Funding a Scale up for Tech Companies and Other Industries
by Jeff Bardos, CEO Speritas Capital Partners
July, 2018 – Connecticut
I recently had the privilege of being a panelist at a Connecticut Technology Council event focused on scale ups. The discussion concentrated on capital strategies for scaling a business.
Growing revenue from $2-3MM to $30MM can be more dangerous for entrepreneurs than the start-up phase. You have more personal wealth at stake, more investors and more staff counting on the company succeeding. You need to be educated, prepared and flexible.
So how do you prepare for scale up financing? I recommend 5 key strategies:
1. Make sure your business and financing plans are in sync.
I’ve seen many businesses that focus solely on their business strategy and expect the financing strategy to somehow fall in line. Equity, debt, cash flow and asset-backed lending each pair best with specific business strategies and opportunities. At a minimum, review both plans on an annual basis and certainly review your financing strategy each time you anticipate a new product or rapid expansion.
2. Assess all your financing options.
Don’t focus entirely on dilutive equity or mezzanine/venture debt. These capital sources can be the right option, but consider whether you can stretch your equity and postpone or avoid dilution by using asset-backed finance. Keep in mind that your financing options change as your business evolves so options you may have discounted earlier could become relevant later on.
3. Invest in cash management.
Investors and lenders need comfort that you know where your cash is and that you maintain a detailed cash forecast as part of your financial reporting process. You should know who owes you money, who’s late and what terms you’ve agreed with each customer and each vendor, and be able to produce reports upon request.
4. Hire the right staff at the right time.
The balance between minimizing your burn rate and staffing up to meet increasing demands is one of the toughest balancing acts around. But make sure you have the right financial and operational talent and a hiring plan that supports your business plan. Using outsourced financial talent is fine but at some point your investors and lenders will expect in-house expertise.
At Speritas Capital, we focus on #1 and #2 and look for #3 and #4. We help clients assess their financing options at every stage of growth. We take the time to understand our client’s business operations and goals. We are very comfortable with complicated situations and structures.
Our approach, based on our years of experience, is consultative and strategic. Once we determine your financing requirements, we identify potential lenders, help tell your story and package your business for the application. The result is a smooth application and closing process.
Connecticut-based Speritas Capital Partners specializes in difficult credit, collateral and cash flow situations.