How to Get Financing to Drive Your U.S. Expansion
September 20, 2015
How to Get Financing to Drive Your U.S. Expansion
In early 2015, Glasgow, U.K. formalwear retailer ACS Clothing began its U.S. expansion after securing an £8.5 million follow-on investment from the Business Growth Fund (BGF). As of September 2015, the total investment reached £17.3m.
As a result of this funding, the company has since signed a lease on a 244,000 sq. ft. distribution facility in Memphis, Tenn., near its shipping partner FedEx, to deliver formalwear direct to customers across the U.S. through a new venture, Suit Up.
ACS Clothing is just one of the many UK companies finding investment as a pathway to new markets. On how the company planned to leverage its investment, ACS founder Richard Freedman said, “A major investment in our e-commerce capabilities and processing software is the quickest way to expand our business but we will also be exploring new international business opportunities and partnerships.”
Getting capital will open doors to U.S. shores, but money wasn’t solely responsible. It’s just as important to find the right investors for your project. Investors are vital in far more ways than just providing cash. Depending on the arrangement, the right group can become unofficial consulting firms or even assist in the day-to-day operations of a company.
Do You Need Angels or Venture?
ACS showed how a mid-sized company can garner recognition on reputation and proof of concept. If you have smaller company, you’ll probably eventually need more capital to really push an expansion forward—to hire talent or get office space, for example—than bootstrapping and crowd-funding will afford you. You’ll likely need to reach out to outside investors.
A good place to start is angel investors, usually established business professionals with high net worth who are looking to invest in promising companies. Typically, an angel will invest anywhere from £10,000 to more than a million.
In addition to making direct loans, angel investing groups sometimes host events that can help provide new entrepreneurs with additional networking opportunities. Check your local community for these groups.
If you’re looking for more extensive funding (at least £1 million), you’ll need to turn to venture capital. Venture capitalists (VCs) are more likely to require an in-depth and airtight business plan, but they can also provide larger amounts of money.
VCs typically invest in a few different companies for their clients, and hope to make money off of one (or all) of them to pay back their client’s investments. What that means for you is that they see all kinds of businesses—and you have to make yours stand out.
Also, you should know that VCs are looking for a return anywhere from 3-10 times their original investment, usually within the next 5-7 years, so it’s best to have an exit strategy in mind.
How Can You Garner the Interest of an Investor?
The best way to procure meetings with angels and venture capitalists is through introductions from other entrepreneurs or investors—which means that if you’ve decided to solicit money, it’s time to leverage your contacts (and their networks) to see who you can talk to.
1. Create an Amazing Group of Advisers
Carefully select advisers who will bring needed expertise and knowledge to your business. They may be helpful in speaking with potential investors. Great advisers are invaluable in nurturing great leaders, and great businesses. When investors see who has signed on to advise you, they may be much easier to attract, on name recognition alone.
Thanks to the immediate nature of blogging and social media, securing advisers can come to fruition with something as simple as a Twitter conversation. By sharing links and holding social conversations, like-minded parties can share ideas and inspiration efficiently, drastically reducing the time it would normally take to nurture such a relationship.
2. Become an Industry Thought Leader
Let investors know you’ve done your research. Show that you know other startups that have worked or failed in the past and why. Explain why your idea is unique and why it will succeed in the market. You want to show them that you have a great idea for a big market, so that they will see the potential for their investment.
Guest blogging or offering insights on a social media posting is an easy and effective way to highlight your expertise, and your company’s unique value proposition. The more people that turn to your views on these channels, the more likely a potential investor will look to your company for a profitable venture opportunity.
3. Know your Company Inside and Out
When angel investors evaluate your business, they want to see if you know what you’re talking about. Show investors you know everything from company basics, market opportunities, and financial data.
Also, be sure to back up the valuation of your company so they know your company’s value is what you say. You can do this by showing comparable valuations for other recently funded companies. Do your homework, because if you inflate the valuation of the business, investors will question your company’s validity.
In the End, Sell Yourself
An angel investor is investing in you as much as they are a product. Show them you’re the right person to run and launch this expansion. Demonstrate a strong track record, tell a story, and show why your company or big idea can solve a real problem, or disrupt an industry.
That great idea needs a leader with a clear, competitive advantage over similar companies or ideas. Confidence is an attractive quality and if investors see you believe in yourself, they are more likely to see that your company or idea has legs.