The 10 Capital Raising Strategies

Many professionals are adopting new changes and able to find new investment capital.

Here are some feedback we have collected from different advisors and venture capital about what they think about capital raising.

No.1: This golden rule remains the same; a good business will always be in demand from investors. The old rules will never change, strong businesses will continue to attract new capital no matter where and what industries or no matter where you are.

Some fund managers comment that too many businesses emphasize on raising capital for their business or for their idea, but they should take a step back and focus in building up their business first before they start looking for the investment capital.

No.2: Embrace power of Internet.

We all know about the power of Internet and social media is changing the world, and how we find deals and how we assess deals.

However, most businesses have yet to adopt the power of Internet fully for their capital raising strategy. Most businesses still use the old strategy, which is simply listing a line about their business; this is like running a small Ad on Internet.

A number of venture capital fund managers mention businesses should be more active on social media to find potential investors. They can use social media to identify potential venture capital investors in their respective industry, they should also use social media to identify angel investors for their projects.

Social media is not simply a marketplace for you to just post an Ad, you need to be more proactive about it and create an effective strategy to identify investors and connect with them.

No.3: Start your Investor Relations Program from Day 1

This is a strategy suggested by a number of respondents. One fund manager mentioned you should have an Investor Marketing / Investor Relations program from Day 1, even though you may just have 2 or 3 investors.

By developing a routine in communicating with your investors and key stakeholders, you will create a very good marketing campaign throughout the process.

These marketing materials can be adopted as part of the larger capital raising and marketing activities in the future.

You should start a monthly briefing or shareholder updates; which can also be used as communications materials for your key customers or PR campaign.

No.4: Link your company news through media channels

This is an extension to investor relations. Broadcast your company announcements and news as widely as possible. Investments often come from least expected sources.

Through consistent marketing efforts in announcing your company news and achievements, you can reach a much wider audience. Some companies also create effective campaigns by subscribing customers, journalists and also other stakeholders through newsletters.

One company we interviewed was involved in water filtration technology and produced newsletters, which they sent out to industry publications and industry forums and websites.

In 2007, the company decided to raise some capital for expansion, and they raised close to $3 million from these subscribers as they had been following their stories and achievements.

No.5: Go for grants and seek different grants

There are significantly more grants you can apply these days. One company executive we interviewed suggested that applying grants should be the first source of capital to consider instead of approaching venture capital funds.

He managed an online reservation company, which helps international companies to plan and manage their exhibitions. As most of its customers are international companies that are looking to exhibit in North America, his company is effectively an exporting company.

As the result, he was rewarded with export grant of close to $500,000 which he used to set up his international offices and upgrading his reservation system.

Further, as he is involved in the technology, he also received a further $500,000 for innovation, and more grants from travel industry association grants. All up, the company received close to $2 million from various grants, and that had helped the company to grow its workforce to 20 people.

No.6: Crowd Funding

Crowd Funding is not a new concept, but integrating with social media, it is becoming a very effective tool to find investment capital. Crowd funding works if you are active in industry specific forums, or in your target market or your localities.

We had a client who was involved in developing online matchmaking website specifically target at certain ethnic communities.

By focusing his ideas and websites in several international websites, he raised seed capital from another website owner in India and the Middle East as they see this as a good fit for their existing business.

Another example is a company that is developing a dental equipment is able to raise investment capital from dentists and doctors through crowd-funding website as they see and understand the niche of the product.

No.7: Go Global

Thanks to the rising emerging markets, capital seekers now have a much wider choice in terms of capital investments; you can now tap into the fast growing venture capital markets in Asia as well as other emerging economies.

Globalization and Social Media are probably the 2 most important factors to consider for capital seekers. Going global is a major strategy to consider, as you can often find your ideas and products in higher demand outside your local markets.

If you are based in North America, you will also notice increasing number of Asian and European venture capital funds are also setting up their operations in North America to identify and invest new opportunities.

No.8: Business and Investment Immigrants

The level of business and investment immigration has been increasing significantly over the past few years, particularly for the United States.

There has been record number of immigrants arriving in the US through its business and investment visas; which some of them also qualify them to apply for green card eventually.

These immigrants are required to invest in local businesses as well as creating jobs as part of their immigration requirement. As the result, a large number of American businesses were able to attract new investment capital from these wealthy immigrants; franchising is also another popular method for business immigrants.

If you are looking for expansion capital, try to find these opportunities by contacting immigration consultants, or post your information on different immigration and business websites.

No.9: IPO in different markets

Perhaps your business already has sufficient shareholders, and you are ready for the next move. IPO is a strategy to consider in the current market, as the equity market has performed well so far in 2012.

Being a public listed company will take you to the next level, both financially and also business reputation wise. However, each sharemarket is different, and you may find your business is not in demand in your local markets.

Identify other markets for listing is a viable solution, for example, many Australian resources companies have dual listed in Canada and UK to access the bigger capital markets. Many Asian companies are dual listed in Asia and North America; and increasing number of American and European companies are also seeking listing in Hong Kong market to attract investors from China.

No.10 Global Executives

A good strategy to find investors is contacting executives in your industry. For the mining sectors, it is very common to find strategic investors from the neighboring mine operators. For IT industries, executives from established software companies are often the major investors of new start-up IT companies.

This is a common and a very effective strategy to use to find investments – and by taking this strategy globally, you can find even more potential investors.

A good starting point is to analyze the industry peers, you can start this process by analyzing the public listed companies in your industry, and identify the executives and decision makers.

via SmartInfoBuzz