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8 Tips on raising capital

Jonathan Gold

Raising Capital? Well sell me the business ...

 

Investors, want to make a return, sometimes we forget that when writing out plans and pitches. Yes, they are interested in your product and all the detail. However, it’s the business model they want to understand.

Far too many people I meet sell me the product, not the business. You are there to communicate what your business is about, how it makes money, what cash you need and how will you use it? What are your costs and assumptions behind your income projections?

Where do you start? Try doing some research on potential investors. They are all different and you should read the small print before accepting any offer. The competition is tough, and typically only around 1 in 10 get the capital they need. Don’t think it’s easier as an existing company; it makes no difference, except if you are a startup you have more to prove.

 Whatever you do and no matter what your business does the key to raising loans, venture capital or Angel cash is the same, communication. You should have at least a 5 year plan based on a clear strategy.

 Sadly, so many plans and presentations I sit through fail to ‘sell’ it to me. I don't know your business; what’s obvious to you is not obvious to me and yes, the detail matters. How you run the business and the team makes the difference between success and failure.

 Some tips:

      1.    Know your business model

2.    Understand the roles in the business and management team

3.    Keep the plan short but detailed; 20 pages is enough plus an appendix

4.    Explain all assumptions you make on the market, sales and growth

5.    Back up all you say with data to help prove it’s possible

6.    Be clear and concise; don't use complicated language

7.    Know your finances and how cash comes in and out, in detail

8.    Tell the story of the business - but this is not an essay competition.

Be sure you understand how it all, including my loan or equity investment, fits into your business. What do you need the money for and how you will give me a return?

 Good luck and why not drop me a line?

Startups in difficult times

By Jonathan Gold • 02 Aug, 2020
Starting a business can be like throwing dice, but it shouldn't be a gamble just research the investors. The fact is that its never easy to raise your first investment. Right now in the Covid-19 crisis its harder than ever. Many venture Fund Managers are just not investing or if they are they are diverting resources to their existing portfolio of investments as they cope with whatever they have to do to stay solvent and keep on track. Investment activity is just not what it was, look at organisations such as Beauhurst for up to date reports on the investment space. Government loans have helped many businesses but that sad fact is that many startups can not service the loans and are just not yet ready to take on debt as many have little or no revenue while they get going and develop their product or service. Further, the Government "Futures Fund" will only invest where a small business already has had £250,000 of venture investment and then only on a matched fund basis with Angel or other investor. Again this rules out startups. The traditional source of startup capital, the Business Angels are not out there in sufficient numbers, partly for the same reason VC and other fund managers are not, reference my words above. Many regions of the UK do have specialist early stage venture funds. These are good but again demand for them is now so high and they are restricted by EU and other rules so they are just not a sufficient solution. So what do you do if you are starting a business and need longer term, equity, style finance? Well Crowdfunding and Angel groupings are a viable alternative. However, be aware competition is high and you need to really raise at least 30% of your target investment before most will consider you. History has shown them that only really businesses that list with some investment already in the bag hit the target raise others do not... In the end the fundamentals apply. I spend my days here and at my sister company Rivers Capital helping investors find the right business to match their needs and also entrepreneurs and startup reach the investors. So contact me and see if we can help.
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