When it comes to capital raising, there are many ways to achieve what you need from retail investors, institutional investors, family offices, alternative investors, private equity investors industry financing and government financing. But what financing should you use as the company CFO?
Well the answer is, in fact, a combination of all of these and the mantra you should be thinking of is ‘Diversify Your Risk’
As a CFO you need to be aware of all the differing types of financing options that you can use, here are some to consider:
– Listing on a market and issuing equity to a broad range of individuals
– Listing on market and issuing equity to institutions.
– Wealthy families who have various business interests the can support your company with capital.
– Also known as venture debt, company’s agree deals to receive capital immediately or over a period of time, with certain protections whether that be the assets of the company or the option to convert debt into equity.
– Private equity typically refers to investment funds, generally organised as limited partnerships that mainly invest in private companies.
– Strategic industry partners who provide investment capital as part of a commercial partnership with your firm.
– Government entities that have an economic-societal mandate and where providing loans or equity to your firm meets objectives within that mandate.
These methods of funding for your company enable you to have the capital that you require to run your business and take advantage of profitable opportunities.
You may be thinking ‘why do I need to diversify between all of these options when it comes to funding for my company?’ Well as previously mentioned diversifying risk between investors helps your company avoid fragility and enables you to proactively design the funding so that the timeline of its supply satisfies the plans of your business.
Whether that’s buying a profit generating asset that may not come on stream immediately to developing a product that needs a large amount of investment to get it started.
By diversifying your capital inflows, it enables you to design solutions that provide funding for your business at the time that it needs it.
Different types of funding can be integrated into different layers of your business, ranging from the publicly listed company, the private holding company, the operational company and the asset owning asset company: