For capital fund raising success consider combining your options
Never before have businesses in the UK had so many options available to them for raising capital. Where in the past networks were limited and generally localised they can now, thanks to new technology and crowdfunding, be national or even international. Where access to angel and venture capital (VC) investors may have been subject to the well connected, today start-up’s and more established businesses can research and present themselves to these types of investors more easily than ever before. But options require decisions, and businesses that look to benefit from this new, expanded network of funding options can find that decision making confusing. At businessagent.com we suggest that they reconsider how they look at these options, because we have observed that through combination comes success.
What are the options?
Businesses seeking capital have a number of options available to them; venture capital (VC) money, family office investment, government grants (and tax breaks), private investors (family, friends, reciprocal deals) and equity crowdfunding.
Every one of these routes to capital financing has its own benefits and of course drawbacks. For most businesses a combination of any number of these routes would represent an ideal, indeed they are becoming increasingly interlinked as businesses better understand how to leverage each of these sources against each other and increasingly canny equity funding investors look for interest from VC investors or a lead investor before committing their own capital to a venture.
And yet how many businesses, whether start-up or more mature, build in this sort of mixture of finance to their capital raising strategies? The answer, it may not surprise you, is that the successful ones do.
The beneficial relationships of combining capital sources
Take for instance Venture Capital investors. These professional investors may take a bigger slice of the corporate pie than crowdfund investors, but they also offer the businesses that they invest in access to advice and guidance built over years of financing and helping small businesses across a generally diverse range of sectors to grow. With a VC investor on-board for a large percentage of the target fund raising amount businesses can turn to the crowd to make up the rest, offering them the comfort that VC money is already secured (generally subject to reaching fund raising targets) and as such sees potential in the business.
In turn equity crowdfunding extends the networking reach of any businesses seeking financing. Note that it extends the reach – that core network remains vital but by accessing the crowd a business can potentially
magnify the impact of that network and connect with other investors interested in the sector and/or interesting opportunities
that present themselves. The downside of crowdfunding is that you get one shot to be successful and it is almost always more labour intensive than the virgin crowdfunder expects. However, when it works businesses return to this route – take for example Brewdog, a well-known success story for crowdfunding that raised capital through a succession of equity crowdfunding bids before accepting investment from private equity firm TSG Consumer Partners to fund global expansion.
Combining these two sources increases the likelihood of reaching fund raising targets. It can also make approaching other capital sources, like friends, family or even local angel investors, more successful – the structure for funding is already in place, the marketing materials are ready and the interest shown by other types of investors increases the potential for interest from these sources too.
How to get started
- Write your business plan
- Map out the influencers and sources of capital that you know
- Map out the influencers and sources of capital that you do not know but can get in-front of
- Consider the best combination of capital sources and strategise how to reach them (what do they want? What have they invested in previously? Why should they be interested in you? What do you offer them?)
- Consider your timeline (for instance you do not want to go live on an equity crowdfunding platform before a VC investor has committed interest but approval to raise on a platform may be vital to securing that VC investor)
- Draft the sales and marketing materials needed to support your fundraising
- Get cracking
And don’t forget that the businessagent.com team is on hand to provide guidance and support if you need it. Good luck.
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