Just Say No

 Not everyone has the guts to turn down £150,000 in first round funding - and fewer still would do it twice. But inventor James Barnham has stuck to his guns to secure the deal he wants. 

- it's a matter of whetting their appetite so they can ask questions.

If everyone has just 15 minutes of fame, then James Barnham could have been in a lot of trouble. After presenting his Nova-Flo invention on the BBC's Dragons' Den last summer, he won some admiration for turning down an offer of £150,000 funding in exchange for a 40 per cent stake in his company. Had that been the peak of fame for him and his product, it would have been an ignoble end for a low-cost flood-prevention device that has since generated widespread interest among both businesses and consumers. Instead, however, his decision prompted a spate of further offers and set him up for a better funding deal further down the line, taking him to the brink of releasing his first manufactured product.

Barnham's Nova-Flo invention was the result of a project he carried out when he was finishing a design course at the London South Bank University. For years, he had been curious about how much damage water can cause and how common flooding problems are - particularly compared to other utility catastrophes such as gas explosions or electrical outages. While there are some electrical devices on the market designed to tackle flooding, water and electricity don't exactly mix well in people's minds, and so Barnham set out to build a mechanical device.

His first effort had a Heath Robinson feel to it, relying on a small soluble tablet housed in a plastic container attached to the skirting board. When it came into contact with flood water, the tablet dissolved and caused the plastic housing to drop: that in turn pulled a cable that triggered a pre-sprung valve to shut off the water. 'It worked well,' says Barnham, 'but it was perhaps a little over-engineered, a bit too complicated.'

But the device was enough to secure him a position on a newly-created masters programme at the university, set up specifically to help students commercialise their inventions. Within two months, Barnham knew the device was too elaborate to mass-produce for the home, and turned his attention back to research. After looking into the major causes of flooding and discovering that the biggest problem is people leaving the taps running in baths, he designed and built a valve that works with two powerful magnets, capable of turning off the water supply and then resetting once the water is turned on again.

Having secured an initial £6,500 research grant from the Emerald Fund, an initiative involving eight universities backed by the London Development Agency, Barnham exhibited the valve at the Ideal Home Show. His idea attracted interest from around 500 people, ranging from bathroom installers to the general public, and that was enough to convince the Emerald Fund to award a further £33,500 grant for product development. London South Bank University also introduced Barnham to Roger Brown, a design and manufacturing expert with 30 years' experience who helped adapt the design for more economical manufacturing, which included reducing the number of parts and optimising it for the injection moulding process.

With the concept proven and the product design refined, Barnham set out to secure his first tranche of funding. In the winter of 2005, he participated in the Lion's Den, a business start-up event similar to the Dragons' Den where a group of entrepreneurs each have seven minutes to pitch to potential investors. He was offered £150,000 in return for more than 20 per cent of the company, but in a sign of things to come, turned the offer down. The experience proved useful, however. When the BBC subsequently approached London South Bank University for potential Dragons' Den participants, he was put forward, went through a screen test and interview, and on a Monday morning was offered the chance to be filmed the following Friday.

Barnham's experiences in the full glare of publicity provide some good insights for any entrepreneur looking to pitch for money. To begin with, he practised his presentation repeatedly on camera, constantly refining it. 'I focused on cutting down any waffle,' he says. 'Also, I tried to slow down so people can hear clearly - it's a matter of whetting their appetite so they can ask questions. You've only got three minutes!' He also double checked his financing requirements with his accountant, concluding that he needed £320,000 for the first year, with £150,000 in equity and the rest coming from bank loans. He was prepared to give away ten per cent of equity in exchange for the cash.

While Barnham failed to strike a deal directly from Dragons' Den, the publicity his appearance generated propelled the project forward. Not only was he approached with other funding offers, he was also flooded with requests from people wanting to buy the Nova-Flo, from hotels and residential care homes to individuals.

Still seeking funding, Barnham turned to the g2i programme, since he already knew one of the consortium members, E-Synergy, as manager of the Emerald Fund. G2i helped Barnham gain a better understanding of the early stage investment market from an investor's point of view. 'There are an awful lot of things you need to understand as an entrepreneur,' he says. 'You need to be able to see what the investment offers both the investor and the investee - what people will expect from you, what you need to fulfil. The roles need to be clearly defined.'

Once the business proposition was refined for investors, the g2i consortium approached a number of smaller investors and in January 2007, Barnham finalised a £200,000 funding deal in an agreement that he rates as 'considerably better' than the Dragons' offer.

In addition to the support provided by the g2i team, Barnham also benefited from engagement with other entrepreneurs in the g2i network. He adds: 'I met some really interesting people on the programme. I've got knowledge in a lot of areas other people don't have - but vice versa applies too! During the practice elevator pitches, it was interesting to see how difficult it is to understand people unless you have a background in their industry. So clarity is absolutely paramount.'

Since getting funding, the product has been through further design changes to meet the requirements of water regulators, particularly in its ability to withstand higher pressure. The company is now about to commence manufacturing, and expects to release a product later this year which, initially at least, will be sold direct. Because it's essential for the Nova-Flo to be fitted properly, Barnham is also training up a team of professional installers to put the products in.

Looking back, he acknowledges that entrepreneurs could always do things differently, but he's comfortable with the progress so far. One thing Barnham has learned in particular, however, is how difficult it is to keep focused. 'You've got to concentrate on the most important things,' he concludes. 'For example, once you've been on TV, a lot of people want to contact you about their product and how it could fit with yours. Occasionally you need to say 'no' a little more regularly. You almost need to put blinkers on.'

By Keith Rodgers, Webster Buchanan Research

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