Fundraising isn’t just for start-ups. SMEs and ETIs can also claim it to finance their growth or accelerate their development. Any type of business of any size can use fundraising, as long as the company is in full development.
It can be difficult to find investors like SMEs or ETI: but with a very solid development project, entrepreneurs can convince business angels, venture capitalists and investment funds to invest in their project. Fundraising constitutes an entry into the company’s capital. This is also called external funding or contribution. Find out why fundraising, the advantages and disadvantages.
Who is the fundraiser for?
Fundraising is mainly aimed at companies with strong development potential and innovative companies. They are generally used by start-ups thanks to the seed capital that allows them to finance the start of the activity. But that is not all : VSEs, SMEs and ETIs are also eligible for fundraising.
Although it is preferable to prioritize financing not thinner, fundraising is a powerful lever for growth. SMEs and ETIs with a convincing development project are able to raise funds. The aim is to fund the company’s growth over the next five to seven years.
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Why raise funds for an SME/ETI?
If an entrepreneur or SME/ETI manager presents a solid project with high development potential within a 5-year horizon, it is possible that he will find investors and financing quite quickly. To finance a large investment, fundraising can contribute to the growth from the company.
Whether it’s to put resources into research and development or to take some time off financially, fundraising is accessible to all companies. At the beginning of an activity, the constitution of seed capital can finance the beginning of the activity. During the activity, it is possible to accumulate development capital, which will allow the company to to accelerate its growth.
The benefits of fundraising for an SME/ETI
The main advantage of fundraising is that it brings in enough money to move a project forward. These resources will allow entrepreneurs to finance all the growth stages of their development project. This type of financing it is not to be refunded : it is therefore a non-negligible advantage to improve the financial situation of the company. Depending on the amount granted, several projects can be financed.
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In addition to bringing money, investors also bring their know-how. Most of them are former businessmen who wish to invest in the capital of a company with strong development potential, in order to obtain added value in the short term. These entrepreneurs can provide valuable advice on managing SMEs/FTEs. Known investors can also provide good media coverage to the company that raised the funds.
The disadvantages of fundraising for an SME/ETI
Fundraising doesn’t happen overnight. Negotiations can take several months, or almost a year in some cases. We must take into account the preparation time, where entrepreneurs give their all to defend their project and show how it will bring real growth for the company. It is then necessary to find investors, convince them and start the negotiation phases.
Who says funding says dilution: investors become shareholders of the company. It all depends on your shareholding percentage in the company’s share capital. The latter will thus have a say in the management and administration of the SME/ETI, especially if your actions are substantial. Therefore, it is important to pay attention to the amount raised, so as not to sell too many shares in the company.
Fundraising therefore, not restricted to start to initialize status. It is also possible for SMEs/ETIs to use this type of financing to develop their business.