Direct capital often comes with a complimentary, entrepreneurial mindset from the investors that may prove beneficial to the private business.
How to be “direct capital ready”
To attract direct capital sources, a business must demonstrate a well thought out and carefully articulated investment thesis, a fit for purpose business infrastructure, capable financial mechanisms and the right rigorous process for planning and implementation to ensure continued value creation and protection even amidst disruption.
Business infrastructure
Good governance and organization are the backbones of every business and the building blocks for future success. Your organizational structure and operational plans must support your business model and strategy. Further, you must have the executive management and employee support to carry out those plans.
Financial mechanisms
Your company must have the financial mechanisms in place to not only safeguard the investment, but to deliver a return through a prosperous business. This includes a well-managed treasury function as well as sufficient financial, accounting, tax and IT processes, systems and controls.
Planning and implementation processes
Your business should be forward thinking with advanced forecasting and planning that rely on institutional quality reporting, and capital providers want to understand how plans will be implemented. You should have in place sound risk-management processes, policies and procedures that provide insight into potential problems and offer transparency on pending issues, including environmental and legal.
Is direct capital an option for your company?
Conducting a succinct and focused readiness review to determine if your business is ready and equipped in critical areas — and prepared to demonstrate the same for potential direct investors — is a great preparation step if direct capital may be right for you and your business. A key component is having a strong network and the right advisors to support assessment and preparation for all capital options.
Summary
Private businesses are having to think creatively about their potential sources of outside capital during this time of change. Understanding how the various capital alternatives support their strategic intentions, having the right advisors to support assessments and being ready to attract the right capital sources is necessary to help ensure longer-term growth.