Mark's lessons on capital raising

27 April 18

Mark's lessons on capital raising

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  Mark's lessons on capital raising:

  • \t\tMake sure material arrangements are supported by appropriate documentation;

  • \t\tBe flexible on how the investment might be made (equity, convertible note, joint venture, “farm in” …);

  • \t\tHave a well balanced team with relevant experience and skills related to the business;

  • \t\tUnderstand current business performance, profitability and customer acquisition costs;

  • \t\tAssumptions for forecasts should be well tested and be able to be supported;

  • \t\tBe realistic on valuations. Investors will only pay for “fair value”. The gap between the balance sheet and the valuation is “good will”.

  • \t\tMaintain good communications with your “followers” (potential investors) and stakeholders including your advisors. Fast growing businesses can change quickly.

  • \t\tPut capital raising plans in place early – don’t wait until you need the capital as it takes time to raise capital;

  • \t\tAnswer prospective investor queries promptly and provide transparency around your operations. Investors are not only assessing the opportunity but the management’s ability to execute.

  • \t\tMake sure the company is solvent and the “burn rate” is sustainable;

  • \t\tChannels to market are critical;

  • \t\tAccounts should be up-to-date and accurate;

  • \t\tDon’t second guess who may or may not invest, contact as many potential investors as possible;

  • \t\tBalance sheets should be “clean”. Loans from related parties should converted to equity if possible.

  • \t\tFounders should not have loans to the Company and also take shares for “sweat equity” (no double dipping);

  • \t\tTake advice around the capital raising process;

  • \t\tCapital raising is a “team sport”, make sure all parties are engaged and active;

  • \t\tCorporate structures should allow investors to have direct access to the intellectual property;

  • \t\tDon’t over invest in the product, you also need to sell it;

  • \t\tDon’t be prescriptive on how the raise should be conducted – the strategy should meet the Company’s capital needs (ie. working capital or a capex milestone);

  • \t\tDon’t just back “one horse”. Curate investors or acquirers so multiple parties are pursuing the opportunity. Many deals do not complete.

  • \t\tTake the money.

  • \t\tReputations of the parties are important.

\tContact us to discuss your capital raising needs:

\tphone +61 7 160 2840 or email brisbane@fundingstrategies.com.au
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About Funding Strategies  

Funding Strategies is an Australian based capital markets firm providing venture equity capital and finance services to small business and companies seeking capital for growth and expansion in the unlisted and pre-IPO capital markets. We work with predominately private and public companies, and sophisticated investors. If you would like more information about our company and services, please email brisbane@fundingstrategies.com.au or phone +61 7 3160 2840.