Our Growth Director, Sophie McLernon, recently hosted a workshop on "How To Get Investment Ready" at the NZ SME&E Growth Conference in Wellington. She shares her key takeaways for companies who are considering raising capital from the event below.
Potential investors want to see a company with strong economics, profitable or a clear path to profitability. Consider how you can highlight this in your company's capital raise documents, such as the Information Memorandum, marketing collateral that supports the raise and investor webinars and Q&As.
Before raising funds, spend time mapping out your company's capital-raising strategy. Take a step back and think about what sort of business you want to have (bootstrapped and slower growth, lifestyle and cash generative or a high growth business with a desire to sell). Identify the 'why' of why your company is raising funds, consider how much the business wants to raise and who from. Also, think about how much control you're willing to give up. Defining the answers to these questions will also inform your capital-raising strategy and who you should raise capital from.
Spending the time to do this groundwork upfront helps ensure that your business has the best chance of a successful capital raise from the right investors.
One of the keys to a successful relationship with investors is to manage investor expectations from the outset. Once you've decided on your capital raising strategy, make sure you are aware of their expectations around key milestones, timelines and their expected Return on Investment (ROI).
Be across your company financials before you start the capital raising process. It's imperative that senior management is able to articulate the business's financials and the assumptions behind them, clearly to potential investors. If this is an area that your business struggles with, don't be afraid to ask for help and work with a financial advisor.
Understand your growth strategy's key drivers and assumptions and how it compares to previous years. As a business founder, owner or senior leadership team member of a growth-stage company, it can be easy to let your enthusiasm for the business paint a slightly rosier picture to potential investors. Be realistic about how the current economic climate may impact your business growth plans and the potential knock-on effect on investors. Keep investors updated on company growth via regular investor communications.
Raising capital before your business needs it is always easier, and our recommended approach. If you leave it too late, a company risks slower growth, competitors taking market share and, even worse, unfavourable company founder-to-investor terms.
Are you interested in learning more about raising capital for your business? Our team is happy to answer any questions and can be contacted at [email protected] or by calling 0800 SNOWBALL.