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Principle 4: Look Broadly and Build Relationships
Boards and management teams worry about how much time company leadership spends on capital-raising activities and away from the business, so they sometimes narrow the search for new investors, in an attempt to be more efficient.
However, going through a capital-raising process does afford management teams the opportunity to meet with a variety of financial investors and to tap into their portfolio company networks, as well as with corporate investors that could eventually buy or partner with the company commercially. In the longer-term, companies with a network of relationships and partnerships are likely to have more strategic and financial options and potentially a higher probability of success.
So, take advantage and leverage the work and preparation of the process to reach out selectively to parties that can both have an immediate interest and/or represent a future relationship or funding sources, as well as potentially helpful strategic or commercial outcomes.
As a buyer of small companies for a large technology conglomerate, I noticed that familiarity with the company made a big difference to the business sponsors. On more than one occasion, companies that reached out to us through a capital raise or a business development process tended to move up the priority stack for acquisitions, strategic partnerships, or mutually-beneficial commercial relationships. In some cases it made all the difference in the world for a company’s future prospect.
Investors want to understand a company’s market strategy and value proposition in addition to the financial statements. The overall business plans represent the way the management team plans to use financial, human and fixed capital to execute its vision. Employing the four principles outlined in this article can help your business get the capital it needs to move forward.