customers’ needs and issues as well as assessing whether the time was right were key elements in their decision to press forward. Originally conceived to combat loneliness whilst also checking on ‘owners’ physical and mental health the ‘distanced, automated, healthcare’ element of their service has now been catapulted forward.

Rob Parkes, CEO of Service Robotics Limited said: “The current outbreak of Covid-19 is teaching us all the importance of staying connected and the increasing need for zero touch virtual care. Genie is on hand to support the most vulnerable people in society, giving their families peace of mind that their elderly relatives are well, safe and happy. Responses have shown that Genie is filling a definite gap in the market where live-in support is not needed but older people cannot live as independently as they once did. This investment will enable us to expand our pilot program and build on our existing relationships with local authorities and stakeholders in the adult care sector.

Data Duopoly, a Falmouth University Launchpad borne start-up is another tech-oriented example. They recently completed trials at the Eden Project to provide visitors with an App to help them navigate away from queues and access special offers. A key value offering within their business model has now pivoted to focus on visitor flows and enabling physical distancing – users will be able to receive recommendations to head to less busy parts of attractions or receive notifications of events with space for more attendees. The South West Creative Technology Network has provided initial prototype development finding and next stage funding is being sought.

As co-founder Tanuvi Ethunandan explained We want to support visitor attractions during these difficult times and are offering a free 6 month license for our XplorIT product. We are conscious of the fact that many of our target customers [visitor attractions and venues] are facing severe cashflow challenges, so our new business model allows our clients to benefit from our technology immediately without worrying about initial monthly costs. XplorIT helps increase concessionary spending at venues via targeted incentives, and provides valuable anonymised data insights, to help our clients make data-driven decisions.”

Another Cornish innovation that we’ve seen recently is Newquay headquartered Crowdfunder’s Pay it Forward campaign. Building on the success of their existing platform Crowdfunder removed all fees to enable supporters and fans of businesses and organisations to pay now for services that they will receive in the future- ideal for supporting cash strapped business with strong local brands and customer followings. However, as Crowdfunder CEO Rob Love explained, it is what happened next that really struck a chord:

“We were so busy during lockdown, our new initiative saw more than 7000 businesses/organisations Crowdfund through Pay It Forward to raise around £10m – but the real story here, which we saw emerging in May – was seeing our customers use the money raised to pivot their businesses to new online offers that will provide them with stability, viability and growth at a very challenging time. Many are saying that they won’t be going back to their old business models.”

Wildanet an innovative Cornish wireless broadband provider, has now received a total of £1.15m from the CIOSIF to support its growth and is now offering new business customers three months of free broadband and free installation to reduce customer costs during the pandemic.

Increasing time spent in garden, food security concerns and consumer desire to grow their own has seen stellar sales during the crisis for Helston based Rocket Gardens. Already backed by SWIG Finance their business model of providing partially grown plant boxes direct to consumers proved to be the perfect solution for many customers during lockdown.

Founder Mike Kitchen, commenting on their recent 600% sales growth, said “Our primary goal has always been to educate and empower the nation to grow their own and eat seasonally. We hope that this dramatic peak in interest will continue to rise beyond coronavirus. We would love to see the nation make some permanent changes to their mindsets with regards to becoming more self-sufficient.”

Cashpoint or Crunch-point?

There is no doubt that effective use of finance will become a necessity for Cornwall’s businesses to navigate their way out of this crisis. Maybe it’s obtaining finance on purchase contracts or a sale and leaseback of a key asset or a growth business raising equity from CIOSIF (or a loan) or perhaps rewards pledges from crowdfunded investors – whatever the most appropriate solution it looks set to be busy time for financiers.

Whether we like it or not further waves and local lockdowns are already becoming a reality. Until and unless we have immunity, effective treatment or total traceability businesses will still need to continue to adapt, flex and innovate in order to stabilise and thrive during recovery. The length of the recovery phase remains uncertain with some sectors saying they expect full recovery in 2021/22 whereas others say it is some five years away. Whilst Cornwall Council developed a ‘crisis cashpoint’ of sorts with its much-lauded rapid deployment of emergency business grants it is unlikely that the government will be able to continue such measures too far into the future.

Cornish business will need to find ways to generate its own cash by looking for the opportunities to better meet customer needs (by offering better or more relevant products/services to existing or new customer segments), get the timing right and access the right type of finance to drive their growth. Insight and foresight look set to become core competences and our finance ecosystem needs to stand ready to back innovative businesses deploying these skills.

CIOSIF is supported financially by the European Union using funding from the European Regional Development Fund (ERDF) as part of the European Structural and Investment Funds Growth Programme 2014-2020.

For more information about the Cornwall & Isles of Scilly Investment Fund including how to apply, please visit www.ciosif.co.uk or follow the fund on Twitter at @CIOSIFBBB2