With traditional debt funding from banks getting harder to obtain, sourcing growth capital is a challenge for many private businesses today.
However, obtaining funding from private high net worth investors is worth considering. But make sure you get your facts right before you proceed.
Fantasy 1: My idea is so brilliant only an idiot would let it pass them by!
Fact: Investors don’t invest in ideas, they invest in people and results. The number one consideration for investors when making an investment decision is the management team, as management strength is a strong indicator of the potential of that business. Proof of concept and sector come after that.
Fantasy 2: I don’t need an exit strategy
Fact: Believe it or not, investors are actually interested in getting their money back one day. No exit strategy-no investment.
Can’t imagine selling part or all of your business? Then you need to consider how else you will get the investors money back to them with an attractive return within an acceptable timeframe.
Fantasy 3: My private business is not sexy enough to attract investors
Fact: A study by Wholesale Investor Magazine found 60% of those investors surveyed are interested in private businesses.
Fantasy 4: Investors secretly want to take over my business
Fact: Being responsible for producing results in your business is the last thing investors want. They are more than happy for you to carry this burden for them. Giving up equity does not mean giving up control. Your shareholders agreement determines who holds control and under what circumstances this can change.
If you would like to raise capital for expansion or exit then please contact me on 1300 987 567 to discuss a no-obligation investor-ready or exit-ready assessment.
Article originally published at: www.gwpmagazine.com.au/gwpmedia/gwpmagazine/_pdf/issue_34.pdf