Mark's lessons on capital raising

27 April 18

Mark's lessons on capital raising


  Mark's lessons on capital raising:

  • Make sure material arrangements are supported by appropriate documentation;
  • Be flexible on how the investment might be made (equity, convertible note, joint venture, “farm in” …);
  • Have a well balanced team with relevant experience and skills related to the business;
  • Understand current business performance, profitability and customer acquisition costs;
  • Assumptions for forecasts should be well tested and be able to be supported;
  • Be realistic on valuations. Investors will only pay for “fair value”. The gap between the balance sheet and the valuation is “good will”.
  • Maintain good communications with your “followers” (potential investors) and stakeholders including your advisors. Fast growing businesses can change quickly.
  • Put capital raising plans in place early – don’t wait until you need the capital as it takes time to raise capital;
  • Answer prospective investor queries promptly and provide transparency around your operations. Investors are not only assessing the opportunity but the management’s ability to execute.
  • Make sure the company is solvent and the “burn rate” is sustainable;
  • Channels to market are critical;
  • Accounts should be up-to-date and accurate;
  • Don’t second guess who may or may not invest, contact as many potential investors as possible;
  • Balance sheets should be “clean”. Loans from related parties should converted to equity if possible.
  • Founders should not have loans to the Company and also take shares for “sweat equity” (no double dipping);
  • Take advice around the capital raising process;
  • Capital raising is a “team sport”, make sure all parties are engaged and active;
  • Corporate structures should allow investors to have direct access to the intellectual property;
  • Don’t over invest in the product, you also need to sell it;
  • Don’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);
  • Don’t just back “one horse”. Curate investors or acquirers so multiple parties are pursuing the opportunity. Many deals do not complete.
  • Take the money.
  • Reputations of the parties are important.

Contact us to discuss your capital raising needs:

phone +61 7 160 2840 or email brisbane@fundingstrategies.com.au


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.