Would you like to raise investment to fund the growth of your business? If the answer is yes, the following information about Growth Capital may help.
What is Growth Capital?
- Investment raised from a third party in the form of equity and/or debt
- The investment is used for a range of purposes, including:
- Hiring key staff (for example, salespeople)
- Working capital – to ensure there is sufficient cash in the business as it grows
- Improving plant and equipment
- Investing in new IT and technology
- Investing in strategic marketing campaigns
- Opening new offices either domestically or abroad
- The investment fuels growth which in turn increases the value of your business.
What makes for a successful growth capital investment?
- A management team that is willing to take the responsibility of making changes to the business in order for it to grow and effectively allocating the additional resources it has raised
- A management team that is sufficiently open-minded to accept investment from an external equity investor
- A private equity investor that ‘fits’ with the business and management.
For examples of growth capital investments that we have successfully backed, see our portfolio.
Is there a right time to raise growth capital?
This comes down to management’s conviction of being able to grow the business more successfully with additional investment and resources that it cannot fund from retained earnings. Specific examples include:
- Sector dynamics unique to managements business exist that management would like to exploit
- Demand for products/services is increasing quickly, and investment is required to keep up with demand
- Technology is advancing within the sector
- An opportunity arises to take market share or accelerate past competition
- M&A activity is becoming more active in the sector
- Management are looking to exit the business in 3-5 years and want to maximise earnings in the run-up
I’m interested – what more do I need to think about?
- Growing a business brings its own challenges (such as operational growing pains) and can be all encompassing
- Growth capital will involve external shareholders who will bring expertise but also challenge you to achieve your business plan
- All external investors will want an exit, understanding and alignment on goals and timings needs to be agreed
Are you ready for this?
If you have ambition, desire, drive and tenacity along with identifying an opportunity for growth, you should consider raising growth capital. Please contact us to talk about how we can help you.