Tips for Raising Capital in any Market

By Reuben Buchanan, Managing Director – Axstra Capital Pty Ltd

Raising venture capital for private companies in any market is difficult. Each week I come across at least five new companies who are seeking capital. Funding for companies who are not already listed on the ASX, or going through a listing process, is very difficult to secure.

No matter the markets, or investor appetite, there is a never-ending demand for capital by new or expanding companies. And make no mistake – there is plenty of money available – it is simply difficult to get your hands on, especially if your venture is pre-revenue or not yet profitable.

If you are one of the companies who seeks capital, here are some tips that will greatly boost your chances of raising funds:

Timing
Allow at least 6 to 9 months to complete your capital raising. Yes it can be done quicker, but you cannot rely on this. Don’t make the mistake that many others have of waiting till 30 days from bankruptcy to start looking for money. You will most certainly fail.

Preparation
Make sure your offer is the best it can be. Ensure you have a good advisor assisting you with the structuring of your capital raising, a good Information Memorandum that clearly explains your opportunity and a succinct Executive Summary condensing your Information Memorandum.

Below is a quick check list that, if you tick all of the boxes, will put you in the best possible position to raise the capital you need:

  • Be sure to have a well thought out and completed business plan
  • Experienced and respectable board and management team. One with a proven track record and is capable of successfully implementing the business plan
  • A very sound understanding of your competitors, the industry sector and how your company is different
  • Realistic and achievable two year financial forecasts that have been professionally prepared (most accountants can do this). Projecting too high is detrimental to capital raising. Be conservative.
  • A clear explanation of the valuation of the business, backed up by a valuation model that the potential investor can understand and believe
  • An explanation of how the investor’s funds will be deployed to grow the value of the business. In other words – a “use of funds” statement
  • Explanation of when and how the investor will get a return on their investment – i.e. an Exit Strategy! (You wouldn’t believe how many companies seeking capital leave this part out. A key element from the investors perspective don’t you think?)
  • Investor pitch presentation – both verbal and in PowerPoint form no longer than 20 minutes total

Distribution
Now that you are prepared, you must get your offer in front of as many potential investors as possible. Raising capital, particularly in the current market, is a numbers game to a large extent.

The other reason to show your offer to as many people as possible is because you never know who they know. They could refer your offer to one of their friends who is more suited to invest into your offer.

Over the years, I have developed a database of over 2,000 investors consisting of private equity, venture capital and high net worth investors who are looking to invest into high growth, private companies. Each month we send out various investment opportunities to this database via email and through Wholesale Investor’s 12,000 strong database (I am the co-founder and director of Wholesale Investor as well).

IMPORTANT: This information is general and should not be taken as specific advice. Readers should always seek their own professional advice. For more information, please email enquiries@axstra.com.au

 

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