The Point: If you are asking the question, “Is your capital raise a boot drop?” then I have some bad news for you. We often think of business as waiting for the other shoe to drop. So, what happens when it’s not just a shoe, but a boot that you’re waiting to drop! When it comes to raising capital for your business, it is and can very much seem like a boot drop moment. So in this post, we’ll explore some alternatives to ease the “drop” event and turn them into more of a “raise” one… Enjoy!
Yes, it’s very hard to raise capital because no matter how hard you try, investors don’t care about your business health or how great your products or services are, they just want information on money. In fact, many investors make their money this way because they use the equity in their business to finance their own projects instead of using credit or other capital sources that require repayment. Many investors also like to borrow money and using equity from their own company helps them with that as well.
If you look at any traditional business, you can see that capital raises are used to expand the business into new markets and/or services that can bring in more income and dividends. However, if you ask most private investors today if they are going to pay additional dividends, you might find that they aren’t as likely to do so as they used to be. While there are still some private investors that are willing to provide additional capital to growing companies, the reality is that they are generally not willing to do so when faced with companies that are doing well and have the wherewithal to grow even further.
So, when asking yourself, “Is your capital raise a boot drop?” the first thing you should do is take a hard look at the business health of your organization and determine whether or not it is really worth investing additional funds into. Next, you will need to look at your overall capital raise and determine if you are going to need to raise additional funds based on the business health of your organization. Lastly, you will need to make sure that you are able to absorb the additional investment that you are going to be getting. If you find that you are unable to absorb the additional funds, then you may want to consider taking a different route to raise capital and perhaps wait until you have a much better operating cash flow before getting involved with another capital raise.
Sam Palazzolo
If your organization is struggling raising capital, we should talk… info@tipofthespearventures.com.
