Fund raising without borrowing
Towers Business Development News
Small companies are embracing the concept of being able to raise funds of up to $5M in 12 months by the issue of shares in the company, thus avoiding having to offer security to lenders.
After a slow start, Crowd Sourced Funding Equity Raising is growing, with an increasing number of companies finding that the process works and that they can raise capital direct from the public.
But before getting to that joyful position of raising funds, there is a lot of work to be done to ensure that the company has the required systems in place, Leadership Team appointments made, Director appointments made and has prepared realistic plans for at least the next 5 years which include:
- Business plan
- Predictive accounting reports – budgets, cash flow forecasts and projected balance sheets
- KPI/metrics systems to give regular analysis on the business performance
- Training/professional development material for the leadership team relating to: corporate governance; reporting to a Board of Directors; creating a ‘rhythm of meetings’ to ensure appropriate due diligence is implemented
- Crowd Sourced Funding Offer Document – required by law
It is pleasing to note that capital has been raised by companies whose business activities embrace a wide range of endeavours.
Birchal, the leading Crowd Sourced Funding Intermediary reported in their 2022 year book:
- Pre-money valuation had an average multiple of 8.7 times
- Company directors and leadership team are encouraged to meet with potential investors before the offer is opened
- Companies already generating more than $1M in revenue made up 50% of the companies raising capital
- 29% of the companies raising capital already had ‘positive earnings’
- The percentage of businesses that were pre-revenue made up only 16% of raises