Investor Series 2: Raising Capital for Growth

Raising Capital for Growth

The prospect of raising business capital can be daunting. There are many ways to raise money. Equity finance is one of them. Whatever path you decide to take to raise finance for your business you must be prepared. Most businesses underestimate the amount of paperwork that is involved and the number of forms that need to be completed. 

First question is how bankable is your business plan?  Your efforts to raise capital for your business or business venture can go more smoothly if you make use of investment consultancy firms who offer bespoke capital sourcing services, they will undertake the search and market your company to selected and targeted investors. 

Here are some useful tips

Do not bother trying to get funding unless you already have a going concern, relevant experience and connections, and an edge that will make your business really grow and attract and retain customers.

TIPS

1.     Business Plan: Write a business plan and a formal pitch, if you do not know how to get help.

2.     Content: Be clear about the deal. Why do you need money? How will you spend it? What will the investor get in return for their money?

3.     Targeted Search: Apply only to Venture Capitalist that show a willingness to invest in your particular sector or ideas like yours

4.      Track record: Have a business that demonstrates the power of the idea in action. Good ideas are nice, but most Venture Capitalist /Private Equity investors invest in an idea only when it has been tried and tested. Has your business shown year on year profit? Do you have 3 years set of accounts? A solid customer base?

5.     Resources: Get a good lawyer and a good accountant. You will need them during the due diligence stages.

6.     Relationship: You may think that raising capital is a cheque in the post , it is not , it is about a relationship. The investors will become part of your business.

7.     Sourcing investors by cold-calling is a big NO NO. No investor will invest in a business through cold calls, you need to be recommended or properly introduced. Most PE firms or VC’s use trusted brokerage firms to source investment opportunities on their behalf. Make sure you engage a brokerage firm to enhance your chances of getting in front of the most suitable investors for your business to enhance your chances of success.

8.      Added Value: Patents applied for or granted are excellent and build the intellectual property value of the company

9.     Know your business sector really well. If you are in the technology business, link up with a business person who understands the financial aspects of your business. What are the reasonable gross margins for your sector or industry? What is the typical sales cycle? What is a reasonable pricing and delivery model? What kind of investment is really needed to get the company to positive cash flow and profitability? These details will be in the business plan but you need to be able to summarise it in your pitch. Know your numbers i.e. the difference between turnover and profit !

10.   Do not get discouraged, must business owners do not raise the money they need from their first meeting. Listen carefully to the feedback; sometimes investors who turn you down have invaluable comments to make that can help you.

11.   Use a specialist firm to get you investment ready and prepare you for the pitch. Note that ultimately they cannot pitch your business for you. They can get you in front of an investor but you will have to do the pitch yourself, investors will want to hear from you.

12.   Making your Pitch: 10 slides or less. Your pitch must be clean, crisp and concise

WARNING

·         Do not celebrate until the money is in your bank account!

·         Know your target market really well. Customers awareness = revenue and revenue = profits.

·         Establish strategic partnerships’ with reputable businesses, this is always seen as a plus by investors.

·         Are you ready? : Seek growth capital funding only when the business is able to demonstrate profit as the less money you need, the more equity you can keep in your business as you will need less money to get it to the next stage.

·         Keep the presentation short, do not get too technical. All the investor is interested in is the figures, how much, what for and how they are going to get returns on their investment and how much return they will receive from their investment and how soon.

·         Pick the right person to make the pitch: Whoever you have chosen in your company to make the pitch must have excellent presentation skills and be able to remain calm whilst under fire. They must be able to stay on topic, stay on message, and keep a presentation moving forward. They must be able to answer questions directly, defer to their partners when appropriate, and not make wild shoot-from-the-hip statements. They must be confident but not cocky, and know when to shut up and listen and be respectful when people are making points or asking questions.

·         Back up your claims: You must be able to evidence and back up any claims you have made in your business plan or pitch. Resist the temptation to exaggerate.

Sandown Corporate and GBSH Consult offer capital sourcing -introduction and referral services for businesses seeking capital. For more information contact us on info@gbshconsult.com 

Look out for information and tips on what to expect during due diligence checks, types of funding available and other useful tips on how to raise capital successfully in our next newsletter.

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