The Problem
Entrepreneurs tend not to like the idea of giving away equity for two main reasons:
1. They don’t like the idea of sharing control of the business; and
2. They don’t like the idea of having less for themselves
Although it is fair to say that there is usually a requirement to relinquish some level of control when investment is acquired it doesn’t follow that there is ‘less for the entrepreneur’ as a result of doing so. In fact, it may not be necessary to experience a dilution of shares at all. It really comes back to understanding your options and determining the most appropriate route to take.
The purpose of securing funding is to enable your business to grow and to enable shareholder value to increase.
The real issue business owners’ face is in understanding the complexity of their options and navigating through the process.
We often see people set out on completely the wrong track due to a lack of awareness of the possibilities. Is it more appropriate for you to seek angel funding, venture capital, debt financing or some other form of investment?
Most business owners simply want the money and are less interested in the detail of how to get hold of it! This is where we come in.
Even when business owners convince themselves that funding may be the best option for the business, they are often held back by a host of other concerns.
Not being financially literate and not understanding the language of investment is often a major roadblock. Talking to possible investment sources without a prior understanding of how to value your business, without knowing how much money you need and without having a proper business plan to support your case will likely defer your decision to seek funding.
Finding the right partner and knowing how to position yourself in the new relationship can be a thorny issue too, especially where you might be reluctant to relinquish control on the one hand and where your prospective partner might be seeking a more prominent role in the day to day running of the business on the other.
Another barrier is the perceived (and often actual) complexity of the process. CEOs and MDs really can’t afford the time to learn the ins and outs of funding and then begin the hard work of preparing documentation to attract the right kind of investors.
Our clients typically want to offload the burden onto us so that they can be left to run the business while we take care of the details in the background. This is what we’re here for.
It is also important to be in a position to negotiate the best funding deal for your business and consider not just your immediate requirements but possible requirements further down the line. It may be that you will need additional rounds of funding and therefore a full understanding of your longer term objectives before you start sourcing investment will add real strength to your proposal.
If your funding requirements are urgent (which is often the case) we would urge you to speak with us sooner rather than later. Our team of over 100 FDs around the UK and thousands of combined contacts means that we have an unrivalled network to assist our clients with their funding objectives. You may find that the process is faster than you think, especially if you have the advantage of a well conceived strategy and key contacts in the marketplace.
The Solution
When business owners arrive at a decision to investigate funding options it usually follows that they are not wishing to drag their feet!
Our regional teams of FDs and our national collaborative network tend to work closely on funding deals in order to cast the net wide and maximise the opportunity of finding investment for our clients within the prescribed timescale.
As part of the funding program we work with our clients to:
- Understand ambitions and objectives and requirement for funds
- Act as devil’s advocate and ask questions which will help steer you in the right direction
- Understand the business model in detail and determine options for an exit
- Determine the right kind of funding partner(s) for the business (VC, banks, high net worth individuals etc) and the business owner’s ideal partner profile (active, passive etc)
- Review the history and track record of the business
- Explore the business owner’s proclivity to risk
- Understand the timescales and urgency of the proposed funding
- Prepare documentation and data for due diligence
- Write a business plan in preparation for funding and include indicative valuation if equity funding
- Identify and appoint any necessary third party specialist advisers
- Identify list of funders to approach
- Negotiate with shortlist of funders on behalf of the client
- Determine ‘best fit’ funders based on suitability for the business across a range of criteria
- Project manage the transaction from beginning to end
- Manage the due diligence phase
- Wok with the business owner to ensure the best possible deal
- Work with lawyers to finalise contract
- Work with the funder on investor relations
- Work with the business owner and key stakeholders to develop and deliver strategy against pre-agreed milestones
Benefits To The CEO, MD And Senior Team
Funding is often the catalyst for taking your business to the next level. Deciding to go down this route and having to learn how a whole industry functions can be a painful process. Having a senior FD as part of your team who has experience of the process and understands the pitfalls and advantages can help lift the cloud of uncertainty.
It is often just a case of shifting mindset and accepting that bringing in funders is a necessary part of the business growth cycle (not always, but much of the time).
If the right partner can be found it can make a profound difference to the business. It may be that the investor brings much more to the party than just money and can add great value to your business in terms of experience, expertise, infrastructure, channels to market as just a few possibilities.
If you are unsure of your options around funding we would love the opportunity to speak to you and let you know how we may be able to assist.
