5M To 50M: Capital Raising Competencies In Advisory Services
In the innovative world of entrepreneurs, the concept of raising capital is not one typically considered: the fleeting thoughts regarding funding are those of “when needed” or “if ever needed,” and the subject is then dismissed.
This is because entrepreneurs clearly recognize innovation; they do not always recognize the processes, strategies, and complications of funding innovation. When the time comes that funding is a necessity, the issue of how to achieve the funding needed is usually unknown.
This is where capital raising advisory services step in to walk alongside the leadership of a company that needs funding to get their product or service to the marketplace.
What Goes Into The Process Of Capital Raising?
Whether a corporation needs five million or fifty million in funding, the process to obtain that funding takes one of three or four options into account. After conducting a review of the status of the company, the capital raising advisory team will make suggestions and offer advice regarding the best choices for the company in either debt capital raising, raising equity capital, or a hybrid/combination of both. Depending on the status of the company and the funding needs in play, the decision to move forward with one process will be made.
The initial process of preparing for an investor presentation can take as long as ninety days or even months. The capital raising advisory service will make a cursory examination of the groundwork needed, then hone in on the specifics required for the investor presentation.
This may include data research and collection, founding documents, company financials and future forecasts, executive team information, and a review of upcoming innovations in the process. All of the preparation for the presentation will flow from this groundwork. The decision to choose how to raise capital is then made from debt capital raising, equity capital raising, or a combination of both methods.
So, What Is Debt Capital Raising All About?
Debt capital raising is simply that. Loans are secured to fund a business in startup or growth mode. External sources may include public credit companies and banks, financial institutions, and private equity investors. Debt capital raising may produce a large sum for the company with practical interest rates.
Debt capital raising includes no ownership or control of the corporation. The loan must be repaid with interest on a set schedule, and the relationship ends when the loan payment has been made in full. The downside of obtaining a loan is that repayment of a large sum can be unwieldy, given that a product or service introduction to the marketplace may lag behind the repayment schedule.
In contrast to debt capital raising, equity capital raising is offering shares to outside parties on the stock market or privately in exchange for financing. Equity capital raising is the more popular choice for company executives because it does not include repayment or, if it does, it is completed on a flexible schedule.
The downside of equity capital funding is the purchaser becomes the owner of shares. If too many shares are offered, the price of the company may appear to be diluted. The investor trusts the company will perform and pay dividends. External funding sources may be private investors, private equity investors, or venture capitalists.
The Role Of Hybrid Capital Raising
Hybrid or convertible capital raising combines both methods of funding with the concept that the positives of each method are included while the negatives of each are excluded. Funding is provided to the company. However, shares are not offered until the company performs to a certain level of expectation. At that point, shares are offered, and investors start receiving dividends. This arrangement is flexible and satisfies the interests of both investors and corporate shareholders.
The Final Step By The Potential Investors
When the process of groundwork is complete, and the decision has been made regarding the type of funding, potential investors are invited to the funding presentation prepared by the capital raising advisory service. The executive team will be fully prepared, and the process of securing funding will take place. Post-presentation duties of the capital raising advisory service are in advising funding allocation, cash flow projections, and other duties to complete the process.
Whether five million or fifty million in funding is required, the services of a capital raising advisory service will take on the entire process, along with preparation for the presentation to investors. The advisory group will also prepare a list and invite the investors. All of these services will lead your company to a funding round that takes the innovative concept to the next level, offering success and long-term growth for your future.