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Checklist for a Company to Seek Growth Capital

Ivan Nikkhoo is Managing Director of Simer & Associates (ivan.nikkhoo@siemer.com). In this video he talks about a company using a checklist to seek growth capital.

  1. Your team plays the biggest role in securing growth capital
  2. Indicate traction by displaying accomplishments
  3. Clearly identify the addressable target market
  4. Determine the company's scalability
  5. Structure the monetization mechanism
  6. Ensure the defendability of your IP

Today we’re going to talk about raising growth capital, when is the right time to do it, and what are the important parameters to keep in mind if indeed you want to do that. So most companies that begin operations and they start with the early stage funding, they come to a point as they grow that they’re going to need additional capital for growth that allows them to expand geographically, expand their product lines, hire additional staff, and a number of other things. There are several important factors to keep in mind when you want to raise growth capital.

Number one is the most important factor is your team. When you’re looking at private equity groups and the growth capital firms like the growth capital VCs, they look at the team as the most important parameter as to whether they want to consider that team for growth capital or not.

The second parameter is traction. They want to look at what this team has accomplished with the resources at hand to date. Do they have a good series of clients, have been able to establish themselves in the marketplace, and do they have credibility.

The third one is the addressable target market. Are they going after a business that can essentially become a very large business? Can the business expand whether geographically or the product line and continuously expand the market that is going after?

Number four is scalability. Scalability means if you’re currently selling 100 or 1000 of this product or servicing 100 or 1000 clients, with the additional injection of a capital, can we scale that to 100,000. Do we have the ability to do so?

Next is the monetization mechanism and this is becoming more and more important. In other words, how do you charge your clients is very important because the ability to charge on a recurrent revenue the ability to potentially get rev share, the ability to have clients that are continuing to buy from you and continuing to buy more from you is very, very important.

And the last one is the defendability of IP. And by that I mean, if I have someone else with another smart team and a couple million dollars, how quickly can they do what you have done in the past few years. Is this something that can be replaced very quickly or do you have a mode that is somewhat difficult to get through.

So with that in mind, if you think about these specific parameters, you would be able to prepare and set yourself up for growth capital. Again, team, traction, addressable target market, scalability, the monetization mechanism, and the defendability of the IP. Once you have prepared that, then you can address the market and there are very specific mechanisms to go to market to raise the capital.