The Context: Focus on the external measure of fundraising is front of mind when businesses consider scale-up resources. Yet, financial and fundraising success depends heavily on how a company structured its processes. Scale-up resources can inform competitive positioning, build operational and technical infrastructure, and forge a go-to-market strategy. Sales growth is key for financial survival.
This is part of a series of articles helping companies to communicate information, scale up their business cost-effectively, and improve their chances for success in finding investors. The key is success in stabilising a business model, industrialising your offers, and commercial market penetration. Capital allocation to new products and services, or minor acquisitions, can help accelerate that growth.
Nobody talks of entrepreneurship as survival, but that’s exactly what it is and what nurtures creative thinking
Anita Roddick – Founder and The Body Shop
What’s new? In most countries, SMEs account for the majority of businesses and are important contributors to job creation and global economic development. In most OECD countries, SMEs contribute more than 50% of GDP. It is mostly differentials in access to finance, which promotes access to services, technologies, and employee skills, that cause SMEs to have lower productivity than larger companies. We provide a list of scale-up resources SMEs can use to help them secure financing for growth.
Popular Scale-Up Resources
The financial considerations have been exacerbated by decisions that triggered the global energy crisis. Facing uncapped energy markets, for many SMEs today, the key consideration is survival. Access to the right scale-up resources is critical. In this guide, we list a number of scale-up resources, covering financial considerations, and software tools, that can add value to processes while keeping costs low.
Capital Raising Considerations
Consider timing: If founders and managers don’t generate sufficient revenue to cover costs or lack sufficient patient capital, there could be times when you are desperate for more cash. Working out how to finance your company begins with knowing how much money you are going to need and when you’re going to need it. Don’t wait until your need for extra funds becomes urgent.
With rising inflation, the flood of cheap capital that greeted happy founders over the last few decades has slowed and in some cases even reversed. Access to financing is now trickier than ever, as unfortunately, macro sentiment plays a big role in most investors’ decisions.
Only approach investors once you have the correct information in your presentation (see our checklist on what to include in a Pitch Deck).
Capitalisation table:
These scale-up resources to help you calculate and manage your shareholders.
Assemble: In an ideal world, founders will negotiate the right valuation for each pitch round so that founders and their employees own more (in aggregate) of a business than their investors. In current markets, that might not be possible. Communication with existing and potential future investors can be critical to understanding sensitivities and securing growth financing.
Dilution: For many shareholders in SMEs, with lower access to alternative financing, growth financing in down markets could result in dilution. SMEs can do a dilution analysis by developing a proforma capitalization table (cap table), using input assumptions like, financing needs, money raised, number of rounds, and dilution in each round.
Cap Table Simulator: Online capitalisation table simulator offered by 645 Ventures. The simulator helps founders evaluate the impact of any number of notes (i.e. SAFEs or convertible notes) or priced rounds on their cap table.
Cost of Equity Calculator: An indicative online calculator that helps compare debt financing to equity financing using certain assumptions via Hum Capital funding platform.
Capital Management Platform: a comprehensive and downloadable Google Sheet by Thomas Rush with the key inputs laid out to calculate capitalisation tables and implied valuations.
Venture Dealr: An interactive sandbox for building typical VC deal structures.
SAFE Genie: A calculator for exploring the impact of SAFEs and convertible notes on founder ownership.
DealMarketing: A software solution to organize the distribution of teasers, NDAs and CIMs, and automate transaction notes, buyer activity, and profiles.
In today’s tough economic environment, with margin contraction and investor pressure rising, when considering financing to stay afloat or scale-up resources, it can be tempting to rewrite old stock agreements and accept new terms.
Don’t!
Remember, it is acceptable to raise money at a valuation that is lower than the valuation achieved in your previous financing round, but not at the expense of your reputation.
Other sources of Financing Information
The internet provides a way to access the names of investors active in providing financing, and for those investors to find opportunities. Many investors will only invest in a future star company if a founder has had a successful exit, or if the investor’s founders, or their close friends, have introduced a business. This is a very myopic way to invest.
Alternatively, a few intelligent investors are increasingly willing to hunt for star investment opportunities outside of their close network, leaving those who expect to find an all-star from within their network, like NFL teams unwilling to sign the next Michael Jordan because they weren’t introduced from within their network.
Investors who venture wider can improve their chances of signing the next superstar business.! It is increasingly up to businesses to find new sources of capital from funds. We list a few scale-up resources we use to find the right information on Funds
Private Investment Funds
Pratt’s Guide: A practical tool to help entrepreneurs and small-business managers locate compatible private equity investors.
Venture Deal: Information about venture capital firms, venture-backed technology companies, and transactions throughout North America
Public Companies & Institutional Funds
Tegus: The Tegus platform provides investor-led and user-generated business insights on over 25,000 public and private companies.
Copley Fund Research: The platform tracks fund positioning over time compared to benchmarks across 1300+ funds.
Asian Private Equity
CAPER: The Centre for Asia Private Equity Research is a leading information platform in the Asian private equity industry.
AVCJ: Asian Venture Capital Journal – A leading source of information on private equity and venture capital activities in Asia since its establishment in 1987.
Early Stage Financial Access and Support
When a company is private, equity financing can be raised directly from angel investors, or from angel investors on crowdfunding platforms, family offices, endowments, venture capital firms, private equity firms, or corporate investors.
We highlight a select list of accelerators, administrative tools, crowdfunding resources, and investor networks useful. Our team at Little Square Capital can help management teams that are in the later stages of their development to access financing.
Accelerators
Social Impact Funding List: Organizations that provide free support to for-profit companies and do not take equity.
Tech Accelerators: Organizations that provide free accelerator programs: no cash charge, no equity charge.
Administrative Tools
Foundersuite: Pricey, but efficient way to manage your investor relations and track your investor pipeline, while gaining access to investors on the platform.
Funderbeam: A global equity funding and trading platform, providing SPV creation, syndication administration and deal facilitation.
Crowdfunding
Crowdsupply: Crowdfunding platform for designers, developers, and engineers to launch open-source electronics hardware and related products.
experiment: Crowdfunding to support scientists to fund scientific research.
Fundable: Crowdfunding platform dedicated to helping US companies raise capital.
FundersClub: An online VC firm made up of highly accomplished business and technology leaders who invest in each other.
Indiegogo: Crowdfunding platform for entrepreneurs to launch new and groundbreaking products.
Kickstarter: Crowdfunding platform for creative projects.
OurCrowd: Crowdfunding to invest in pre-vetted startups and venture funds.
Republic: A crowdfunding platform to access investment opportunities in startups, real estate, video games, and crypto.
Seedinvest: Crowdfunding platform offering lower minimums to enable easier diversification.
Networks
ACG: The Association for Corporate Growth (ACG) is a global community for middle-market M&A deal-makers and business leaders focused on driving growth.
gust: A networking platform with over 800,000 founders and 85,000 investment professionals supporting and investing in business starters.
Signal: A free community-driven investing network for Founders, Venture Capital firms, Scouts, and Angel Investors.
Underrepresented Founders: List of investors, accelerators, and resources supporting underrepresented founders and funders.
Other Sources of Financing
The most common sources of debt financing for scale-up firms include investment trusts, business development companies (USA), private equity firms, individual investors, and asset managers.
Traditional Debt
While most of the sources of debt for scale-up companies below are US-focused, there are a select few options available elsewhere.
Axial: A North American platform for lower middle-market private deal sourcing, deal marketing, and relationship-driven business development.
BitX Funding: US Online small business loan marketplace.
CAPX: US Online scale-up capital marketplace to obtain $5 million – $100 million+ in finance.
Capital Source Group: Flexible financing solutions for scale-up businesses earning anywhere from $60k – $24,000,000 in annual revenue.
Cerebro Capital: Data-driven financing marketplace to secure mid-market business loans between $500k – $100 million+.
Corl.io: Startup Financing Marketplace for loans between $5k and $5 million.
Find Venture Debt: Helping US technology and scale-up companies raise debt financing between $1 million to $25 million.
GUD Capital: US platform hosting 4,000 Business and Commercial lenders that compete to fulfill your company’s financing needs.
LendingClub: US fintech marketplace that offers personal loans (up to US$40,000).
lendio: US network of 75+ lenders in this small-business loan marketplace for scale-up businesses.
nerdwallet: Compare the best small-business loans in the USA, including bank and SBA loans, business lines of credit, term loans, and equipment financing.
Prosper: A US peer-to-peer lending marketplace offering personal loans from $2,000 – $40,000, credit cards, home equity lines, and investments & IRAs.
Quickbooks Capital: Flexible small-business loans with loan amounts from $5,000 to $150,000 and terms from 6-18 months.
smartbiz: AI-powered financing platform connecting small US scale-up businesses with SBA, bank term loans, and flexible financing options.
top funding: US small-business loans through Top Funding’s financial marketplace.
Alternative Financing
There are also other alternative sources of non-equity finance…
deBanked: A directory that contains US merchant cash advance providers, small business lenders, and equipment finance companies.
Clearbanc: Lending against future e-commerce sales.
C2FO: Online platform for lending against working capital.
Shopify Capital: Payroll, Inventory, and Marketing funding for businesses on the Shopify platform.
We explore options to improve operating margins and productivity here.
Thank you
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