Before deciding which equity funding is best for your business, you must determine what the equity is being raised to
accomplish. Businesses need different funding for different
purposes, at different stages of development. The relative costs, obligations
and requirements of funding should be carefully considered within this context. Some possible equity sources
are:
1. Small scale capital
offerings allow many smaller companies to access finance. The offerings are made under the rules applied
by ASIC, and there are restrictions on the number of shareholders and value of
capital raised. The costs involved can sometimes be too much
for micro businesses. However, if the strategies are properly defined and
all the rules applied, there is a case for growing businesses with this
method. If a project calls for this type of funding Vebiz usually work with Business Growth Strategies (BGS)
2. Venture capital can be a great way
to launch a new business, product or idea. The rigor of the
venture capital processes often adds to the value of firms seeking the capital.Companies seeking finance
from venture capital firms must have a sound business proposition or a product
that has potential. Often, the value of the small business is overestimated by
the existing business owners. Since the competition
for venture capital is strong, VCs often have an advantage in the market
place. Small businesses should not
see VCs as the only way they can obtain growth funds.
3. Private equity - grow
your own Some small businesses have many contacts who might like to invest in their business. The
advantages, the mechanisms, the costs and the benefits of this approach should
be well documented and understood prior to taking this step. Private equity may
seem inexpensive and easy at first glance but can have unexpected costs in the
detail and could change control of the business.
