How do I raise capital for my business?

Raising capital can be one of the most important milestones in a business journey. Whether you’re a startup founder looking to scale quickly or a business owner looking for a platform for expansion, navigating the capital raising process requires more than just having a great idea. It demands clarity, vision, strategy and a strong sense of purpose. 

From understanding what capital raising means and why it matters, to a step-by-step preparation guide (!!), Kearney Group has you covered with this smart guide to raising capital. Let’s dive in.

What are the types of investors and funding options? 

There are two common ways to raise capital: equity and debt.

1. Equity funding means selling shares in your business to investors, such as angel investors or venture capital firms in exchange for capital. More on this below.
2. Debt funding means borrowing money (e.g. loans, lines of credit) that must be paid back, usually with interest.

There are however various types of investors and funding options available that suit different business stages, sectors and strategies.

Angel Investment.

Angel investors are often established, high-net-worth individuals (HNWIs) looking for businesses with potential. They provide capital in exchange for equity, investing early and bringing their networks, experience and mentorship with them. An angel investor is likely to invest at the pre-seed or seed stages of a business or idea. 

Venture Capital.

Venture capital firms (VCs) have a pool of money to invest, that can come from a variety of sources such as HNWIs, insurance companies, super funds and more. Again, they provide capital in exchange for equity, but are usually looking for a heftier chunk and seek a strong return on investment. 

VCs are likely to invest at the startup or growth stage. They target businesses that already have proven wins on the board and look for things like a strong and stable team and market potential, size and differentiation. Rosterfy shares insights on what made them attractive to VCs further here. 

Private Equity.

Private equity is when investment firms put money into private companies, a.k.a businesses that aren’t on the stock market. 

Here’s how it works. A private equity firm gathers money from investors into a big pool called a fund. The firm then uses that fund to buy or invest in companies. In exchange, they get a share of ownership in those businesses, and this can be controlling or non-controlling, depending on the goals of the investment. Private equity firms usually target established, mature businesses that they believe can be made more valuable. 

Private equity funding can often work like a partnership. Once they invest, they work closely with management to help scale, make improvements and create efficiencies – which can include anything from operational changes to expanding into new markets. 

They often hold board seats and bring a wealth of experience to help businesses grow and scale. Read about Rosterfy’s experience with this type of funding, here. 

Other types of funding:

• Crowdfunding. This is where lots of people (the crowd) put in money to support a project, idea or business venture in exchange for rewards, equity or as a donation or loan. In Australia, equity crowdfunding is regulated by the Australian Securities and Investments Commission (ASIC). Small businesses can legally sell shares to everyday investors through approved platforms. 
• Grants and loans. There are a range of government grants and loan programs designed to support innovation, expansion and resilience. Grant programs can be super competitive but are an excellent way to access capital. 

Seek advice before deciding on a funding strategy.

Like everything, there are pros and cons to all capital raising options. Choosing the right mix of funding can mean the difference between a short-term boost and long-term sustainability. 

We always recommend chatting to your business advisor about which of these might be right for you before making any moves.