When is the right time for capital raising?

When is the right time for capital raising?

Capital raising can help give a business additional funding to keep growing and growing, but doing it wrong can result in losing parts of your business.

All business owners want their businesses to be the best they can be, and capital raising can help that out, but serial entrepreneur Mat Collet says it can be a difficult task, and if done poorly, can “give up too much of your company”.

“It's a long process, capital raising. It's not a matter of just going to market with what you've got. You've got to go through so many different stages of your business to get where you need to get before you even think about a capital raise,” Mat warns on the My Business Podcast.

“Unfortunately, that's a little bit to do with the Aussie market.”

According to Mat, trying to prove a business is right for capital raising at all is a tough sell in of itself.

A piggy bank watching a clock“There's money for that really early stage concept, the angel investors... if you're turning over $5 million,” he says.

“Above that, you've got the small private equity groups and venture capital groups.”

However, having turnover of less than $5 million is too soon for capital raising. Even if a business manages to have a turnover of $1 million, investors will not be impressed.

“I feel, just turning over a million bucks, [like] you've proven, but you haven't really proven,” he says.

To get a business ready for capital raising, Mat suggests business owners should ask family and friends to help with funding a business, which has worked for him with his previous entrepreneurial efforts.

“What we did in the early days is, not only the director's money and what we put into it, we did raise some money from family and friends. That keeps the wheel turning,” he says.

If a business owner is too eager and decides on going through with capital raising before they hit that $5 million mark, they face the reality of giving up too much of their business.

“The earlier you're doing the [capital] raise, the more you're going to give up in your company,” Mat advises.

“You're under a bit more scrutiny. That's why companies these days, I look at them and say they're too early for an IPO, but they still do it [and] often not to great success.”

Hear more insights from Mat on the best and worst times to undertake capital raising, his tips for finding the right distributor and more on the My Business Podcast now!

When is the right time for capital raising?
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