Dave Furlong, Investment Director at Maven's Manchester office, talks about the important factors in mind when considering your equity funding options.
As businesses grow and expand, putting in place a suitable funding structure becomes increasingly important. With an ever-growing choice and often complex finance options for businesses, getting the right balance becomes key.
There are a growing number of products in the market place, so if you’re looking to raise equity finance, there are currently more alternatives than ever before. For a business owner, the evolving market may seem intimidating, but what’s the key to identifying the right investment? And what do we as investors look for when assessing an application for funding?
It’s important to keep a few key factors in mind when considering your options.
At Maven, we see businesses at various stages of their growth trajectory and across many sectors, from medical device specialists to innovative tech solutions and platforms. There is no typical business or sector that we work with – what we look for in our investments is a strong management team with the skills to take the business forward to its next stage of growth.
It’s important to be clear on two things before you start searching for funding: how much you need and what you need the money for. Ideally, your business plan will include the non-financial and financial goals your business wants to achieve, outlining any need for funding necessary for accomplishing those goals. This should ensure that you apply for the right amount of funding, from the most suitable investor for your business needs.
The next step is identifying the stage your business is at in its growth cycle as this will impact the type of funding you can access. Typically, equity financing can support a range of SMEs from start-up through to later-stage finance and is an important ingredient in supporting the growth of innovative and ambitious businesses in a variety of funding scenarios.
For start-up and early stage businesses, development or venture capital can help fund early growth including R&D, product development and testing, commercial trials and setting up operations etc. Once businesses start to establish a track record of growth, profitability and cash generation, private equity funding can help to further drive growth and expansion.
Ultimately good ideas come in all shapes and sizes, but success tends to be driven by a capable management team. The common thread across all of Maven’s investments is a strong management team with sector expertise or previous experience of growing an SME, and the capability to deliver growth in earnings. A knowledge of the market and competitive space is also important; being able to articulate the opportunities and threats and how you plan to address them shows a clear business vision. We also find that successful businesses are often the ones that find a niche or have strong core characteristics such as a sector-disruptive business model which is capable of being scaled.
Many SMEs with strong business plans and highly capable management teams are struggling to access the funding that will allow them to develop their businesses and market offering. NPIF is addressing this situation, with a focus on supporting the growth aspirations of high-potential SMEs that can contribute to regional economic development, job creation and innovation. The Fund is producing greater levels of investment in smaller businesses, and increased flexibility in the type of funding available.
Read the full article on the British Business Bank's website here.