We have covered the topic of raising money for business in our eBook, Cash Light in a Rich World, in some detail. However, as Beany has just completed a capital raising round, we felt there may be other clients who are interested in doing the same and want to know what their options are.
This blog only looks at raising money in exchange for selling some of the shares in your company. We do not look at debt funding here.
Why do you Want Capital?
This is a very important question to ask at the beginning of the process. Clarity about your purpose will help you find potential partners to invest in you and will help define your ‘pitch’.
Beany wanted capital as we wanted to continue our software development to make the user experience even better. It’s expensive. We also wanted to launch the Beany service in Australia and the UK, again expensive.
We naturally attracted investors who were looking for ambitious young Kiwi companies that wanted to take some homegrown tech to the world. Our purpose helped us find our investors.
Who are Your Potential Investors
- The first round of investment in you and your idea is often family and friends.
- The second round of investment can come from Angel Investors.
- Venture Capital companies – these are almost completely absent from the NZ capital market but we do get fishing trips from Australia. Australian VC’s regard NZ companies as ‘robust’ because of our small and tricky capital market. We are also relatively inexpensive. Do not, however, look for a warm, or kind, experience. It is a shark tank.
- Debt/equity funding – a new form of funding from Australia whereby you can get a rolling form of debt which grows as you grow. An example of this is ‘Partners for Growth’. It is expensive debt, relative to bank debt, but it can be cheaper than selling down your shares. Worth a look.
- ‘Family Offices’ – a lot of NZ capital is tied up in family offices. These are the investment arm of private money made from other sources. For example, the Todd family has a ‘family office’ which takes the money made from their businesses and uses it to invest in new business. Beany has not dealt through the family office structure as the investment criteria tends to be more conservative.
- Private Equity – these companies are set up to acquire a substantial shareholding in companies that are trading profitably with turnover of $10 million plus. Private equity seeks out low risk, high growth potential companies that, with the addition of significant sums of money, can really accelerate.
- IPO – list on the stock market! Just about everybody tells you not to do this, but it worked for Xero! You require a valuation of $10 million plus for this option.
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