Potential funding options

There are an increasing number of diverse funding options potentially available to high growth scaleups. Here are some of the many examples:

The following sections provide some potential ways in which you could finance each of VCS’s strategic options:

Launching a significant marketing campaign

There are many potential options for funding this, including:

• Asset-based financing against the company’s offices or debtor book;
• Equity investment from a business angel; and
• Generating surplus cash flows by offering your target customers a special discount.

Developing a major new product offering

This is likely to require a significant investment that cannot be funded internally by the business. Here are some potential options:

• Equity investment from a business angel or venture-capital fund;
• Venture debt from a specialist provider; and
• Asset-based financing combined with an equity fundraise.

Expanding into an attractive new market

Your financing options will likely be similar to the above scenario. Here are some potential options:

• Equity investment from a business angel or venture-capital fund;
• Venture debt from a specialist provider; and
• Asset-based financing combined with an equity fundraise.

Acquiring one of your main competitors

The level of financing required will depend upon the size and structure of the acquisition:

• A cash purchase funded by a private equity leveraged buyout;
• A share-for-share acquisition that provides the seller with shares in the combined group; and
• A three-year earnout with annual payments financed by external debt.

Creating a shareholder liquidity event

There are various ways that you could approach this, including:

• Generating a shareholder exit such as a trade sale or private equity buyout;
• Undertaking an Initial Public Offering on an appropriate stock exchange; and
• Paying out a company dividend funded internally or through a term debt provided by a bank once the company has sufficient retained earnings.

Each of these funding scenarios has various pros and cons. The range of options will vary according to many factors including the company’s circumstances, the investor landscape, the industry sector and market conditions.