Tell us about what Chance Capital does?
The majority of the work I do is with businesses seeking growth capital, primarily seeking equity but very often they’ll also be looking to build an element of debt into the fund-raising. We’ll help them to raise between £1M and £50M, though £1M to £5M is most typical.
What are the challenges of working with such companies?
It can be a tricky time in the development of a business. They’ve gone past the stage where it’s practical to raise funds from friends and family, but they’re probably not quite ready for venture capital investment. They’re also very often looking for investors who bring more than just money; they’ll want some strategic support too.
What’s your role in the fund-raising process?
Our first job is to evaluate the business’s readiness – we’re looking for evidence of an established trading record that is generating revenues; ideally the business is profitable and has moved beyond the ‘jam-tomorrow’ stage, where it’s simply a theoretically good idea. If the business isn’t ready, we won’t put them forward for finance – it’s a waste of their time, and of investors, and it undermines our credibility.
Do SMEs have realistic ideas about the kind of finance they will be able to raise?
Many of the businesses we meet start out with a very clear idea of the type of finance that they’re looking for, but we conduct our own due diligence and consider the business proposition – occasionally, the financing structure we suggest will not be what they had originally imagined, but that’s partly where we add value.
How should SMEs get ready for the process?
A good fund-raising starts with good preparation: businesses need to have all of the important information in place in their data rooms, but they also need to have a very clear idea of how the capital they’re raising will be deployed; the business plan must spell that out in detail. Sometimes we find that businesses that think their data is in good shape are actually quite light on information and strategy once you’ve scratched the surface.
What’s your advice to SMEs pitching to potential investors?
Don’t overlook the human element of a transaction – in the end, growth capital investors are investing in people so the real test of whether a deal will proceed often comes when the two sides first sit down with one another; there has to be a connection. It’s certainly important to be passionate about your business and sometimes people do need to up the volume; what’s most crucial, however, is that you know your brief, and that the numbers are all on the tip of your tongue when you’re asked for them.
How do you get them over the line?
Our job as brokers is to help the business identify the right financing solution and to introduce them to the lender that can provide it; but SMEs have to clinch the deal for themselves, by convincing potential investors they’re a good fit.