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Your business stage is GROWTH.

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Under this score, you should already be in the conditions for discussing your business perspective with investors.

Therefore, a critical step in this phase is having prepared a completed business plan, inclusive of a 3-year financial perspective (P&L).

→ The most appropriate financing tools in this phase include:

1. Equity Crowdfunding

Why?

→ Mechanism that enables broad groups of investors to fund start-up companies and small businesses in return for equity. Investors give money to a business and receive ownership of a small piece of that business.

Important to know:

→ For entrepreneurs/companies: When crowdfunding you asking investors to back your business: provide sufficient information for them to be able to assess what the business does, how it will make money, and also how it might go wrong.

Investors want to know:
(1) If they can trust the management team.
(2) As much as possible about your product or service
(3) Any available financial information

2. Venture philanthropy and social Investment

Why?

→ Venture philanthropy (VP) and social investment (SI) address the growing need for support and flexible funding. Through three core practices, VP/SI offers an effective, high-engagement and long-term approach to supporting Social Purpose Organisations in generating social impact.
The process through which a venture philanthropy organisation or a social investor (VPO/SI) finds the most suitable financial instrument(s) to support a social purpose organisation (SPO), choosing from the range of financial instruments available (grant, debt, equity, and hybrid financial instruments). The choice of the financial instrument(s) will depend on the risk/return/impact profile of the VPO/SI and on the needs and characteristics of the Social Purpose Organisations .

Important to know:

→ (1) High engagement:
venture philanthropists have a close hands-on relationship with the social entrepreneurs and ventures they support, driving innovative and scalable models of social change. Some may take board places on these organisations, and all are far more intimately involved at strategic and operational levels than are traditional non-profit funders.

→ (2) Tailored financing:
as in venture capital, venture philanthropists take an investment approach to determine the most appropriate financing for each organisation. Depending on their own missions and the ventures they choose to support, venture philanthropists can operate across the spectrum of investment returns. Some offer non-returnable grants (and thus accept a purely social return), while others use loan, mezzanine or quasi-equity finance (thus blending risk-adjusted financial and social returns).

→ (3) Multi-year support:
venture philanthropists provide substantial and sustained financial support to a limited number of organisations. Support typically lasts at least three to five years, with an objective of helping the organisation to become financially self-sustaining by the end of the funding period.

→ (4) Non-financial support:
in addition to financial support, venture philanthropists provide value-added services such as strategic planning, marketing and communications, executive coaching, human resource advice and access to other networks and potential funders.

→ (5) Organisational capacity-building:
venture philanthropists focus on building the operational capacity and long-term viability of the organisations in their portfolios, rather than funding individual projects or programmes. They recognize the importance of funding core operating costs to help these organisations achieve greater social impact and operational efficiency.

→ (6) Performance measurement:
venture philanthropy investment is performance-based, placing emphasis on good business planning, measurable outcomes, achievement of milestones, and high levels of financial accountability.

3. Venture capital

Why?

→ Form of financing that is provided by firms or funds to start-ups in exchange for equity. They look primarily for growth stage firms – companies that have demonstrated high growth (in terms of number of employees, annual revenue, or both).
In later stages (scale-up), private equity makes medium- to long-term investments in, or offers growth capital to, companies with high-growth potential. Private equity investors would usually improve the profitability of the business through operational improvements and aim to grow revenue through investment in product lines or new services, or expansion into new territories.

Important to know

→ For growth stage companies – Key elements of a private equity firm are:

(1) A top-ranked company evaluation team.
(2) Long experience in the market where the target company is operating.
(3) Long experience in the private equity sector.
(4) Contacts which may bring opportunities to investors.

4. Bank loans

Why?

→ Bank loans and leasing can be in most cases better suited to larger longer-term purchases, such as investment in plant and machinery, computers or transport.

Important to know:

→ To obtain a bank loan or overdraft, management must prove to the lender that the business will generate the income and cash to both repay the facility according to the terms of the loan, and service the loan by meeting interest payments.

5. Microfinance programs

Why?

→ Microfinance provides financial services normally tailored to low incoming entrepreneurs needs —such as credit, deposit, and savings services. Good microfinance programs are characterized by: small, usually short-term loans, and secure savings products.

Important to know:

→ Micro-finance is a widely used tool in emerging and developing countries. However, operating costs associated to it might even result in higher interest rates for borrowers. When applying, make sure to receive all relevant info about funding conditions.

6. Grants and Competitions

→ Register your company to the Switchers Platform and have access to grants and competitions info in your region!