No more easy money by Jonathan Moules NOVEMBER 30, 2009 Ambitious entrepreneurs are prepared to go the distance to get financial backing for their bright ideas. Sanchita Saha, founder of CitySocialising, a website to help people make new friends after relocating, went all the way to southern France. This was not as pleasant an experience as it might seem. Once there, she spent months pitching to hundreds of potential investors to no avail, only to get a lucky break at the end. “It was a nightmare at first,” she recalls. First, she looked into “angel” networking clubs, which provide entrepreneurs with access to large numbers of wealthy individuals interested in investing in early stage ventures. However, she turned down a number of these for reasons of cost: they were charging £1,500 ($2,488) just to submit a business plan. Eventually she settled on London Business Angels, through which she could pitch to roughly 100 “angels”. She also hedged her bets by securing a place on gateway2investment (g2i), a four-day programme to help ambitious entrepreneurs hone their pitching techniques, delivered by financial advisers Grant Thornton and backed by the London Development Agency. “A lot of it is about networking – finding out who to talk to, who can help you, and keeping your ears to the ground,” she says. Through the LBA, Saha discovered a third scheme, called the European Border Investment Programme, which was running its own event in Nice. Although it was a risk, she booked herself on a flight and found herself pitching to another couple of hundred investors from across the European Union. Among those were a couple of Finnish investors who, together with five wealthy individuals at the LBA, agreed to back Saha’s business with a combined investment of £300,000. Her work was not yet done, however, as she had to bring the disparate team together to form a syndicate with a lead investor, who would then become CitySocialising’s chairman. “It was hard work and very stressful,” Saha admits. However, she is also one of the lucky ones. Access to finance remains difficult for all sorts of companies, whether they are looking for rich individuals to take equity stakes, debt or venture capital. Although bank finance is easier to get hold of than it was a year ago, the costs remain stubbornly high. The latest quarterly research by the Federation of Small Businesses (FSB) found more than three-quarters of companies had seen the cost of their existing finance increase by up to 5 percentage points above the Bank of England’s base rate. Two-thirds of those in the FSB survey decided not to seek credit at the moment, which could suggest they are fearful of the cost. The good news for start-ups is that the banks seem happier to lend to them, according to Stephen Alambritis at the FSB. “That is a fresh approach,” he says. Victoria Weisener, programme manager at g2i, is less optimistic about debt fundraising. “What you hear is still the same: that people are lending, but we are not seeing any of that coming through,” she says. She is similarly pessimistic about equity finance. “While no one will say they are not actively investing, it is still pretty difficult to raise funds,” she says. “Most of the activity is with business angels.” Raising equity finance through venture capital funds is possible, but it is taking about twice as long as before the recession struck, according to Simon Cook, chief executive of venture capital firm DFJ Esprit, which has invested in some of Europe’s most successful technology start-ups. In the past, both FeedBurner, the web feed management system, and Skype, the internet telephony service, have received backing from Cook’s firm. “Fundraising is taking longer and is slower, but funds are being raised,” he says