Knowing and showing your value when seeking growth capital

It might be to put a new sales team on the ground in a new market. Or to import some expensive production kit and fly an expert over to teach your staff how to use it properly. Or you might need to bring in outside technical help to bring a tricky project up the last few Technology Readiness Levels.

Accessing capital is a common obstacle between manufacturing businesses and their opportunities. And it comes tied to different sets of expectations depending on who you’re seeking it from.

Looking for growth equity is not something to blunder into, and Paul Childers, a Partner in BDO’s Advisory team, says an early and obvious enough question from investors will be around exactly why you need money.

“There’s this concept called ‘use of funds’. So it’s really hard to go to the market and say ‘I need $20 million’ and then say ‘I know what I’m going to do with five of it and I’ll tell you later what I’m going to do with 15,’” he tells us.

“And then… the type of investment. Capital can come in many different shapes and forms. The purest form being equity – shares in the business – and then at the other end is debt. And then there’s a number of hybrid instruments you can have between the two.”

Naturally, there are huge differences in the types of investors (and well as lenders), with some of these explained in the below podcast.

Childers will be moderating a panel on Finding Funding – featuring senior leaders from the National Reconstruction Fund Corporation, the Australian Business Growth Fund and Breakthrough Victoria – as well as giving a standalone presentation at next week’s Spotlight on Scaling Up seminar. (Ticket and other info for the June 25 event at UTS Ultimo is here.)

His speech — Preparing for investment: An investor’s view of value — will look at what makes a manufacturing company valuable through an investor’s lens, the kinds of capital available, and how companies can prepare to seek it.

In this episode of @AuManufacturing Conversations, Childers talks about some of the things that private equity investors will stress test in a manufacturer, how you can command a higher multiple, and more.

Episode guide

0:53 – An introduction to Childers and his work.

1:58 – The issue of scale’s importance in manufacturing at a macro and micro level.

4:15 – How to get the best valuation when fronting potential investors

6:02 – What a bank is looking for vs an investor

7:02 – Articulating a clear value proposition

8:15 – The importance of investor materials and what these should include

9:28 – There are different kinds of investors, and it’s important to look at a number of them.

10:55 – Spotlight on Scaling Up and Childers’ presentation, which will include what makes a manufacturing company valuable through an investor’s lens.