A Guide to Raising Capital Part 1 – My 7 Top Tips
Having raised capital twice in my working life as the Founder of Wholesale Investor, I felt it essential that I share my experience with you.
Nothing quite prepared me for the journey, and it was the biggest learning experience I have had in business. There is no precedent for raising capital. Your first day at school prepares you for your first day at work. Getting your knees dirty and grazed in the playground prepares you for the hard knocks of life, but nothing quite prepares you for the arduous, daunting task that is capital raising.
This is my short point guide to raising capital. In it, you will find three tips and four common mistakes to avoid. I have also included some bonus comments at the end.
The three most valuable lessons I have learned:
1. GET READY – If you are looking to attract a significant investor onto your register, you need to expect that they will want to see more than just your IM and latest financials. Often, they will look to do due diligence on your business, to discover potential risk factors.
2. STAY READY – With the amount of time it takes to get ready, you are best to keep your DD folders up to-date with your quarterly board reports, financial reports and other relevant material. By staying ready, your board are kept happy, and your business remains appealing to potential investors.
3. ALWAYS BE RAISING – This is not because you always want to be taking on money, but the reality is, in the next six to 18 months, this is going to be required. Build relationships now. More than that, you will receive some great advice and suggestions on your business model and additional opportunities. You may even attract strategic partners.
Mistakes to avoid:
I have learnt the most when I have made mistakes throughout the capital raising process but, this is where thebest form of learning comes from. Here is what I have found.
1. Relying on one potential investor is risky. It is important not to put all your eggs into one basket.
2. Relying on your existing investors. While existing investors have helped to get you to where you are to date, total reliance on them isn’t recommended – this is not to say that you won’t have success out of re-investment, but for some investors, one round is enough.
3. Waiting until you’re 100% investor ready with documents, IM etc. – perfectly ready does not exist, the truth is you are always raising, and you need to start any interaction ASAP!
4. Success fees do not equal results – Many companies try and raise capital utilising multiple advisors or groups, who are operating on success fees only. This does not work. Advisors will focus on clients with a paid monthly mandate, as that is a guaranteed revenue source.
If you would like to know more about my experience in raising capital, get in touch with me on LinkedIn here, or fill out this form to speak to a WI Capital Raising Consultant and tell us more about your ambitions to raise capital.
Read part two and part three of this series.
A Wholesale Investor insight by Steve Torso, Co-Founder and Managing Director
Wholesale Investor is Australasia’s leading investment platform that connects innovative, emerging companies that are looking to raise capital with our active, engaged and growing ecosystem of over 21,500 high-net-worth investors, fund managers, family offices, PE and VC firms, government bodies and industry participants.