Capital Raising Options, Strategy, and Process

2 min read

Sep 27, 2022 9:52:46 AM | Assure

Are you a business owner overwhelmed by the sheer number of options you have for raising capital?

You’re not alone.

With countless options available, starting the process of raising capital for your new venture can feel miring.

In this blog, we unpack a number of capital raising options, as well as strategy, process, and best practices to get your capital raising journey off the ground.

Capital Raising Options

While there are many ways corporations can raise capital, they predominantly fall into two distinct categories: equity raising and debt raising.

Equity Raising

The term equity raising refers to the exchange of a percentage of business ownership in return for funds.

Equity raising can include investment from venture capital firms, angel investors, or other share owners. This umbrella of raising also includes strategies like special purpose vehicles (SPVs) and crowdfunding. Entrepreneurs can source funds from platforms like Kickstarter, allowing them to raise equity from a crowd in exchange for goods, shares, or other entities.

Debt Raising

The other bucket of capital raising is debt raising. This process refers to exchanging debt in return for capital. To illustrate this process, think of loans, credit cards, bonds, and other debt-transactional interactions.

What is an SPV?

Above, we mentioned an SPV as a strategy to raise capital. A special purpose vehicle (SPV) is a subsidiary company specifically created by a parent company to protect assets and mitigate risk.

Designated legalls as separate companies, SPV assets and funds can remain secure, regardless of the financial state of the parent company.

Built by a parent company to safeguard or silo assets in a different company, SPVs can help protect companies as they undertake high-risk investments or attract investors with low risk margins. Regardless of intent, across the board, SPVs help companies build joining ventures, ensure asset security assets, protect specific corporate assets, or enact other financial transactions.

Rationale for creation of SPVs can range from investment in a startup or other high-risk ventures to capital raising for expansion or a specific venture.

Capital Raising Process, Services and Strategy

Regardless of which route you choose to pursue for your capital raising strategy, you are essentially building a map to chart your organization’s path to your capital raising goals.

While the process of raising capital may be lengthy, creating your strategy is a must for ultimate success.

To help you start your journey toward raising capital, we broke out specific roadmap signposts to identify as you decide upon your capital raising selection.

Establishing Fundraising Goals

Raising Capital isn’t a haphazard process--you need to go in with a clearly delineated plan. You need to know how much you need by when, along with many other financial variables. If you have a chief financial officer on your team (CFO), they should be involved with the process from the start. If you don’t consider outsourcing to a virtual CFO or other financial professional.

Financial Preparation

To demonstrate to potential investors that your company is prepared for this new growth, you must demonstrate that you’ve taken the correct steps for success. If you’ve established an SPV, gather all of the notation that documents the creation of the subsidiary company. Ensure your finances are in unimpeachable order and that you’ve undergone an external audit.

Developing your Materials

The materials that you create to woo investors will be vastly different from those you use in your general marketing stream. While they may cover familiar topics like value prop and pain points, they also must include materials like:

  • Letter of intent
  • Complete financial model
  • Summation of investment factors
  • Executive summary
  • Legal documentation

Without these materials, it is unlikely that investors will be interested in your proposition. By creating these materials, you display a fully-realized plan for your company and your investors’ roles within it.

After you’ve built out materials that fully share your company’s narrative with potential investors, it’s time to pitch. Although perhaps the most nerve-wracking step in the capital raising process, you’ve done all the necessary work to make a compelling argument in favor of your company.

If you decide to pursue SPV management services as part of your capital raising strategy, Assure is here to help.

Complete the form to start your journey toward an SPV today.