The changing face of fundraising

Fundraising for start-ups or early stage companies has never been easy but with more and more technology companies emerging each year, the competition to secure investment is becoming even more challenging.

There is no doubt that Scotland has developed a fantastic infrastructure to help nurture entrepreneurs with their business ideas, but securing investment to take the business from an idea to a profitable business is something that requires more than just luck.

Several factors will determine whether a fundraising process is likely to be successful but three key areas that must be considered are:

• Target Market – having a clear vision of the market or sector that will use your product or service.
• Funding Requirement – knowing how much funds are needed and when. A realistic cash flow forecast with built in sensitivities is essential.
• Management Team – establish a credible team to deliver the plan and source outside expertise to fill any skills gaps.

For technology companies in particular, the investment opportunity is often high risk / high reward – so while the thought of multiplying the original investment many times over will be very appealing for investors, the risk of losing money will also play a big part in deciding whether or not to invest.

 

One of the biggest challenges for early stage companies is the ability to demonstrate a commercial return for their product or service, i.e. who, when and how much is someone prepared to pay and will this deliver an attractive return on investment. This is not a case of questioning whether or not the idea is a good one – it’s whether it has the potential to generate a profit.

 

Thankfully there are many investors currently looking for new opportunities so now is a good time to find the right one.

For more information please contact Brian McMurray (brian.mcmurray@aab.uk) or your usual AAB contact.

To find out more about Brian and the Corporate Finance team, click here.