Philip Tellwright, Managing Director of the South West Angel Investor Network (SWAIN), provides some answers on how equity finance can provide vital resources for high-growth businesses.
How difficult is it to raise finance in the current market?
It remains tough borrowing money. But you can achieve it by putting forward a compelling business case. This has to be well prepared – it needs to be watertight.
Funding resources are limited and you can’t afford to take shortcuts. Some lenders are quite active, but they are able to select the best quality opportunities and the best individuals.
What is the attraction of equity finance?
It’s not just about getting your hands on the cash you need to grow. A vital appeal of equity finance is getting access to an experienced investor, who can bring a wealth of experience and insight to your business during a period of rapid change and growth.
Benefits include access to the investor’s contacts. They can help you shape your business model and avoid making mistakes. Bringing in an investor improves the rigour and discipline of a business. For example, regular board meetings are held and directors are kept on task.
An equity investor can help you get where you want to be more quickly. It can be more appealing having 70 – 80 per cent of a bigger business rather than 100 per cent of a smaller one.
What are equity investors looking for?
Investors will often be looking for opportunities in markets that they understand and have experience of. They will want to see a compelling value proposition – what customer problem does your new product or service solve?
They will want to understand it in a market context. Is there a niche market here that the product can fill? Is there a sufficient market in the niche to sustain the projected business growth?
Making the right first impression demands robust financial projects. Investors will be able to sift through a range of opportunities before shortlisting businesses that they will take a serious look at. They will quickly dismiss candidates whose numbers don’t appear to add up.
The chemistry between the business owner and equity investor is also important – they will want to fund individuals that they feel they can get on with and work well with.
There is a special Cleantech Co-Investment Fund for businesses in the low carbon, renewable energy sectors. Companies in this area that attract experienced keystone investors can receive up to £100,000 matched funding from this resource managed in this region by SWAIN.
To help businesses make these difficult finance decisions, and provide practical guidance, GWE Business West has recently introduced a new service called Understanding Finance for Business. Find out more about Understanding Finance for Business and how you can access free support from a dedicated finance coach.