Your business is a success and there are opportunities to grow it. That’s great. The only hitch is that you need more funds.
It’s a perennial problem for SMEs and just knowing where to start the hunt for capital can be difficult.
With this in mind, we’ve spoken to three businesses who have just been through capital raising to discover how they went about it.
Miranda Bond, chief executive of Inika Cosmetics, told SmartCompany it took her years to raise capital for her organic cosmetics business when she was looking for a cash injection of between $500,000 to $1 million.
Inika competes against what Bond describes as the “global goliaths” of the cosmetics industry and had been entirely self-funded relying on organic growth.
Bond decided Inika needed capital to grow from being an Australian company to one that sells in multiple countries.
“I have been on the capital hunt for several years, it took me two years to find a deal that I felt comfortable with and part of that was me needing to get a reality check,” Bond says.
“As an entrepreneur when you start on this whole capital raising process you always feel your company is worth so much more than it is and you are always really reluctant to give away equity.”
Bond initially looked at raising capital through a deal with “a big company in the fashion industry” however when the deal was about to close she pulled the pin.
“It just did not feel right. I just felt that the actual people themselves at the company were not the right people for me to get involved with so I walked away,” she says.
Bond then tapped into entrepreneur networks including the Entrepreneurs Organisation, Sydney Angels and Head over Heels, a group specifically designed to assist female entrepreneurs.
From these groups she got network connections and good advice in terms of how to progress.
“I didn’t have any experience in fundraising so the Entrepreneurs’ Organisation and Head Over Heels were really good in terms of having people who have gone there before and done this,” Bond says.
“I was able to talk to people to really learn from them what were the pitfalls and learn from them,”
Through the Entrepreneurs Organisation, Bond got in touch with the Sydney Angels and although a syndicate formed from this Bond ended up walking away from the deal.
“I went and pitched to a room full of men in suits about organic and natural makeup, I think there was one other woman in the room,” she says.
“We could not come on an agreed valuation of the company so I walked away.”
After the failed capital raising Bond got talking to one of the people behind the Sydney Angel’s syndicate, Melissa Winmar, who Bond says “took me under her wings a bit” and impressed on her to stop worrying about the percentage of equity she was giving away.
“She impressed on me if you don’t take the money then the opportunity will pass you by.”
Bond ended up speaking to a whole lot of individuals to make a shortlist and received assistance from accounting firm PwC for this and then went out and did “loads of rounds of pitching” out of the shortlist from this she came up with a venture capital firm called Cardinia Partner.
“It’s actually a pseudo VC firm as it does not have a pot of money, they approach their network of investors and say we have a particular deal,” Bond says.
“It’s made up of mainly high net worth individuals out of Asia particularly Singapore and Hong Kong, I went with them because I could secure a convertible note which gave me more comfort and by the time I was dealing with them I got more realistic on what my expectation was in valuing the company.”
As well as getting a deal that she was happy with, a principal representative from Cardinia Partners also joined the board of Inika to provide experience in managing growth and taking companies “from woe to go”.
“It wasn’t just completely dumb money and it was being able to get someone’s opinion,” she says.
The deal closed in July this year and now Bond is back on the capital raising path already.
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Cara Waters is the editor of SmartCompany. Cara was previously a senior reporter at the Financial Times website FT Adviser in London and has also worked for The Sunday Times.
