Kim Kovacs, CEO of OptionEase (http://www.optionease.com/) explains why you should find an investor for your company. Understand the main reasons and situations in which you should pursue funding for your business.
- Expansion is an appropriate time to seek capital
- Restructuring can yield financing for your business
- Exiting or selling your business is an ideal time to find investors
- ESOP- offering employees shares as part of their salary
So we’ve kind of boiled this down about 3 reasons potentially to get an investor in your business and there’s probably more, but these are 3 top ones that I come across frequently or I have done personally and I was just recently giving a talk to the Women’s President Organization, and we went through these in some detail.
So, the first one is expansion. So a lot of times, you’ll be looking at new business or new opportunities and you want to expand your business and now might be the time to go out and seek an investor, and depending on what stage you are in your business you’re going to attract different kind of investor. It might be an Angel investor. It could be a venture capitalist. It could actually be debt. You could actually use debt to grow your business if you’ve already had a business that has been somewhat either profitable or successful or has some credit.
So there’s a lot of opportunities for capital with expansion and in fact most people like to invest in that, but it isn’t the only time. We’ve seen or I’ve even done financing around restructuring.
So let’s say you’ve got a company with maybe 2 or 3 business units and one of them maybe not be doing so well. You might actually finance the opportunity to sell that off or to spin that business into something else, and then you know use the funds to restructure what you’ve currently got. And so you know money is available for a lot of different reasons, and depending on what it is that you want to do, that’s where you might want to go to seek some investment.
Probably the biggest one is an exit. So there’s a lot of funds available for exits as well. And so let’s say you’re a company that has been going strong for a number of years and now you want to exit your business. Well you could exit it to a competitor. You could exit it to a partner or maybe a customer. They might be willing to buy your business and so that’s a financing that they would do to buy it from you. There’s things called ESOP’s which are Employee Stock Ownership Programs and so you could actually exit your business by financing this whole thing through a bank and then your employees own it.
And then there’s also things like retirement and other ways of doing that. Private equity firms also finance an exit.
So depending on what you want to do, you really need to assess you know what’s the purpose of the financing, what are the reasons why, and then looking for the right money source to support that decision.