Creating an Investment Case as part of your Capital Raising Business Case

Every week we come across 20 new companies that are about to engage in a Growth Capital Raising round i.e a capital raise that is specifically for growth (more-so) than product development or proving traction. 

A common problem is that their pitches are completely driven towards why they are great as a business and do not include why they are great as an investment choice.

Your differentiation, future margin protection/expansion, team and momentum are almost a given these days – so how can you also show why you are a better choice than others on the same journey?

1. What is the capitalisation/ valuation to date and the desired for this round? 

  • Here we are looking for fairness, fairness is judged differently by groups with different investment mandates – however it is not simply fair to compare your company to Canva at the same stage, or if you are raising money in Australia, a group at a similar stage in the American market. Fair is a market comparable with discounts or added multiples given based on how well you really know your business, the model, the market etc.

2. With $X investment you will be able to go from Y to Z (Revenue (or user growth) and valuation) 

  • We know that it’s almost impossible to execute a plan on paper, however here we are looking for the worst, middle and best case scenarios to judge return on investments/equity. i.e at a broad level – if your worst case scenario is the best case scenario of a comparable group – you have a good shot.

3. How are you going to execute this? 

  • Presenting proof and a formula/ validity around your execution here is key. For instance, if your Saas model was already working with modular sales that grew into enterprise contracts over a 6-month period, then what is your hypothesis around adding freemium to the equation and extending the zero-enterprise sales cycle to 12 months? We’d suggest holding this strategy close to your chest and if the feedback was 6-months is too long, then you can extrapolate rather than convolute.

With these answers, Seventytwo Capital can match your company with the right strategic investment, whether it is an investor that wants;

  1. 3x ROE and wants no chance to lose money
  2. 10x and can recapitalise some along the way
  3. $1b or nothing 

The execution questions are the big one here, a lot of bold assumptions get built into the forecasts, however as our team have come from operational backgrounds – we can tell when people are formulaic, prioritised and experimental with their approaches or they are just winging it.

If you are thinking of raising growth capital, book a no-strings 30-minute pitch session with me for feedback.


Tags: No tags

Comments are closed.