The road to ScaleUp – are you ready?
At Shaw & Co we regularly help growing, early-stage businesses to scale up through external investment, working with owner managers who have built revenues and are now seeking funding to facilitate their next phase of growth.
In this blog I’m going to focus on what businesses need to consider when they seek ScaleUp funding – and how we in turn are scaling our services to support them through our innovative Investor Platform and Funding Academy.
The state of the market
According to the 2018 ScaleUp index, investment into ScaleUps is running at record levels and almost half of all businesses growing revenue at 100% year-on-year or faster have received equity backing.
Venture Capital Trusts (VCTs) remain key players in the market, with tax rules encouraging funds to seek out smaller or earlier stage companies. VCs, private equity funds, family offices and high net worth groups are also highly active. In short, there is still plenty of money out there looking for a good home.
However, against an uncertain macro-economic backdrop many investors are becoming increasingly selective and will expect solid evidence of current as well as future business growth. For those companies that do stand out, strong valuations and attractive terms can be expected. Certain sectors will be a harder sell than others, with B2B and software currently likely to be favoured by many investors over consumer propositions, however specialist focussed funds remain active in most sectors and market niches.
This creates a number of opportunities and challenges for ScaleUps as they navigate the many options out there to find the right investor on the best terms. Presenting your case successfully and then managing the transaction process smoothly will require skills and experience that are unlikely to be in the toolbox of most owner managers. That’s one reason we find our services in increasing demand.
Setting the bar – can you clear it?
Firstly, we make sure your company will meet the requirements of investors. That typically means approaching annualised revenue of around £1m and a defensible track record. We’ll also take into account non-financial metrics such as user numbers or intellectual property that is ready for commercialisation. For businesses at this stage debt is rarely a viable option, meaning equity funding is often the favoured route.
However, we can explain and explore all options with you. Our gate process provides a structure to assess whether your business and its growth plan are investible and, if you’re not quite ready, we can help you identify the changes that need to be made to attract external funding. From there the next stage is to build the business plan, financial model and pitch deck that will sell your business story to investors.
Streamlining the process
Finding the right investor is a highly rewarding process but also a complex and time intensive one. It’s one we undertake every day for clients, yet we are aware that there are more businesses out there that could benefit. So, how can the process be streamlined to help more, excellent businesses with the right proposition get in front of the right investor?
To answer this this question we have developed two initiatives:
Our Investor Platform
The first is our Investor Platform, which brings high quality deals and investors together. On one side of the platform, we leverage our extensive contacts to attract a range of Private Equity Funds, VCTs, Family Offices and High Net Worth groups. On the other side of the platform, we champion highly investable businesses that have been through our robust preparatory process.
By sharing all the details – from business plan to pitch deck – through a private online platform, investors can easily identify the right opportunities while ScaleUps benefit from direct access and exposure to a variety of funders.
The Funding Academy – stand out from the crowd
While the investor platform is all about putting sparkling propositions in front of serious investors, the Funding Academy is about preparation and polish. It offers ambitious entrepreneurs the chance to take part in a series of hands-on workshops and receive individual support aimed at getting their businesses ready for external investment.
The Academy’s five-month programme consists of five one-day classroom sessions spread over five months, with one-to-one support in between. Best of all, the academy is free to all participants and fully funded by Shaw & Co.
If you’re an owner manager looking to ScaleUp your business through external funding and would like to be part of our first ever Academy cohort, beginning July 2019, simply send your pitch deck or a business summary to email@example.com
Putting our skills to work for scale ups
Understandably, the primary focus for any entrepreneur raising funds is the amount they need to grow their business, but there is more to consider than just the numbers on the cheque. It’s crucial not only to maximise business valuation but also make sure you secure appropriate wider terms. Even then, two investors offering the same deal may add significantly different value if, for example, one can offer greater industry knowledge and more useful connections.
Similarly, it’s not just about putting you in front of the right person. It’s about using our experience to help you make the most of that opportunity with a solid business case and investment proposition, alongside our understanding of the personal preferences of the investor sat opposite.
Ready, set, ScaleUp
With ScaleUps continuing to benefit from a strong equity funding market, and our new initiatives enabling us to scale up the support we provide, now is a great time to get in touch with us and start taking your business to the next stage.
Please feel free to get in touch so we can discuss the options available to you and your business.