how to raise equity capital

How to Raise Equity Capital

For your business to grow and develop it needs money, but where can you get it? One answer is equity capital. With it, you transfer a share of your business to shareholders, after which they will receive some portion of your profits, and you don’t have to pay interest to creditors. However, the other side of this way of increasing your capital is losing control of your own business, but if that’s an option you’ll probably want to know where you should start. In this article, we’ll detail how to increase your equity capital.

Create Your Business Plan

When you go to private investors, you have to remember that these people are looking for a way to invest their money in a way that will maximize their benefits later on. They invest in companies that are not listed on the stock market. Providing investors with your business plan is an important step in making deals that will help them better understand your company and the analysis of the relevant market. Also, your plan should describe your marketing moves and sales strategies, projections, and the financial history of your organization.

The financial background provides possible investors with the certainty that you are trustworthy. Check your financial data before showing it, and make sure it’s all true.

Find potential investors

There are many ways to do equity raising and find potential investors, one of which is a website. There are many websites where investors sit and wait for an offer that will interest them. When you find a site that appeals to you, you should create an account there, and enter basic information that would characterize your company. When your application is processed, you can continue working on creating a profile for the company. You can edit your profile at any time. 

When your profile becomes active, you can start contacting investors who have shown interest in your proposal.

You can also find investors in other ways, such as:

  • Find a company (or even several) in the same industry, and of the same scale as yours, and find out who has invested in it. Then send these investors letters explaining your purpose, offer them your organization to invest in, to do this, attach a resume describing your company and the service or product it promotes
  • Reach out for connections and ask them about possible investors who would have an interest in your service business and in making an equity investment in your company. Obtain their details and send an email or make a phone call.
  • If you do choose websites, you will receive dozens of offers from possible investors if your profile is done correctly. Then it’s important to respond to their inquiries promptly
  • The IPO is a method that is not suitable for start-ups, it is intended only for organizations that are well-established in the market. With a public offering, companies will be able to raise funds by offering their stock for trading on the capital markets

So, once you have found your answer to the question how to raise equity you move on to the next step of making a deal with investors, which is due diligence. During due diligence, you provide potential investors with all the background of your business, all sensitive data, including finances, legal data, sales data, and intellectual property. To keep it secure, and to conduct this process as quickly and comfortably as possible, use a virtual data room.