Managing finance is one of the crucial factors for survival in business. A strong financial structure is required to stay credible and be profitable. Scarcity of funds or mismanagement of finance remains one of the major contributors to business failure and can have your dream come to an end. Here are 6 tips to help you manage your company’s finances. (more…)
Businesses fail due to diverse reasons. However, scarcity of funds remains as one of the major contributors to business failure. In today’s highly competitive world, businesses perish when they fail to grow. With growth being primarily fueled by continuous investments, a dearth of adequate funding may actually hinder growth, which, in turn, may shorten the lifeline of your business. The inflow of external finance can promote a drastic growth of your business only if you know how to capitalize on it. Additionally, you should have certain key things in place in order to be able to attract the right type of finance.
What do you need finance for?
Why do you need finance to grow? You may need finance to grow in a number of different ways:
- Expand into new markets
- Acquire human capital and get the right talent in place
- Develop new products or services
- Expand the reach through marketing.
So finance is required to support major functions, and it can really help accelerate the growth of a good company.
Getting Funded through Private Equity
So how can we attract finance especially by means of private equity? When you opt to raise funds through private equity, a group of financiers lends you money and, in return, they take a shareholding in your company, so they’re invested in that particular way. According to the latest weekly DNA Money update, PE-backed companies outperform various companies that are listed on the SENSEX. Additionally, it shows that the revenue growth of PE-backed companies over a five-year period is 40% as opposed to just 18% for the NIFTY Midcap or just 15% for non-PE-backed listed companies.
Interestingly, the asset growth is also 46% higher compared to just 16% with non-PE-backed listed companies, and 18% for SENSEX-listed companies.
We will reveal 4 key steps, which will improve your readiness to acquire PE finance:
The other day I was listening to a co-founder of a Start-Up pitch his company to a group of about 70 Angel investors. I’m a “Virgin Angel” investor, but I’m really excited about this type of investing. I believe this next decade is going to belong to Start-Ups in India.
I have spoken to a number of experienced Angel investors in India and abroad and I could come up with 7 key reasons why High Net Worth Individuals or successful entrepreneurs should consider being an Angel investor.
The rewards are many, assuming you can check yes to these basic caveats: Personally, you must be willing to lose your investment money, should have a portfolio strategy, and use good investment practices. This high risk, high reward kind of investing isn’t for everyone. Typically 8 out of 10 investments fail.
- Potential Financial Returns – A US study found that the overall return on 1,100 plus angel exits was 2.6 times the money in 3.5 years, or about 27% gross Internal Rate of Return. Not bad compared to other types of equity investments. Even so, it’s important to look into the details. More than 52% of those exits lost some or all of the investment and 7% provided nearly all of the returns.It would be interesting to get similar India relevant research. While the Indian Start-Up and Angel scene is relatively young, as the ecosystem continues to develop and evolve we will see more success.This means that angels need to start with a strategy to make multiple investments to minimize risk and increase the chance of good returns. Typically Indian Angels should also educate themselves on good angel investing processes via events, reading and networking with experienced angels.