The Pit - IMI Trust

The business of going green and becoming community and humanity focused has become increasingly popular amongst listed companies around the world.

Businesses have discovered it adds to their bottom line, governments have discovered they can secure votes with it and consumers are doing their bit to contribute to the planet. In fact, ethical investment funds is the fastest growing sector in Australia at the moment.

You know that it has become popular when Rupert Murdoch comes out and promotes that his company will be carbon neutral by 2012. Google are utilising alternative energy sources to power their server farms and Virgin Blue are offering heir passengers the opportunity to help them become carbon neutral.

Capital Raising is an important arm of the IMI Trust service and we are fortunate to come across some amazing companies, who’s innovation is quite astonishing.

Inventors out on their farms in the middle of nowhere, are coming through with breakthrough innovations that will go along way to contributing to the empowerment of our planet. They are quite possibly tomorrows billionaires and millionaires. Overnight success stories that are 10 years in the making and out of the spotlight.

What has been even more amazing is the amount of assistance the Federal and State Governments are providing to assist these technologies and innovations. Australia is often accuse for not ratifying Kyoto, and yet they are continuously sponsoring and investing in companies which can benefit the world. There are a multitude of programs, and people in place to advise and guide companies on the path to commercialisation.

With the ASX 200 and the Dow Jones Index consistently achieving new highs, investors have now started to seek investments with higher risk and higher growth potential. Many sophisticated investors realise that this occurs before companies hit a stock exchange.

Sophisticated Investors, Retail Investors and Professional Investors are now seeking to invest in the companies of tomorrow. By investing in start-ups or early stage businesses they can reap large rewards if the companies lists or is bought out.  On the flipside, there is every chance the company could fail.

Why would they do this, when everyone knows the risk associated with companies in their infancy? Risk vs Reward is the simple answer. 

Investors are now looking to allocate risk capital to these companies as part of their portfolio.  When looking at asset allocation in a traditional portfolio, you tend to see cash, property, conservative investments, growth investments and aggressive investments.  Typically, early stage investment is seen as aggressive but in reality it sits in its own band even higher.

The rewards are great but the chances of losing money are just as high.  Which is why only risk capital, or in layman’s terms, money you can afford to lose, should ever be placed in these investments.

Even only as far back as 3 or 4 years ago, this kind of investment was only available to the wealthy who acts as business angels or venture capitalists.  Today, companies such as the Australian Small Scale Offerings Board (with whom IMI Trust is a member of) is making it easier for investors to gain access to these type of opportunities.

Early stage investment is an exciting prospect but carries heavy risks.  Investors should carry out their due diligence, ask questions, find out as much as they can about the Company, its Management Team, the Market, the Competitors and the Marketing Strategy for success.  By analysing these aspects, an investor can see if the Company is doing its best to be successful.

And by success, this can be defined in a number of ways.  As an early stage investor, a good result is a company takeover or a public listing.  Today’s penny dreadful may be tomorrow’s dollar dazzler.

Companies are looking for early stage investment but do they deserve the capital from investors?  Many don’t but some do.  To learn more, about emerging growth companies looking for early stage and expansion capital, click here.  Or if you have any stories to tell about early stage investment, please tell us here. 

Capital Raising, Venture Capital, Business Angels and Private Equity have become flavour of the month in Australia.

The reality is, for businesses looking to raise capital, it can become a nightmare for the unsuspecting owner. You always read about the successful ventures but rarely do you hear of about the challenges associated with raising capital for your business. For other business, who utilise business factoring services, it is their opportunity to utilise an alternative solution. 

When it comes to capital raising, most business owners believe they have 3 places to go: Banks, Angels and Venture Capitalists. Few people realise there is a 4th way to go if you want to raise between $250,000 and $5m (without a prospectus).

Below is a snapshot of some of the issues related to each.

Venture Capitalists
There is a reason they are called Vulture Capitalists. They generally look for small to mid size companies and traditionally Venture Capitalists will value your company on its current value (prior to growth following funding), and then look to take a stake based on that value. Some Venture Capitalists, will also look to play a role in the management of the business. It is a coin toss whether this becomes an asset or a liability.

This path is fraught with problems especially if you are looking to retain control of your business. With one business we worked with after funds were raised through a Venture Capitalist, personal attitudes and business differences surfaced and the owner was forced to leave the very organisation they started.

Business Angels
Business Angels could be ideal for your business if the Angel brings a wealth of experience, contact or resources to the table but again the problems you face with Venture Capitalist’s, you are likely to face with Business Angels. You lose control and possibly a lot more.

Banks -
Although the most common option for people, you should only really go to a bank if you a desperate. This is why…

1. Do you enjoy putting your own personal assets at risk?
2. Do you enjoy paying interest for the life of the loan?

Of course not. When raising capital the questions you want to be asking are…

1. What percentage of the company am I willing to offer? How are the shares going to be split up between the current owners and stakeholders.
2. Is your business structure investor friendly, as well as business owner friendly
3. If you are utilising the banks, are you willing to put your personal assets on the line
4. Do you want to retain control of your business, or are you happy for a 3rd party to have an influence?
5. Have you put in place a strong management team?
6. How unique is your offering, and what is your realistic potential for growth?

All of these questions are important, and you should definitely know the answers before you approach any organisation to assist you in funding the growth of your business.

These are the questions you need to answer when looking at the 4th way for you to Raise Capital for your business

This path offers some unique benefits…

1. The capital raised is interest free
2. Doesn’t require you to put your home up as security
3. Allows you to maintain the majority shareholding in your business… allowing you to retain control of the future direction of your company.
4. Allows you to crystalise the value of your business, which is recognised by the markets and considered as an asset on your balance sheet
5. Provides an investor-friendly environment allowing your investors the opportunity to sell their holding if they desire
6. Ensures that you are compliant with ASIC’s rules and regulations. Most people dont realise the legal mine field and potential issues if you try and do this yourself… and get it wrong. Let me provide some insight… a $20,000 fine, 5 years jail, the company wound up… and then it starts to get ugly from there.

Our focus is to help entrepreneurs realise the aspirations they have for their business!
What this means for you is that IMI Trust is able to facilitate debt and equity funding for your business growth, expansion and acquisitions.

To explore the commercial potential of raising capital for your business click here.