Preparation is key in most things in life, and this is especially the case when it comes to raising capital. Snowball Effect's Director of Growth Capital, Michael O'Byrne, shares three tips for capital raising preparation success.
One of the first things I recommend to companies when preparing for their capital raise is to get their historic data and forecasts in order. Potential investors will want to see evidence via data and insights justifying or supporting the assumptions you make about your company's future growth. The more you can support your assumptions with evidence and rationale, the easier it is for investors to understand and buy into the opportunity. In addition, you should be clear in your Information Memorandum about how new investors' funds will help your business reach its goals. Download the Information Memorandum template here.
Landing on a valuation can sometimes take too much focus when preparing for a capital raise. Remember, this is not a liquidity event; this is the next step in your journey to becoming a successful business. Securing funding from the right investors on the right terms should be a far higher priority than trying to maximise a short-term valuation.
Not only can a higher company valuation make it harder to raise capital, but it can also result in unrealistic expectations from shareholders who will have less tolerance for setbacks. Future capital-raising rounds can also become more challenging if the initial company valuation is set too high.
Relationships and credibility are important for successfully raising capital. It's never too early to start building rapport and relationships with potential investors and advisors. Don't leave it to the last minute! The earlier you start to demonstrate your ability to execute your company's growth plans, the easier everything becomes down the line. Whereas if you leave your raise to the last minute, with only a few months left of cash burn, you may find yourself forced to accept investment on disappointing terms.
Are you interested in learning more about raising capital for your business? Our team are happy to answer any questions and can be contacted at [email protected] or by calling 0800 SNOWBALL.