01/02/2011

Chris Griffiths on equity investment

Your business has an ambitious management team, a clear growth plan and you know where you want to get to. Then comes the all-important decision about funding your plans and this is where you can start to impact your chances of success from the start.

Achieving higher growth

The latest BVCA figures reckon that venture capital–funded businesses achieve on average 30% higher growth than those funded by other sources of finance, so I wonder why more businesses don’t consider equity?
 
For instance, you may need to strengthen your balance sheet/build your capital base and equity investment can help because it doesn’t require regular capital repayments like debt investment. 

Match your funding to your ambitions

Matching the right funding package to an ambitious business plan from the outset is all important and can significantly influence success. Loans can often be the first option businesses consider, yet even the best business plan can run into difficulty without an adequate and appropriate capital base.

Create long-term shareholder value

Investments structured with equity can free up vital cash-flow and allow businesses to create long-term shareholder value. Many businesses are unaware that equity investment can add value as well as strategic direction, with the appointment of a non-executive director (NED), for instance.

Choose funding and funder carefully

Finally, I believe both the choice of funding and also the funder need careful thought. The whole investment doesn’t necessarily have to be equity and a strong investor like Finance Wales will work with you to structure the right funding package.