Deepak Mandy is a business coach who has been building businesses Down Under all his life. From commendable expertise in the IT sector to a tight grasp on logistics, he has also been a mentor for budding entrepreneurs, giving genuine and effective business advice. As a business coach, Deepak Mandy understands the challenges that young, as well as seasoned businessmen, face while raising funds for their companies. It is true that the proper execution of an idea is what makes it work. Bringing good solutions to the masses has been Deepak Mandy’s forte ever since he entered the Australian markets and raising capital is one of the foundations of any good execution. This guide seeks to explore these challenges and how to overcome them.
Challenges in Raising Capital
Entrepreneurs come up with brilliant ideas and even have the right knack for executing them into practice. However, a slow or lack of cash injection at the right time is a major reason for many crushed dreams. Deepak Mandy suggests:
- Investors are Dicey: It happens often that a verbal commitment given by the investors during a pitch is not followed up with a proper investment decision by the investors.
- Lack of Urgency: Entrepreneurs often fail in creating a sense of urgency to the investor which results in a delayed reaction. The number of investors is less compared to the number of companies seeking funds – a major reason behind this issue.
- A Declining Economy: You can’t do much about it, can you? Well, coming up with a market disruptive solution is the only business advice that would work here. Moving on.
Companies Eligible to Raise Funds in Australia
Public companies (a company with more than 50 shareholders that are not direct employees of said company) are eligible to raise money from the general public (IPO). The company has to declare securities before entering the public pool to raise money.
Private companies (technically the opposite of a public company i.e not more than 50 shareholders that are not employees) can also enter for raising capital:
- From a private party such as employees, shareholders, or a subsidiary company.
- If there is no disclosure document required, the private company can raise funds from the general public.
Restrictions on Advertising or “Cold Calling”
When a disclosure document is required to raise funds, cold calling or advertising to the general masses has restrictions and boundations. In the most general terms, it is not allowed to cold call people from the general public and tells them about the securities. There is an exception in this case though. Deepak Mandy suggests that you check this link out. Holders of the Australian Financial Services Licence can raise funds from the public. Do check the link for more information though.
Advertising securities, as aforementioned, is not allowed. However, if the disclosure document is lodged, the scenario changes a bit. You can start advertising for public funding in Australia after the disclosure document is lodged as long as there is a statement in the advertisement or cold call stating that:
- Offers will be taken only with an attachment of the disclosure document
- There is an application form in the disclosure document and anyone who wishes to infuse money should fill it out first.
Don’t have a disclosure document? The Right Time to Raise Funds is this
With years of experience raising as well as investing funds, business coach, Deepak Mandy has compiled some pointers for you in this regard. If your company does not have a disclosure document, the right time to raise funds depends on:
- In case there is a personal offer. This also includes (a) offers made to less than 12 people in the course of a year and (b) the offer will not raise the total amount (in a year) above $2 million.
- Offers are made to the person who is not eligible for a disclosure document.
- There are also various conditions that are included in this category. For a detailed understanding of when you can raise capital without a disclosure document, check out the official link.
The right time to raise capital in case of the non-existence of a disclosure document also depends on where your business is currently and whether you have an execution plan in place. In simple terms, the allocation of the proposed incoming funds needs to be decided by the entrepreneur. Although this is not some mandatory step, it is absolutely essential for the entrepreneur to have a thorough understanding of where the money would be used and how much the returns will be.
How to Overcome Raising Capital Challenges
As a business advisor and coach, Deepak Mandy suggests that entrepreneurs take the following roadmap to overcome the challenges of raising funds in Australia:
- Scalable business strategy: A scalable business strategy is one of the major factors that investors look into before injecting money into a business. Investors look for good future prospects before making a decision so a scalable business model is a must.
- Market feasibility: Entrepreneurs and young businesses should not fall in love with their ideas and lose a sense of the real world. The feasibility and the problem-solving power of a business is the one thing that will keep the company floated in periods of crisis.
- Having a realistic time frame: Unrealistic deadlines are also a reason for the failure of many young businesses. Business advice in this case requires entrepreneurs to keep a realistic sense of time frames.
- Networking: Networking with high net individuals as well as good companies of the different industries is another key factor that will help you to raise capital.
- Crowdfunding: Crowdfunding is another great way to raise capital if you believe that your idea is capable of motivating the general public to help you grow.
It is crucial to understand the place and time where your company stands before you start planning the next step. If you decide to raise money at the wrong time, it may end up hurting you more than helping you. We hope that this ‘Deepak Mandy’s guide to helping overcome capital raising challenges’ was mind-opening for you.