From A to Exit: How to finance your company at every stage

Experienced investors, lenders and entrepreneurs share their insights on financing options for scale-ups, specifically focussing on debt vs equity.  

World-leading venture capitalists, debt and equity investors, and FinTech entrepreneurs joined forces this November on the panel at Financing for Scaling Businesses, held in partnership with Silicon Valley Bank. They offered their unique perspectives on how companies can raise capital most effectively for sustainable business growth and long term success.

JustGiving’s Chairman, Jonathan McKay chaired a panel of experts, including:

Erin Platts – Silicon Valley Bank 

Catherine Wines – Co-founder, WorldRemit

Ben Blume – Atomico – Investor 

Oliver Cummings – Capitalise, formerly of MarketInvoice

Jonathan Lerner - Smedvig – Managing Director

Companies on the cusp of scaling-up face difficult yet exciting decisions. One of the most important is how to fund their growth. With a broad range of options and an abundance of information online, it can be daunting. At Financing for Scaling Businesses, financial experts discuss the pros and cons of each fundraising option including equity raising, which offers hands-on investor experience. And debt raising, which offers ownership protection and can act as a short-term bridge to increase valuation.  

 Here, we reveal the advice they offered to businesses at different stages of their journey. From Series A investment seekers, to Series B and C, to businesses looking to be bought.

When you’re starting to scale up: Tips for Series A investment seekers

Decide if you need funding  

Raising capital isn’t essential for every start-up. Some founders can self-fund for years while they shape the company. The advantage is no dilution of ownership, but the disadvantage is that you might lack the resources to scale up. 

Catherine Wines, Co-founder of WorldRemit, explains why they ran for four years without VC funding. “We wanted to prove our model and go to market with more direction and less dilution. Most venture capitalists want to see the potential for global-scale growth and we could only show that once we reached that stage.”

It’s not about numbers, it’s about vision 

“At the Seed or Series A stage,” explains Ben Blume, senior associate at Atomico, “talk to investors about your vision and the size of the opportunity. At the Series B and C stages, bring in more detailed performance numbers to show how you have scaled.”

Tailor your pitch to the individual investor 

A one-size-fits-all approach doesn’t work. Be clear on who you’re pitching to, understand their unique interests and know their basic information requirements. Many firms have standard pitch deck templates, so do your research and ensure your presentation meets their minimum requirements. 

Master every financial detail of your business

You might be an expert in the broader economic condition of your business, but if you can’t do a deep dive to discuss the tiny details, you could be caught out. Understand every financial nuance and be prepared for a thorough examination. 

Send your pitch deck in advance

“If you don’t send a deck in advance,” advises Jon Lerner, MD of Smedvig, “you risk having a much lower quality meeting.” Informed investors make meetings more productive. They come to meetings with salient questions, pointed advice and a better sense of whether you have the potential to work well together.

Keep your pitch deck as simple as possible 

Bear in mind that investors might have minimal exposure of your industry and won’t understand the context in which you operate. Put your pitch deck in layman’s terms and keep it as simple as you can. 

Use a meeting to demonstrate your product

“Use face-to-face time as effectively as possible,” explains Ben Blume. “Show live demos and offer hands-on experience of your product, not just a polished pitch you prepared in advance.”

Be sure you can work with your investor

“Conducting due diligence on your investor is so important when you first start.” says Catherine. What do they want out of the investment? How will they react to scale? How do they respond to bad news? What is their capacity like? What is their reputation? Get references.When you’re ready for the next round: Tips for Series B and C investment seekers

When you’re ready for the next round: Tips for Series B and C investment seekers

Focus on customers and creating partnerships

At the Series A stage, you should be seeking operational support from your investors. At your later stages, it’s about gaining access to new customers and creating partnerships. Put as much effort into due diligence on this now as you did before. 

Don’t choose debt if you are in decline

“Debt is a good option for businesses who are growing, who want to kick up their valuation and have time to raise money,” explains Erin Platts, head of commercial banking at Silicon Valley Bank “But it’s not a good idea when your business is flat or declining. Debt should not be the last money in.”  

Debt can be an effective financing bridge

Debt can act as an effective bridge, especially if you’re planning on further rounds of equity funding. If you choose to go down this route, make sure you have a clear purpose for it. Know your destination and break-even points, put down metrics and profitability goals and always hit your plan. 

Plan your debt financing thoroughly

“Don’t wait until you have just 3 months of cash left before you action anything,” urges Erin. “Be organised and prepare for this option in advance. That way you can ensure you know exactly what you’re signing up to with the terms and conditions of the loan.” Remember that some lenders ask for the full interest amount, even if you pay off your debt early. 

Employee equity grants should be role-appropriate

“Employees should receive an amount of equity that is appropriate for their role and increased when that role changes.” states Jon. “The idea of offering continual equity grants as employee bonuses doesn’t make business sense to me.” 

But in the US, explains Erin, using equity grants as employee incentives is commonplace and many businesses must offer it to secure the best talent. 

“The best employees are invested in the business,” adds Ben. “But don’t forget that employees are incentivised in different ways, so it’s important to offer them a choice.”

Don’t shy away from sharing bad news

 If you’re on top of your business, you should know whether you’re on the brink of bad news. And so should your board, as they’re and an extended part of your team. You should be constantly communicating with your board members and nothing should be a surprise to them. They are there to help you find a solution, recover and they share liability.  

When you’re ready to go: Tips for exit seekers

Consider your exit strategy at the start

But don’t dwell on it. You shouldn’t be actively mapping it out, but you should have an idea of what path you can take when you reach that stage. You should also invest time in cultivating potential acquirer relationships early on in your journey – whether they’re customers or partners. 

Put the building blocks in place

Don’t underestimate the time it takes to prepare for an acquisition. If you’re getting acquired by a big player, it’s common for them to throw 150 lawyers at you in the process, so the more prepared you are – the less daunting it will be.

Engage firms with experience of your unique circumstances  

If you’re selling to a big global buyer, seek an international law firm that has acted on the sell side previously. They will provide invaluable advice, know whether the move is right for your business and be able to act fast. 

Would you like further advice on your growth strategy? 

No matter what stage your business is at, we're here to help you with your growth plans. Contact Andrew Richardson to find out more on [email protected]