Capital raise – there is no one size fits all

Author:Mr Tom Corkill
Profession:Wynn Williams Lawyers

When looking to raise equity capital for your business, it is crucial to understand that there is no one size fits all approach. A business will need to understand the full range of capital raising options available to it and then choose the option which not only optimises the actual cash raised but the value added to the business by an investor. That value may come from tangible or intangible sources – it may be from an investor who can provide new business opportunities, synergies, individual expertise or skills.

There are also a number of different types of investors you may wish to look to:

Friends and Family: It is very typical in early stage businesses to seek small investment amounts from personal friends and family members. Angel Investors: Angel investors typically invest in businesses when capital is needed to develop and commercialise products and services (i.e. when the business is just beyond the start-up phase). They typically look for people or teams of people they believe will succeed. Venture Capitalists and Private Equity Investors: VC and PE investors typically invest in businesses with a proven track record who are looking to increase scale, production or to commence a new project. They often invest large amounts of money and are focused on maximising their return on exit and typically expect more control over the business in exchange for their contributions. Trade or Strategic Investors: Trade or strategic investors are operating businesses and may be a competitor, supplier or customer of your business. They may be interested in investing for vertical or horizontal expansion or even for reducing competition. Just like when looking to sell your business, it is critical that your house is in order before raising external capital. Whilst it may seem obvious, it is important that you can present your investment case...

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