Aug 23, 2022
Lygon Connect episode #2: Inside the capital raise process
With many learnings to share from the process, Lygon’s Chief Operations Officer, Rodolf Salem (RS), and Bishop and Fang’s Director, Nick Bishop (NB), joined the second episode of the Lygon Connect podcast for a Q&A on the process.
Q. How does partnering with a capital advisory firm like Bishop and Fang give start-ups the best chance of success?
Partnering with a firm like Bishop and Fang helps executives at growing businesses manage their time and takes away some of the burdens of the investment process
A capital advisory firm also has specific expertise, for example with financial modelling, that can help make sure the facts and figures can be backed up
The enthusiasm that a capital advisory firm like Bishop and Fang can bring to the process is invaluable
Their expertise in go-to-market strategies play a significant role in the process
Q. How does a business that is looking to raise capital value themselves?
It isn't an exact science, so there are a few elements to consider:
How much investors are willing to pay in the marketplace
Cashflow figures a startup can demonstrate
The value of similar, more mature organisations can be a helpful guide
Verifiable assumptions can also help to guide the valuation
Nick also noted that if a start-up has shown fast growth and is operating in a large market, there is more volatility which makes pricing more subjective.
Reiterated that a valuation is subjective based on the types of investors you are dealing with
A start-ups 1, 3, and 5 year timeline
Revenue and growth estimates also play a big part
Q. How do you decide who is an ideal investor?
This is another way that capital advisory firms can assist, as this vetting process can be intense and involves a lot of effort with Directors.
To most start-ups, the ideal investor is:
Investors who are involved with the process and aren't passive, bringing value to the organisation by offering strategic knowledge or being able to open doors
An investor that offers multiple rounds of investment, as this saves time and money on the future education and due diligence process
With Lygon, it was important that friends, employees, management, family the chance to invest and be a part of Lygon's growth, but a key focus was:
Figuring out exactly what we want from an investor, and have a clear understanding of how they will help Lygon grow as a business
Q. Advice for any start-ups going through a similar raise process at the moment?
Don’t underestimate the amount of research investors will do on your business
However, the more research they do, the more likely they will be useful to you
Tricky questions include:
What level of traction does your organisation have?
What is the product market fit?
What is the total addressable market size?
What calibre of people do you have on board?
What is your USP?
The process felt very similar to an interview process. The whole of the business is under scrutiny and will be compared with competitors doing similar things.
Tricky questions included:
What are the contracts you already have signed?
What is your business structure?
What is the information that has been presented, and is there confidence in the figures?
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