How to Raise Capital when an IPO isn’t an option?


Well, it is a well-known fact that Initial Public Offerings (IPOs) are the best way to raise capital, but realistically, it doesn’t work for everyone, especially startups and small and medium-sized businesses.

Well, it is a well-known fact that Initial Public Offerings (IPOs) are the best way to raise capital, but realistically, it doesn’t work for everyone, especially startups and small and medium-sized businesses.

So, what options ambitious companies have today to grow their business when IPO isn’t an option?

A number of alternative fundraising routes exist today that are leveraged by businesses to raise capital:

Private Equity

What it is?

A private equity firm invests money in start-ups or emerging, profitable businesses. They expect high returns from the original investment that is capitalized by exiting the original assets or securities position.

Advantages and disadvantages

Advantages

  1. A stable and robust investor that will support the business for the upcoming 3 to 5 years
  2. High Capital Allotment
  3. Mentoring support to the executives

Disadvantages

  1. It requires giving up to 50% stake of the business.
  2. You might end up being influenced by the investors in the decision-making process diverting from the original vision for the interest of the investors.

Venture Capital

What is it:

Venture capital is a type of private equity. It is a legal form of an entity that aims to put together the capital sourced from firms or funds. This capital is normally invested in small and start-up companies that show high growth potential.

It is more or less similar to the concept of private equity, but with VCs, startups have an advantage. VCs mostly prefer growing business and only invest 50% in the equity available to diversify the portfolio risk.

Advantages

  • Large amounts of capital can be raised
  • Help managing risk is provided
  • Monthly payments are not required
  • Personal assets don’t need to be pledged
  • Experienced leadership advice are available
  • Networking opportunities are provided
  • Collaboration opportunities with industry experts other startups are available
  • Assistance with hiring building a team is available
  • Increased publicity exposure are likely
  • Help to raise subsequent rounds of funding is available

Disadvantages

  • VCs tend to take or share control over company decisions
  • Securing Investment through VCs is time-consuming and long-winded
  • Difficult to obtain VC company support, unlike private equity firms
  • Founder ownership is reduced
  • Finding investors can be distracting for founders
  • Funding is relatively scarce difficult to obtain
  • The overall cost of financing is expensive
  • Formal reporting structure board of directors are required
  • Extensive due diligence is required
  • Business is expected to scale grow rapidly
  • Funds are released on a performance schedule
  • Losing the business for founders is possible
  • Leverage in negotiations is rare for startups

Digital Asset Investment

What is it?

An online investment platform for creating and launching offers, where people can invest in by purchasing digital assets offered by both public or private companies without geographical barriers.

This offers greater liquidity to both companies and investors. Legal compliance and security are also more when you raise capital through digital investment platforms, unlike alternative fundraising methods such as ICOs.

Advantages

  • Online automated investment ecosystem offers a cheaper, easier, faster and more efficient way to raise capital.
  • Eliminates unnecessary middleman between investors and companies.
  • High liquidity and 24X7 trading facility for investors
  • No geographical barriers
  • Facility to offer fractional shares to investors through security tokens for businesses.

Disadvantages

  • Finding a suitable investment platform is a complex task
  • Some platforms do not provide complete resources to manage the complete investment lifecycle

TAKE CONTROL OF YOUR CAPITAL RAISING PROCESS

As the creator of a Turnkey Digital Investment Ecosystem, we want to encourage ambitious and growing businesses to adopt the new way of raising capital through security token offering.

DCI Ecosystem Team largely believes that using our Open, Democratic, Decentralized,

Cross-asset Investment Ecosystem will allow businesses to create digital assets and launch security token offerings (STO) easily without getting stuck into a lengthy paperwork process.

Instead of jumping into a cumbersome stock exchange process to raise capital, opting for DCI Ecosystem will help you to complete your initial funding rounds in just a few weeks.

SMEs, growing businesses will be able to track, analyze and monitor their STO performance through a powerful user dashboard.

Product and service providers (e.g. accountants, STO legal advisors, etc.) will be there to guide companies to complete their STO in a legal manner with compliance to local regulations.

DCI Ecosystem will help growing companies by offering the necessary tools and resources to support their investment journeys, enable communication with investors, offer tracking facility for the fundraising event through an online dashboard and much more.

To unlock more secrets about DCI, please visit the DCI Ecosystem and register on the website: Register Here

Originally published on: DCI Ecosystem Blog