In an ideal world, the company that you put so much energy into building would be making enough money through the sales of goods and services to be able to expand and grow naturally. However, sometimes you have to spend money to make money, and just about every company has to raise funds at some point in order to grow and scale.
The number one question we get asked by founder teams is, “How do we raise funding or investment for our company?”. Every successful business reaches a stage where it has to choose its growth path. Either grow organically, using operational capital as and when it’s available, or raise growth capital in order to scale up faster. There are a number of ways in which to solve the problem of raising funds for business growth.
Five types of fundraising for your business
It is a truism that you need money to make money, and entrepreneurs need to find ways of either freeing up capital within their operations or reaching out to potential outside investors for a cash injection. The five major sources of corporate funding for a business are retained earnings, debt capital, equity capital, angel investors and venture capital investment. Keep in mind that all these avenues have their own sets of advantages and disadvantages, and it pays to get in expert business fundraising services in order to choose the right course of action for your unique business goals and restrictions.
1. Retained earnings
Retained earnings are the amount of profit a company has left over after paying all its direct costs, indirect costs, income taxes, and dividends to shareholders. This represents the portion of the company’s equity that can be used for expansion and development.
2. Debt capital
Debt capital refers to borrowed funds that must be repaid later. This is any form of growth capital a company raises by taking out loans. These loans may be long-term or short-term, and debt capital does not dilute the company owner’s interest in the firm.
3. Equity capital
4. Angel investors
Angel investors are wealthy private investors focused on financing small business ventures in exchange for equity. Unlike a venture capital firm that uses an investment fund, angels use their own money. The goal of an angel investor is to help businesses get established. Their funding terms are often more favourable than those of other lenders and many of them invest in order to support the entrepreneur behind the business, not just the business itself.
5. Venture capital investment.
Venture capital (VC) is financing that investors provide to startup companies and small businesses with long-term growth potential. Venture capital generally comes from well-off investors, investment banks, or other financial institutions.
The benefits of using a professional fundraising service like OCFO
Fundraising services can help you raise the money you need to keep your business running. They can also help you expand your business and reach new markets. There are a number of benefits to using fundraising services like those offered by the team at OCFO, including:
You can focus on running your business
When you are busy running your business, it can be difficult to find time to raise funds. Fundraising services can take care of this for you so that you can focus on what you do best-leading from the front.
You can get expert advice
Fundraising services can provide you with expert advice that can make all the difference when raising funds. They can also provide you with the necessary resources and support so that you can succeed in your fundraising efforts.
OCFO's Funding Readiness Journey
Building your business is challenging, and keeping it afloat while also looking for investments can often be the straw that breaks the camel’s back. This is the time at which every entrepreneur needs a fundraising team at their side, ready with expert advice and the right tools to get the job done. Imagine having access to a team like OCFO, who have navigated the complexities of the fundraising journey dozens of times over to serve as your funding round’s deal crafters!
The first step in the journey to raising funding is conducting a Fundraising Gap Analysis which dives into the details of the business and is designed to provide clarity and direction when seeking to raise capital. From the Gap Analysis flows the fundraising strategy, financial modelling, valuations, due diligence, investor’s collateral, and investor linkages.
Fundraising Gap Analysis
The core focus of this fundraising engagement is to identify the potential roadblocks and opportunities for your company’s raise. It identifies the direction to take with your fundraise, the type of capital you should consider, and the suite of documents and details that you should set out in order to impress even the most particular of investors.
Fundraising strategy and deal crafting
As part of the fundraising strategy, we help founders and management teams build out or refine the growth roadmap of the company, as well as how much capital needs to be raised for specific purposes on this growth journey. It’s also critically important to start narrowing down whether you are raising equity or debt – or a combination of these – and under which terms you would accept this kind of funding.
Financial modelling and forecasting
Our fundraising teams have a wealth of experience in building or refining your financial forecasts so that investors can have confidence in your offering.
Understanding the value of your organization when you head into a funding round is critical and knowing upfront the drivers of value that investors will look at along with the valuation metrics they will likely apply will make a huge difference. Using best-practice valuation methods, we help management teams understand their value going into a deal. Knowing what you are worth is an important part of taking a seat with confidence at the negotiation table.
Due diligence pack preparation
We’ve helped countless founders and management teams prepare for and navigate the due diligence process. Having a CFO on board that understands investor questions and how to position their answers can make all the difference at the negotiation table.
Investors' pitch decks and collateral
Knowing what elements of your exciting company to share – and more importantly, which ones not to share – plays a big part in every fundraising drive. Following a proven process of highlighting the important information without getting stuck in the detail, our team helps founders prepare the right content for investor conversations.
Investor access and dealmaking
There is so much capital out there, yet it is so hard to close a deal. And in this deal-making process, your time is a critical, scarce resource. Only spend it on investor outreach where there is a good mandate fit.
Drawing from deep technical and professional wells of expertise, we help founder and management teams build world-class finance functions and offer tailored packages that can assist them to access suitable funding to support their growth.
As many new and younger companies cannot afford to appoint an appropriately qualified professional to navigate this facet of their business, but also cannot afford to be without the technical financial skills that one could offer, Outsourced CFO offers the solution – the business services of a passionate OCFO for a number of hours per month tailored to your needs.
Select the fundraising journey that is right for your business. Depending on how quickly you are looking to move, your Funding Readiness Journey can take place over a 10-week, 4-month and 6-month period. Whether you select a 10-week or 6-month journey the destination is the same – accelerating your access to funding and unlocking your next phase of growth.
Reach out to the Outsourced CFO team and get the expert assistance that you need in order to access those crucial funds.