What to consider when raising capital for growth
You are a high-growth business with a stellar product or service, a core team and have been trading for a few years but need that extra capital to actualise your growth plans. Where do you go from here? How do you raise capital?
This blog will provide you with an insight into what you need to do get to the next stage.
What to consider when raising capital for growth
Businesses across all industries need finance for day-to-day functions and long-term growth. What you need to decide as a business is what kind of finance you need, how much and when. The first step is to look at the 3 main aspects of any business:
Consider how much resource each of these aspects needs to grow and the sort of growth you would like to achieve, rapid or slow?
What resources are required? How much will they cost? How long will they last?
This then needs to be reflected in your financial plan. Having a five year projection helps you visualise how you want to grow and allows you to decide how much funding you will need in each year of trading.
What are your capital requirements and when do you need it?
Once you have decided on what your business needs finance for, you need to consider the type of finance you need, the timing and the amount. What sort of finance do you have right now?
Think carefully about what options you have:
This is finance you will be borrowing, such as working capital. This type of finance can be accessed in a relatively short time period but is probably better for solving a short-term finance problem such as cashflow. There are medium- and longer-term options available also, depending on your situation and requirements. Risk for lenders is a big factor here, which determines the cost of borrowing, which may be high. It’s also typically only available to more mature businesses with reliable revenues. There are many types of debt finance and plenty of complex options, so it’s always best to consult with a professional, such as our finance brokerage team who will work with you to find the best finance for your needs whilst providing free and independent advice.
This is a great funding option, as it is essentially money that does not need to be paid back. There are numerous grants, but you do need to find one aligned to your innovation / business plan and it can be time consuming to find the right one and complete the typically comprehensive applications. It also isn’t an option you can rely on as they tend to be highly competitive.
This can be the boost of funding your business needs, where you can raise relatively large amounts. In addition to the funds, you can acquire investors with expertise that can benefit your business. However, it can be difficult to secure, and it can take a relatively long time to access the investment. Of course, you will also have to hand over some equity in the business.
Increase in revenue
Can you maximise revenue and minimise your expenses? This can be a great way to organically increase the funds you have available.
What investors are looking for
Most investors tend to invest in companies with a good risk to return on investment, typically companies that have started trading and are earning revenue. The company needs to ideally be profitable and the more history of trading they have the better, but it’s not a deal breaker. To have a better chance of succeeding, the business would need to have a strong team, an innovative product which is highly scalable and assets, which includes Intellectual Property (IP). It’s highly competitive and there are several other important factors.
How to get ready for outside investment
Getting ready for investment is going to take a lot of legwork but the main three steps that you’ll need to take are:
1st step: Do all the background work such as protecting your intellectual property by obtaining patents, registering trademarks and getting your financials in order.
2nd step: Decide on what type of investor you need
3rd step: Prepare for investment – Prepare your business plan and create a compelling Pitch deck
Investment readiness programme
It can be difficult to get your business ready for outside investment, which is where our experienced Innovation and Growth Specialists come in. They will be able to help you assess your business, prepare for investment and help you through the process. Of course, they can also support other aspect of your business, such as operations, strategy, IP, sales etc
One of the programmes we provide is the Investment Readiness Innovate UK EDGE Pitchfest delivered by Innovate UK EDGE, which is a comprehensive national offering for clients, designed to help the UK’s most innovative businesses to get investment ready and hone their pitching skills.
The programme offers two days of comprehensive pitch training, an understanding on how to find UK investors, access to leading pitch and innovation experts, an opportunity to craft a powerful investor pitch, constructive feedback from a panel of investors, bespoke follow-on support from a dedicated innovation and growth specialist.
We’ve covered some of your funding and finance options, which can be difficult to navigate by yourself, so we are here to help you with:
- Grant application critique and access to our own FIRM (Funding for Innovation Readiness Module) to develop your idea.
- Access to updated information on grants available.
- Pitch and investment deck development.
- Peer-to-peer pitch learning activities.
- Introductions to funding and investor opportunities regionally, nationally and internationally