Business

Now is the time to raise capital!

By Reuben Buchanan

The latest Wholesale Investor National survey, published in August 09, reveals that private investors in Australia are more optimistic, have more money and have invested over the last three months.

The quarterly survey, conducted by Wholesale Investor magazine on its database of 4,286 high net worth, wholesale, professional and international investors, revealed the following points:

Investors remain optimistic

A staggering 81% surveyed said that now is a very good, or exceptional time to invest. The more the market recovers from the financial downturn, the more this statistic will drop. Smart investors invest when values are right down and become less enthusiastic as the market moves towards its peak.

Private companies are preferred

59.3% of investors prefer to invest into private companies (down from 71% in May '09 survey). Investors see that private companies can be invested into at lower values, and are less exposed to market fluctuations and nervous markets. Private companies also carry less debt and are less burdened by compliance, reporting and public scrutiny. It is anticipated that interest in public companies is set to increase as the market recovers over the next 18 months.

Management team is the key

77% feel that quality of management is the most important investment criteria. This is followed by proof of concept, sector and exit strategy. Many people believe that 'profit' and 'quality pitch' are the attributes of a deal that gets investors excited. This is not correct as these attributes were listed last.

Tips for entrepreneurs raising capital – listen to what investors want

This survey gives an in-depth insight into the investor's mindset. This greatly assists companies and entrepreneurs to shape their investment offers, greatly increasing their chance to raise capital. Here are some key tips:

• Focus on building a very strong board and management;
• Only target investors who invest into your sector;
• Be realistic on valuation – get it stress tested by advisors or friendly investors;
• Be flexible – investors today seek more than a ride when investing into private companies.
• Investors in the survey highlight that 41% of opportunities they seek are not 'investor ready'. Companies need to seek the right advisor and get educated on becoming investor ready.
• Raise capital now. Investors are active right now and have cash. Don't wait till the market recovers – as values go up – investors' appetite for private deals and available cash will continue to decrease.

To receive a full copy of the survey, please visit www.wholesaleinvestor.com.au and go to the media centre.

Reuben Buchanan is a corporate advisor and he assists companies who are seeking to raise capital.