GROW YOUR COMPANY WITH EQUITY CAPITAL: CONSIDERATIONS
- Albie Heigers
- Apr 15
- 3 min read
The saying ‘the only real partnership is a sinking ship’ illustrates how partnerships are often filled with challenges and potential conflicts that can lead to failure. Partnering remains one of the biggest challenges Founders and Owner’s experience as they turn dreams into reality and then grow their businesses. Get it right and the business flourish; get it wrong and you entered a very long nightmare as so many can testify.
SELECTING PARTNERS:
a. Reasons:
There are three reasons for partnering with another person, company or entity. They introduce the:
capital;
know-how; and / or
networks / access to markets
you do not have in place.
b. Values-fit:
What most underestimate at their peril is the importance of determining a values-fit before forming a partnership. What appears honest, dishonest or ‘grey areas’ to one partner may be very different to the other and having to find this out once agreements have been signed can be disastrous. What seemed expedient at the time may very well become differences in strategy, conflicting expectations, the difficulty of untangling, legal wranglings and in many cases implosion or a sad end to what could have been a great business.
c. Further considerations:
a realistic assessment and sharing of each partner’s own strengths, weaknesses and shortcomings;
vision; strategy; short-, medium- and long-term goals and harvesting strategy (to sell your business, hand it over to family or listing);
potential gaps (current, medium and long-term) in terms of capital, knowhow and or network;
short- or medium-term capital requirements vs growth capital requirements and different options in this regard.
As in the matter of personal health, a sensible and long-term approach is far better than waiting for a crisis after which change might get imposed on you.
In Carry Out Great Exploits (Pty) Ltd we support Business Founders and Owners at various stages of this journey.
EQUITY GROWTH CAPITAL:
One of the options open to a Business Founder or Owner ready to take its next step of growth is to consider equity funding which has the following advantages and disadvantages:
a. Advantages:
No repayment obligations: unlike in the case of debt financing capital is freed up for business operations and growth.
Access to expertise and resources: investors may introduce valuable skills, contacts, experience, guidance and support.
No collateral required: does not require collateral, meaning business or personal assets are not at risk.
Sharing the risk: investors share the financial risks associated with the business and are motivated to support the company’s success.
Enhanced company credibility: securing investments from reputable investors can boost a company’s reputation; validate its business model, market potential and management team.
Can accommodate rapid and greater growth: in some cases, follow-on funding becomes available providing for bigger growth and eventually making the company attractive to potential buyers.
b. Disadvantages:
Dilution of ownership: issuing equity means giving up a portion of the company’s ownership – potentially reducing control for Founders and existing shareholders.
Loss of control: equity investors often have voting rights and may exert influence on decisions, potentially leading to conflicts with the Founders vision.
Sharing of profits: equity investors are entitled to a share of the company’s profits through either dividends or capital appreciation.
Slower capital raising process: equity financing can be more time consuming than debt financing - requiring building relationships, developing a pitch and conducting due diligence.
Exit strategy requirements: investors typically seek an exit strategy to sell their shares and realise a return on investment. This could involve selling the company, going public or finding another investor to buy their shares.
PRIVATE EQUITY WITH A DIFFERENCE:
The private equity fund that we represent invest in selected companies in Australia, New Zealand, England and now South Africa with a very specific target group:
Early-stage growth companies led by founders with an active Christian faith - businesses that not only aim for financial success but also strive to make a meaningful impact in their communities by incorporating Gospel priorities into their products, services, or organizational culture.
This fund pays equal attention to the financial success of their investment as well as the meaningful impact that the companies they invested in make in their communities. We source, screen, and prepare potential investment candidates on their behalf that align with the funds ethos. If and when required, we provide our relevant services.
Albie Heigers
+2782 852 8585
April 2025
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