How do you see the current Covid situation affecting capital fundraising for businesses?
The market reaction to Covid in 2020 was to stall investments which resulted in wave of capital now looking for investment opportunities. So, it’s a great time for high growth companies with ambitious management teams to raise capital!
What are the practical steps to successfully raise capital?
- Preparation is key – so before you run out of cash you need to:
- Define what success means to you, your team and your business
- Build a robust business plan and be clear on your funding requirements (quantum, timing, exit)
- Assess the funding options available & ask advisor if you’re not sure!
- Efficient project management of fundraising process is vitally important to protect the business and avoid lengthy protracted negotiations.
- In selecting the funding partner, consider the cultural & strategic fit and the execution risk, not just the cost of funds or equity percentage stake!
- Ensure you have clear understanding of terms and set these out clearly in the legal contracts to protect the business.
What can the government do to attract private capital investment in firms and make equity financing easier to access?
Incentivise private investment in early-stage Irish companies by providing more accessible tax reliefs. This should include review of criteria for EIIS, broadening CGT reliefs for owner entrepreneurs and extending share option schemes to help companies attract and retain talent.
What will be the leading trends in the financial services sector in the coming years and how will companies need to adapt?
There is significant focus on sustainable finance and “impact investing” as global funds look for investments that meet their ESG objectives. This will mean companies will start to pitch their funding journey to deliver more than just financial returns.
Venture capital is also becoming more globalised and increasingly accessible for individual investors to participate in listed venture capital funds. This will mean early-stage companies in Ireland can access global capital but will need to demonstrate the corresponding ambition to scale internationally.
What are some of the challenge’s growth-stage businesses encounter when they are on the lookout for new investors?
Many companies underestimate the fundraising process which can include unrealistic expectations in terms of timeframes or pricing, and poor preparation resulting in delays or potential impact on value. Key challenge is to not get distracted and to focus on the business operations. It’s important also for companies to do their own due diligence on the funder. Asking for references of previous investee companies can be invaluable in terms of assessing their approach.
What does an advisor like BDO Ireland bring to the table?
Pragmatic, commercial and straight-talking advice. We use our local expertise and international reach to develop solutions for our clients that achieve their objectives and deliver successful outcomes.
To discover how BDO’s Corporate Finance team can help your organisation achieve corporate objectives and grow shareholder and personal wealth, click here.