Access to Finance Challenges for Scale up Businesses

If you are a scale up business, you will already be familiar with the challenge of growing with limited financial resources. Our article ‘Considerations for Scale-ups when raising funds’ outlines some of the common solutions in addition to fundraising support we provide clients.

Do you lack financing to sufficiently scale? The Scale Up Institute notes that 50% of scale ups do not believe they have sufficient capital to meet their current growth trajectory. Traditionally, VCs and Angels have been key sources of equity provision but there are alternatives to funding growth with equity. Debt is one option, and not as limited or intimidating as it might seem when selected carefully.  Grants are another and quite sizeable grants are available from Innovate UK for example with more information in our article ‘Funding Growth Without Investment’

Even in these leaner times when some investors are reserving their capital for follow up raises in their existing portfolios, there are still active VC and Angel investors out there, but their risk appetite is reduced. Our experience suggests that their investment and risk committees tend to be less comfortable with potential losses from higher risk bets as they sense that in the short to medium term, there will not be sufficient offsetting gains. 

Particularly now, there is a greater onus on businesses seeking investment to demonstrate that they merit investment at this point in the cycle. Engaging with those investors who are demonstrably active and delivering a compelling and demonstrable business case has never been more important. Given M&A activity has fallen, VCs  are less likely to invest in a business that may not fully mature as there are less opportunities to recover some of their investment through an earlier stage exit. 

Being clear on your path to growth is key to securing their interest.  The standards have just got higher and a recurring issue is often the quality of the business plan and the reasonableness of growth projections. These are seasoned investors who need to prioritise the best investment cases and filter out those that do not present a compelling reason to invest. 

Drawing on scale up and high growth experience from venture boards to listed companies, we provide finance support, introductions and a strategic approach to fundraising. Our integrated approach combines operational experiences and expertise covering leadership, strategy, finance, people, legal and IT. To understand how we might help you, contact us at hello@linkstoneadvisory.com. 

Are you a high growth business? 

If you are wondering what a scale up business is, it’s a fair point. Scale Ups are defined by the Scale Up Institute as businesses surpassing the £10m turnover level or with assets of more than £5.1m and sales growth of 15%-20%. The threshold mirrors current financial reporting thresholds that mean this is the first opportunity for those businesses to be visible and in reality, there are many more scale ups – fast growing businesses of substance that fall below these limits but are nonetheless experiencing similar growth challenges. It also means that these are proven businesses who have gone far beyond the MVP and market validation challenges of earlier stage businesses. To see an overview of the top challenges facing scale up businesses, see our article Top five challenges for scaling businesses”

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