Capital Raising

 

Capital Raising for unlisted Australian companies via small-scale debt and equity investment

capital raising Accrutus

Acquisition  |  Property Development  |  Global Expansion  |  Leveraged Buyout  |  Commercialization

Capital Raising through equity or debt finance is another option many Australian companies consider to fund an innovative product launch or business acquisition. In an equity investment, you buy into a company and your profit is related to the performance of the company. Management may invite additional skills to the executive team when capital raising in exchange for selling a percentage of the company. In a debt investment, you loan money to a person, a business, or a government institution and your profit is not directly related to the performance of the borrower. Capital raising for unlisted companies is a cost effective way to raise $1 to $5 million.

Capital raising as an alternative financing tool

  • Implement a strategy which analysis the use of debt versus equity investment.
  • Consider the benefits and costs of capital raising as debt is often cheaper than equity.
  • The cost of the debt, i.e. the interest rate, is tax deductible.
  • The ‘cost’ of equity is the earnings required to cover the non-deductible dividend payment.

Capital Raising Services

Accrutus Capital will discuss your successful business model and understand your companies value and high growth potential for investment partners. Fundamental to the capital raising process, we then work with you to build the business plan around your unique business model so that the company attracts the right investors to help you realize its full potential. The investor is not that interested in your  business, your product, market or what customers think of the product or service being developed or sold. All investors want is proof of a ‘compelling investment opportunity’. They want to be convinced that their investment funds will be used to create a successful exit event so that they achieve a great return on their investment. A successful capital raising starts and ends with how the company is going to make investors money not produce the world’s best widget. The investor will approach the investment opportunity with a set of assumptions as to how the company will be developed for scale and how and when the exit will be achieved.

Capital Raising create a ‘compelling offer’

For your capital raising to be successful, resulting in an IPO or financial trade sale, we must demonstrate the potential to sustain the revenue and current profit levels to provide a good return on the investment. Your capital raising program must satisfy some basic high growth potential criteria, such as;

capital raising start-up and acquisitionIdentifiable Customer

Proven customer implementation strategy to reach your target customer with a compelling need

capital raising start-up and acquisitionGlobal Opportunity

A growing market with significant global potential which is fragmented and where demand meets supply

capital raising start-up and acquisitionGrowth Strategy

Demonstrate that your company can achieve the levels of revenue and profit within 3-7 years to meet the investors ROI

capital raising start-up and acquisitionExecution Strategy

A robust business strategy and cash flow risk management that secures investment and ensures the expected returns to the investor

capital raising start-up and acquisitionBarriers to Entry

A proven product or service that has clear customer acceptance and sufficient or high barriers to entry

capital raising start-up and acquisitionManagement Team

Demonstrates the skill and experience to  execute the growth strategy, and a willingness to sell the company in 5-7 years

capital raising start-up and acquisitionPurpose of Funds

A well defined capital raising plan for the use of investment funds with a clear and measurable target which in turn supports the exit strategy

capital raising start-up and acquisitionRealistic Valuation

A team willing to negotiate a realistic valuation, and the level of scalability or development of new products and services to generate new revenue.

capital raising start-up and acquisitionExit strategy

For a capital raising to be successful the company must demonstrate the potential of a probable exit through a strategic trade sale.

capital raising acquisition
  • Investor Ready Coaching
  • Disclosure Offer Documents & Pitch Deck
  • Issuance of SME Bonds Debt Securities
  • Business Exit Strategies
  • Full & Partial Capital Raising Campaigns
  • Australian Acquisition Opportunities
  • International Investors Network
Capital Raising Australian SME

Capital Raising Process

  1. Evaluation of the business opportunity
  2. Getting the business model investor ready
  3. Key components of a successful Offer or Exit
  4. Professional presentation of your opportunity
  5. Reasonable valuation versus risk and reward
  6. Targeting the right investment channels
  7. Negotiating terms, shareholdings and exits
  8. Fulfilling your obligation to investors
  9. More capital raising details visit our FAQ page
  • Quality of Management

  • Size of the Opportunity

  • Rate of Market Growth

  • Competitive Landscape

  • Barriers to Entry

  • Stage of Development 

  • Current Capital Structure

  • Equity and Valuation 

Capital Raising Essentials

  • Proven business model & solid execution plan
  • Unique IP and a clear competitive advantage
  • Disrupt an existing market or create new one
  • Dynamic and amenable management team
  • Return on Investment of 25% of higher
  • Exit strategy as trade sale or IPO in 3 to 5 year

Capital raising for unlisted companies with proven innovations and demonstrated market acceptance that are cash flow positive and offer a medium-term exit

Capital raising equity finance?

Over time, equity based investments will provide higher rates of return than debt based investments. Capital raising should include a mix of debt and equity to manage risk and return

Companies raise capital to

  •  acquire another business to grow market share, or franchise the successful business model for scale
  • strategically execute the new business model, or launch new products or services
  • fund research and development around innovative products or disruption existing markets
  • retiring of debt by issuing new capital via rights issues, bonds and placements
  • management buyouts or founders want to liquidate their shareholding
  • fund property development projects from private investment

Seeking Debt or Equity to $5M

* indicates required

Capital Raising risk versus return

The aim of investors is to secure the highest rate of return appropriate to the risk, due to the high level of risk if a company goes into liquidation. Equity investors expect a high return between 25% to 50% within a 3-7 year time-frame or longer.  Debt investors typically look for a return of 8% to 20% per annum over the short to medium term as debt ranks higher than equity.

 

Capital Raising participants are;

  • Institutional investors
  • Corporate venturing
  • Private or Individual investors which represent the following;
    • the passive long-term investor
    • the active hands on investor usually Angels
    • the irregular trader
    • individual venture capitalist or small fund
    • mum’s and dad’s who may invest in public or unlisted offerings
    • small scale offerings in unlisted companies
    • rewards based investing via crowdfunding trading platforms
    • peer-to-peer or B2B private funding channels

Capital Raising options to consider  

Different funding options impact on a number of important areas, which needs to be considered carefully before making a final decision on the best capital raising structure for your company while offering an attractive return on investment to potential investors, such as;

 

 

  • Capital gains tax implications

  • Dividends vs. capital growth policy

  • Exit strategy for investors over the medium and long-term

  • Independent valuations

  • Board representation

  • Existing staff agreements

  • Management or employee share options

  • Performance options and bonus structures

Capital Raising Stages

Seed

Founders / family / friends / followers

$100K – $300K

Idea Development

Produce Prototype

Proof of Concept

Early Stage

Individual / Angels / SME Bonds

$400K – $900K

Proven business model

Shows initial revenue

Break-even or negative

Growth Stage

Sophisticated / VC / SME Bonds

$1m – $2million

Selling products

Maybe profitable

Expand market

Exit Stage

Private Equity / Venture Capital / Peer-2-Peer

$2m – $20million

Established market

Significant revenue

Trade Sale or Exit

Capital Raising success with valuations

Successful capital raising is about alignment with your potential investors starting with the management team and growth strategy to scale the business. The most common reason for unsuccessful capital raising negotiations is the valuation and agreed method used to determine the value. When considering going to the market to raise capital the critical questions is “How much is your company worth?”

Comparable Company Analysis

Evaluating similar companies with current valuation metrics, determined by market prices and applying them

Discounted Cash Flow Analysis

Valuing a company by projecting its future cash flows and then using the NVP method to value the business

Precedent Transaction Analysis

Looking at previous valuations for completed capital raising deals with similar industry and valuation multiples

Leveraged Buyout Analysis

Valuing a company by assuming the acquisition of the new company via a leveraged buyout assuming its rate of return

When raising capital the 3 most common “valuation concepts” used are:

Enterprise Value – the total value of the company’s net operating assets

Market Value – the value of the company’s issued shares of common equity

Book Value – expected value of a company’s assets after paying off all existing liabilities