Posted on: February 12th, 2021
Raising capital is a lot like diving off a steep cliff, like Instagram cliff diving reels where a person lunges off a cliff, plunges hundreds of feet and lands not far from a rocky base. There are major obstacles and variables to contend with. The Instagram divers are clearly experts and merely showboating for social media impact. They know all the key technical points required to nail the dive – the distance, the angle, the body position, and force of impact.
They have done it hundreds of times, are well-prepared and expert in execution. Successfully plunging into growth capital waters require a similar disciplined approach. Business owners often approach their growth capital waters with less preparation and experience than these divers. They jump headlong into the process, only to realize halfway down that their position is off and are coming in for a big splash of a landing.
They spent too little time before the big dive understanding what they need and what is available. It pays to realize early on that your growth capital raise is like any other strategic corporate project. Its execution success depends largely on the level of research, planning and process that goes into it. Pursuing growth capital requires a structured approach by a growth capital expert who has extensive training and contacts in the field.
Types of Growth Capital
This approach should consist of a well mapped out, multi-stepped process with a history of predictably strong outcomes. The Company should have a strong awareness of the different types of growth capital available before the process is even initiated. There are at least six different forms of growth capital, each with their own set of requirements and preferences. The growth story and projection must be conformed to each form of growth capital.
Finally, the Company needs to accurately determine the right amount of capital to be raised. This is best done through detailed financial analysis and using conservative growth assumptions as to scale up trajectory. The best estimates are highly conservative and allow the company extra time and capital. When all these elements come together in an integrated approach, companies can handle the rigor of the task and nail their growth capital landing.