| Raising capital can be one of the most difficult
tasks a company executive has to face. The multitude of sources of
capital and types of funding, and the scrutiny and critical analysis
they perform on your business can be energy draining, time
consuming, intimidating and even discouraging. It’s a complex world.
However, like most things in life, once the learning curve is
gained, corporate finance can be fascinating and provide critical
fuel for your continued value creation. There are many ways to raise capital, however, the key to being
successful, whether simple bank financing or venture capital
investment, is being prepared and understanding your audience. When
you package the securities of your company, you are essentially
creating a product (a corporate securities offering with specific
features and benefits) for a specific market (a funding source with
an appetite for your specific securities offering). Your company and
its securities will be valued based on the perceived probability of
you being successful in meeting your business goals and providing a
return on capital specific to the type of funding source.
Therefore, it is absolutely critical to have a growth plan that
highlights 1) how uses of new capital legitimately support increased
sales, market share and equity; and 2) how all associated risks will
be minimized by a well thought-out business strategy and plan.
Because raising capital, or selling financing, essentially mimics
any product sale to a customer, it is critical to understand your
customers’ needs and desires. The critical understanding is that the
investor’s perceived business risk and timing of liquidity (when the
investor gets their capital and required return back) often
determines the valuation of your company, which determines the
structure of the investment and how much of your company you
exchange for the financing.
At Mikael Meir, we have a proven ability to raise capital. We have
significant capital fund raising experience in private and public
offerings, and we can offer sound advice on the most appropriate
structure, pricing and legal marketing to get your financing closed,
while maximizing shareholder equity. We offer objective advice on a
fee-for-service basis – no commissions, no success equity, and no
self-interest. This allows us to be completely objective, and focus
on the best interests of our clients. Please
contact us for more information.
Which Capital Source Is Right For You?
When assessing how to raise capital for your business, the capital
raising process should be looked at from both a strategic and a
financial perspective. A strategic investor (an experienced
individual, corporate supplier, large customer or strategic partner)
can offer growth capital with a predisposition toward creating
significant increase in the equity value of your business.
Surprisingly, many of these exist, but the downside can be a loss of
autonomy, and the need to play to the interests of the strategic
investor.
Alternatively, a financial investor is looking for a rate of return
in exchange for funding. From the company’s perspective, the
analysis could include costs associated with various sources of
capital with a view toward both minimizing costs for your company,
as well as understanding the risk-return requirement from different
sources of capital. For example, conventional bank financing is the
cheapest cost of capital, looking for 6% – 12% in annual interest.
Mezzanine/sub-debt lenders are typically looking for between 12% -
25% in some combination of interest income and equity. And finally
when raising venture capital or private equity be prepared to show
the investors how your company will return between 30% – 100%
annually along with a achieving a liquidity event (merger, sale or
IPO). When raising equity capital, Angels and “family and friends”
are also a great source of funds, with costs varying between bank
financing and venture capital rates.
For more information on how to capitalize your business for growth, please fill out the request form below:
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