• What are different investors looking for?

    What are different investors looking for?

    No matter what type of investor you are looking for, you will have to prepare a compelling case to get another individual or company to put money into your business. Different investors, however, look for different things when making their investment decisions. Who you are approaching for investment will dictate which points or areas you should highlight about your business.

    Angel Investors

    If you are just getting your business off the ground, angel investors can be a great source of capital to make your vision a reality. These wealthy individuals use their own money to invest in businesses they believe in.

    What are angel investors looking for?

    Since your business is brand new, angel investors aren’t going to be looking for sales or track record of the business. Instead, they will look to see if the business has the foundation to become successful.

    Specifically, angel investors will want to see that you have a strong founding team and a compelling business plan with an identified market. They will be backing you, as the entrepreneur, so you must provide them with the confidence that you have the ambition and resources to execute on your plan.

    Venture Capitalists

    As with angel investors, venture capitalists invest during the early stages of a business. These investors invest through a fund on behalf of a larger group of investors. Often, venture capitalists will invest seed money in pre-profitable companies.

    What are venture capitalists looking for?

    Again, because they are investing in businesses that are not yet profitable, venture capitalists will be looking closely to see that the business has a strong foundation.

    In particular, they will want to see that your company has a strong team with a proven track record of success. They will focus on the market opportunities for your business and its potential for growth. They will want to see that you have a product that has the potential to do well in the market, grow significantly, and that stands to make a good profit for their investors.

    Growth Equity

    If your business is already established and requires capital to expand or grow, then you may consider seeking investment through growth equity investors. A minority growth equity partner will allow you to retain control over your business while providing the capital and expertise to help you execute on your vision.

    What are growth equity investors looking for?

    Because growth equity investors are investing in more mature businesses (mid- to high-level growth of 20% or more), they will have more requirements as they decide whether to invest in your company.

    These investors want to see that you have a strong and multi-disciplinary team. You should also be able to demonstrate that you have a proven business model and that you are on a clear path to profitability. In addition, growth equity investors will want to understand your use of the proceeds and how they will be leveraged to support the business’s growth. Do you have a clear acquisition plan ready to put into gear? Do you plan to invest in building out your team or speeding up product development, or focusing on sales and marketing to retain new customers? This clear vision will attract investors to support the business on its growth trajectory.

    Contact CBGF today

    CBGF is an investment firm that specializes in minority growth equity. If you have an established business generating $5 million in revenue that requires capital to expand, we want to hear from you. Contact us today to learn more.

  • How to Find the Right Partner: Vetting Prospective Investors

    How to find the right partner: Vetting Prospective Investors

    If you are thinking about scaling up your business but can’t do it with your current capital, you may be thinking about taking on minority growth equity. This type of equity is particularly useful when you are in a high growth phase or when you would like to capitalize on a specific growth opportunity like geographic expansion or hiring. A minority growth equity partner allows you to retain control of your company without the need for taking on a lender. This strategy, however, is most successful when you find the right partner to invest with.

    Vetting prospective investors

    You should take several steps to find the right minority growth partner for your company. At each stage of the process, you will want to collect key information to help you find the right partner for you and your business.

    Initial screen

    Before you begin to do outreach to potential investors, ensure to start by researching what options you have in front of you and what qualities you are looking for from a capital partner. During this stage, you will want to collect the basic information. You have criteria for an equity partner, and each investor you speak with will have their own criteria for companies they are interested in working with. The initial screen will help you both determine if you are a match for each other.

    In this stage of the process, you will want to find out how the investor structures their deals (e.g., equity, debt, etc.), their investment criteria, their experience with your industry, how long their process may take and how involved they are post investment. These are items you will want to ensure alignment before you proceed.

    You will also want to get details about the investor’s fund or portfolio. This will include whether or not their capital is committed, how many investments they have in their portfolio, and whether they are willing to make follow-on investments. Further, make sure to ask them how they can help you and the company continue to grow post-close.

    Investment process

    Once you have found an investor that you believe is a good match, you will want to learn about their investment process.

    At this stage, it is recommended that you get some references as well to perform your own due diligence on the fund. Ask the investor to provide the names of some CEOs of companies that they have previously invested in. Speaking to some of their portfolio company management teams will provide great insight into how they operate and work with their partner companies. You may also have common connections with members of the team. Make sure to assess their reputation in the marketplace.

    Post-close

    Ok, so you’ve found the right partner and have a tentative agreement in place – congratulations! But there are still a few important conversations you will want to have with your investor. Discuss the details of what your day-to-day relationship will look like and what their reporting requirements are post investment.

    You will want to know how performance is measured, what ways your investor can contribute to your business other than capital, and what happens if one of you decides to exit the relationship.

    By going through a careful vetting process of potential investors, you will increase your chances of success in finding the right partner for your business.

    Contact CBGF today

    Are you looking for a minority equity investor to partner with you in your business? Let’s see if we are a fit for each other! Contact CBGF today to schedule a meeting.

  • What are the Pros and Cons of Running a Private vs. a Public Business?

    What are the Pros and Cons of Running a Private vs. a Public Business?

    Many entrepreneurs dream of building their corporate empire and, perhaps someday, taking their company public with a listing on a stock exchange, but is going public really the best choice? To be sure, there are some big advantages in doing so, but it is not without its drawbacks.

    In this article, we will discuss the pros and cons of running a private vs. a public company.

    Private Company

    When you start a company, you usually do so because you’ve got an idea for a product, service, or brand that you want to present to the world. Your company’s decisions and strategy are up to you and (perhaps) a small group of investors who are passionate about the business.

    This makes it easier to focus long term on growth, and the values of the company.

    But operating as a private company may also mean that you’ve got fewer resources, less liquidity, and less name or brand recognition. This can make it more difficult to attract and retain top talent since providing certain employee benefits – like stock options – may not be feasible for you.

    Additionally, it is more difficult for a private company to acquire its competitors or other businesses. Doing so would require either having large amounts of available cash or taking on debt, and your investors could be limited in their ability to liquify their shares.

    Public Company

    Going public with your company can seem like a dream come true. There is no doubt that being listed on a stock exchange will dramatically increase public awareness of your company, and there is a certain amount of prestige that goes with it as well.

    Public companies also tend to have an easier time growing their balance sheets, taking over competitors, and providing incentives to their employees.

    But there are some cons to going public too.

    For starters, going public is an expensive exercise and administrative and regulatory burdens placed on public companies are exponentially higher. The scrutiny of being a public company means that you may have to run your company for quarter-to-quarter results, versus focusing solely on the medium and long term value creation.

    And while your average investor will have more liquidity than they would in a private company, management will face certain restrictions and lock-up periods for selling their own shares.

    Is it better for a company to remain private or go public?

    Ultimately, the answer to this question will depend on the specific entrepreneur and company. The entrepreneur must first ensure that the business has the resources necessary to go public, but then they must weigh the pros and cons as to whether it is the right thing to do and the right time.

    Contact CBGF today

    Are you looking to explore funding options to grow your business? If so, we can help. Contact CBGF today to learn more.

  • The Risks of Taking on an Equity Partner

    The Risks of Taking on an Equity Partner

    Taking on an equity partner in your business is one way to bring in some much-needed capital to get your business off the ground or to scale it up to capture a larger piece of the market. And while it may indeed be the right decision for many businesses – it is not for every business or every business owner. There are risks involved, and you need to understand what those risks are before you choose to take on an equity partner.

    Cultural Misalignment

    Chances are, you have worked hard at developing a company culture that aligns with your personal values and preferences. A new partner with different values can quickly throw that culture off. When vetting potential partners, it is extremely important that your ideas of what the company culture should be are closely aligned.

    Divergent Exit Plans

    Do you intend to scale up quickly and then sell your business to the highest bidder, or do you intend to stay with it for the long haul? Both are acceptable means of doing business, but any partners you take on should be on the same page as you.

    Loss of Control

    Trading equity in your company for a cash investment can help your business grow, but it also means you are giving over some control of your company to another person or firm. If you aren’t quite ready to let go of that control, you may want to investigate other funding options before you take on an equity partner or consider selling only a minority position. With a minority partner, you remain in control.

    More (or Less) Intrusive Relationship Than Expected

    What are you expecting from an equity partner? Do you want someone who is more of a silent partner that offers you a cash infusion? Or do you want someone who will give you feedback, advice and expertise or use their business network to help the company? Before you enter into a contract with an equity partner, be sure to discuss your expectations and understand their level of involvement.

    Mismatch in Planning For Growth

    What are your plans for your business? New geographical markets? Are you entering a new sector? When vetting a potential equity partner, be sure to have these discussions to see if your thoughts on the future of the business are aligned.

    Mismatch in Pace of Investment and Growth

    How fast do you want to scale your business? Is there a level you want to stop scaling at? Again, the desired pace of investment and growth needs to be a topic of conversation with a potential partner.

    Finding an equity partner can be a great way to boost your business, but it’s important to be aware of the risks and to vet the right partner to mitigate these risks. Having these important discussions with any potential partner is a great place to start.

    Contact CBGF today

    If you would like to learn more about how the Canadian Business Growth Fund can help your business access the capital it needs – with a patient minority growth equity partner – give us a call today.

  • Government Funding vs Private Equity Funding in Canada

    Government Funding vs Private Equity Funding in Canada

    The COVID-19 pandemic has had a significant impact on the bottom lines of many Canadian businesses. The Canadian government has rightly stepped up to the plate and offered a variety of support programs to help businesses recover. But for many businesses, this support may not be sufficient to help them through the pandemic – or there may be factors built into the government programs which make some businesses ineligible.

    For businesses that must look beyond what the government offers, private equity (PE) funding may be a good option; however, businesses that are new to applying for and receiving this type of funding may understandably be hesitant. It is important, therefore, to understand the benefits of PE funding.

    Get Expertise and Experience in Addition to Funding

    PE investors aren’t just throwing money at anything that comes their way. They are proactively looking for the right investment opportunities and businesses either to invest in or to buy outright. Business owners who choose PE funding often do so because they are getting more than just a financial infusion – they are getting a savvy business partner who is looking to add value through their expertise and experience.

    And while these owners may, in fact, be selling a portion of their equity, they see the opportunity for business growth and revenue as outweighing the percentage of their company that they are giving up.

    The PE Sector is Evolving

    Although the idea of selling off a portion of the company still makes some business owners nervous, the PE sector has been continually evolving to meet the needs of its assets. For example, more firms are building teams of professionals who can provide better advice and expertise to help their assets thrive.

    Additionally, environmental, social, and governance (ESG) has been incorporated into the mission of many PE firms. These firms are looking to create benefits that go far beyond just their own profits – and this outlook ultimately leads to much more sustainable growth.

    Rigorous Preparation is Involved

    Even though many PE firms have large amounts of capital to invest, it doesn’t mean that they have money to burn. They are professional investors looking for the right opportunities. The process for debt underwriting, for example, is still extremely strict, and some companies are still going to be quite difficult to finance.

    How to obtain PE funding

    There are a number of things that business owners can do to improve their chances of being approved for PE funding:

    • Ensure PE funding is right for you and get buy-in from your management team and stakeholders. This means doing your due diligence and being able to clearly communicate how such an investment can be used to help the company grow.
    • Have the proper financial information ready. Your potential investors will want to see this – and they will want you to be organized enough to have it when they ask for it.
    • Ensure the right management team is in place – this is part of your value proposition to investors!
    • Seek professional advice and support. You should have your own lawyer, accountant, financial advisor, etc., that you trust to provide you with advice.
    • Understand that you have as much control in choosing the right partner for the company, as the PE firms have in choosing entrepreneurs to back. Spend time looking for the right partner, with similar values, to ensure you find the best fit
    Contact CBGF today

    For more information on how CBGF can help your business, contact us today.

  • What’s the Difference Between Seed, Venture, and Growth Capital?

    What’s the Difference Between Seed Venture and Patient Capital

    When growing or expanding your business, it’s possible that you’ll have to secure private business funding. Once you start your research, it won’t take long to realize that there are many different types of capital available throughout the business lifecycle. Although three of the most common types – seed, venture, and growth capital – are used to fund ambitious businesses looking to grow, they feature some notable differences. Below, we unravel them.

    Seed Capital

    Just like it sounds, seed capital describes funding sourced at the beginning of a startup’s journey. Private investors provide this type of funding, such as family members, friends, banks, or angel investors. Also known as seed money or seed financing, seed capital is crucial in developing an idea for a business or a new product.

    Often, seed capital investors take on significant risks without proof of revenue from the business owner. Entrepreneurs using seed capital receive smaller investments – typically from tens of thousands to hundreds of thousands of dollars.

    Seed capital is often needed and used to support foundational business needs – such as a business plan, initial operating expenses, and research/development costs. Acquiring seed capital is typically the first of four funding stages to become an established business. Its primary goal is to attract more financing, usually from venture capitalists or banks.

    Venture Capital

    Once a business has launched and is beginning to gain traction, it often will require venture capital, which is a broad term to describe funding at the early or start up stage of a company’s lifecycle.

    Angel investors and VC firms are two primary sources of venture capital. These private investors or funds offer their capital to finance a business and typically request equity in exchange.

    Unlike seed capital, venture capital investments often provide entrepreneurs with larger raises (above $1 million). Most entrepreneurs seeking venture capital have begun generating revenue, and are working hard to prove out their business model.

    To receive this type of capital, a startup business typically exchanges shares or an active role in the company. Obtaining venture capital is often the second phase of investment as a startup progresses beyond the early stages.

    Growth Capital

    Growth capital (sometimes known as expansion equity and growth equity) is a form of private equity that, in most cases, is a minority investment in established firms seeking funding to expand or restructure operations, enter new markets, or finance a major acquisition.

    A transformational event in a company’s lifecycle, such as an acquisition or expansion, might necessitate the use of growth capital, but it may also be used for working capital purposes or to continue growing and adding members of the team to sustain continued growth of the business.

    These firms are more likely to be bigger (over ~50 employees) and more established than venture capital-funded businesses, capable of generating steady recurring revenue but unable to finance significant expansions, acquisitions, or other investments towards the business’s growth. Access to growth equity is often critical in helping these businesses continue to scale, pursue essential facility expansion, sales and marketing efforts, equipment purchases, and new product development.

    Growth capital may also be partially used to restructure a company’s balance sheet, particularly to lower its leverage (or debt) ratio to enable the company to continue to scale.

    Canadian Business Growth Fund (CBGF): Another Source of Business Funding

    Canadian Business Growth Fund (CBGF) fits in the growth capital funding category, aimed at helping entrepreneurs grow their business – while leaving them in control. To learn more about this unique offering, contact us today.

  • What Is Patient, Minority Growth Capital?

    What Is Patient, Minority Growth Capital?

    You’ve started your business with a lot of hard work, sweat, and sacrifice – and that dedication has finally paid off. The time has come for your business to expand, but you’re worried that getting an investment means giving up control. What if there was another way to grow your business – a way that allowed it to grow while you remained at the helm?

    Patient, minority growth capital may be the solution you’ve been looking for. Here’s what you should know about this particular growth fund so that you can decide if it’s right for you and your business.

    Canadian Business Growth Fund (CBGF)

    Until recently, Canadian entrepreneurs have experienced difficulties securing the necessary capital to fund their business’s growth. Many times, business owners ended up having to give up control of their company upon obtaining capital.

    That started to change in 2017 when the Minister of Finance’s Advisory Council for Economic Growth brought forth a recommendation to launch a private sector-led growth fund. The Canadian Business Growth Fund (CBGF) aims to provide investments between $3 and $20 million to ambitious entrepreneurs seeking capital for a growth opportunity.

    Canadian banks and insurance companies support this independent, evergreen fund. Starting with an initial capital commitment of $545 million, the investment fund is projected to eventually increase to $1 billion.

    Qualifying for CBGF

    CBGF is suitable for established, high-growth Canadian businesses generating $5 million or more in annual revenue. The company must have a demonstrated business model and a clear vision for growth.

    Depending on a company’s individual needs, the investment horizon time fluctuates – which is why it’s known as patient. In some situations, CBGF is a partner for five or ten years, and sometimes the timeframe is even longer. Without having a restriction of an end date, companies can focus more on business growth than exit timelines.

    Regarding the term minority, CBGF does not seek a controlling position in companies. Instead, the fund controls between 10 and 40 percent of the company, leaving entrepreneurs in control.

    Besides receiving long-term, patient, minority capital, businesses who have partnered with CBGF will be privy to its talent network of business experts who offer support, guidance and expertise to help their companies expand. Business owners learn how to overcome critical knowledge and address talent gaps while remaining focused on business goals.

    Benefits of Growth Capital

    CBGF helps contribute to a vibrant, innovative, and diversified economy while creating a healthy ecosystem of innovation.

    Entrepreneurs no longer face two difficult decisions when contemplating business growth: giving up control of their business or looking for an investor south of the border. Instead, they can achieve their full potential and make significant contributions to productivity, employment, exports, and growth with the CBGF made-in-Canada solution. The fund supports Canadian mid-market companies to become strong and respected marketplace leaders on the global stage.
    Most importantly, CBGF helps build a reputation for Canada as a location to grow a business – rather than only start a business.

    Are you looking for additional information on CBGF’s investment opportunity? Contact us today to learn more.