June 12, 2015

Four benefits of raising capital for a startup

If your goal is to someday complete a merger or acquisition, raising funds from investors and firms can help position your enterprise for success.

If your startup is profitable, there might not be an urgent need to raise more capital. However, if your goal is to someday complete a merger or acquisition, raising funds from investors and firms can help position your enterprise for success.

"Start your capital search with a good business plan that shows investors and lenders your company's potential," explains Inc. Magazine. "Follow that up with a thorough knowledge of the resources available and a determination to make your business a reality, and you should be on your way to uncovering a source that fits your new business's cash needs."

Here are some of the ways that drives for capital can help companies approaching speculation for a M&A deal:

Capital allows you to grow your enterprise. 

If you have a small but strong team of 20, odds are good that you could be even more productive by adding hands on deck. From hiring new employees, creating new divisions of labor and even finding a new office space, investors can help startups scale to a more visible size and improve the optics of your workplace. Right now it might make sense to keep costs as low as possible but the beauty of capital is that it can present a way to make those important investments without cutting into your current operating budget. 

Capital allows you to invest in innovation.

Whether your business lacks the technology or human resources to achieve the next steps in its growth objectives, investments pave the way to tackle those goals. By presenting a clear vision to would-be investors and following it to fruition, your company can take its specialty even further and fine-tune issues along the way. If your startup is a few years old, it's possible you need to upgrade your system or make adjustments that pave the way for a successful future. 

Capital allows you to acquire other businesses. 

Your company might be small compared to giants like Google and Microsoft, but other enterprises on the block might have similar goals or products you'd like to absorb. Even a healthy business doesn't necessarily have the free resources to buy a peer or competitor, but doing so can be a great way to achieve the first two goals we've listed. Acquisitions give mid-sized enterprises the ability to grow and diversify so that someday they can be even more appealing to a larger organization. One of the best ways to assemble the resources you need to take that step is to raise capital. 

Capital signifies a vote of confidence. 

If your business has investors who have contributed equity to the enterprise, it's a sign you're probably doing something right. Continuing to raise capital throughout the life of your company shows that outsiders are impressed by the progress you've made on overall objectives. This doesn't even include the positive media attention many companies receive when they earn backing from individuals and firms. In addition to improving your business model, the ability to raise capital is one more item that adds luster to the corporate resume. 

If your company is hoping to acquire or be acquired, there are steps decision makers can take to position the enterprise for the best possible deal. With the guidance of an experienced M&A advisor, navigating these steps isn't so challenging. Contact us today to learn more about the benefit of working with an advisor to meet your growth targets and sign a satisfying M&A deal.