Over the last two weeks, I've noticed a significant shift in topics from companies and funding groups regarding market conditions, which includes everything from a strategic pivot, changing new market focus, raising more capital, cutting costs, adjusting expectations around valuations, and moving faster on raises. There are numerous articles and reports circulating, but I wanted to quickly compile some notes from what we're seeing from both investors and companies in order to better prepare and inform those companies looking to raise capital this year.
- Companies are looking to extend their runway by raising additional funds and extracting costs
- Investors will look at businesses with more scrutiny, take more time to make decisions, and will look closely at fair valuations the reflect the current market conditions
- Make sure funding being raised is enough to hit key milestones to ensure continued support. Needing to grow into a high valuation can be risky when market forces make growth more uncertain
- Inflation and supply chain disruption will continue in the short to medium term so factor cost increases and delays in budgeting and ensure adequate working capital finance is in place.
- Understand what support you have from your bank for increased facilities, more flexible facilities, and where the support stops. Supportive shareholders are the backstop
- Think carefully about trying to raise capital for a speculative crypto project
- Private capital has been raised by funds so has not disappeared however many investors may slow down their deployment of capital to manage risks and make new assessments of needs for their existing portfolios
- Investors will prioritise local companies over international opportunities, resulting in possibly less international funding but more Kiwi-backed businesses supported by local funds and investors.
- Obtaining funding that is likely to enable subsequent rounds will be an important consideration for companies when choosing funders
- It's also important to diversify your shareholder base; companies that rely solely on one investor are more likely to struggle with follow-on rounds or finding new investors than those with a better risk-mitigation mix.
If you have any questions about the fundraising process or want to raise capital this year, you can arrange a meeting here at any time or contact Emily Heazlewood at [email protected]
This is just an opinion piece based on what we've seen, but it varies by region, funding type, and company.
