Capital raising – What are investors looking for from CFOs and advice on securing growth

Being a CFO of a company can be exciting and challenging, particularly given that plans change, markets shift and revenue fluctuates. Despite the uncertainty, managing a capital raise is a crucial skill for a CFO.

There’s nothing quite as exhilarating as raising capital for a CFO. The process can be long and arduous, but also a fulfilling and worthwhile exercise when handled well.

The CFO holds all the cards during a capital raise. It’s a period of time when the pressure is on to get the investor across the line, and the task can be more art than science.

While the role the CFO plays here is increasingly pivotal during a capital raise, the fact is that investors want to see the hard data – which is clear evidence of whether it’s worth proceeding or not.

The uncertainty of how the pandemic will impact the operating environment sparked many capital raisings on stock exchanges around the world this year. It was often an almighty effort to go through this process amid lockdowns and travel bans.

It hasn’t been easy, with meet and greets long been an important part of the pre-investment checklist for many companies trying to weigh up the risk versus reward scenario. But savvy CFOs looked for alternative ways to get the deal across the line.

Here’s 5 key things that investors want from CFOs

1. Value the company

To be able raise capital for a company, the CFO first needs to determine its value. Giving away shares in a company requires a careful balance between knowing how much capital you need and how many shares the company is willing to part with.

The methods employed in valuing companies can be complex, and the process can take time to complete.

2. Know the numbers

Determining how much money is needed and how it will be spent is the first step for a CFO. Mapping this out in layman’s terms and creating an insightful narrative around capital raise can make or break a deal.

The CFO needs to work with the company founder, board or chief executive through this process to present the vision thoughtfully and transparently. There will also be a specific reporting framework that the information need to be presented within that the CFO will have to work to.

3. Due diligence

The CFO will need to go over the target in granular detail to ensure all claims are backed up with facts and figures, while contradictions need to be explained and understood.

This can be a long process, depending on how prepared the other party is and what information is readily available.

4. Pitch presentation

With so much at stake a CFO will need to be present at the pitch presentation, or even run the process.

Handling the presentation and presenting the narrative that the CFO has helped developed will be important, and can improve the credibility of the organisation for investors.

5. Bedding down a deal

Once a deal has been reached, the process of bedding down the raise and ensuring all parties are communicating will be important.

By providing investors with detailed information on how the funds are being utilised and what the impact has been, further investment could even be on the cards.

The task for the CFO can include developing communication methods, reporting processes and annual reports.

Capital raising tips

Even with an experienced CFO at the helm, the process of raising capital can take months, or even years.

To increase your chances of success, organisations need to understand the steps involved, according to tips shared by Axtra Capital managing director Reuben Buchanan.

His tips include:

Build a board: A strong and stable board capable of implementing the business plan is crucial.

Be realistic on valuation: You need to be able to explain how the business has been valued, backed up by a valuation model that the potential investor can understand and believe.

Detail an exit strategy: Explaining how the investor will get a return on their investment, known as the exit strategy, plus a capital gain.

Investor style: Identify the level of involvement you are seeking from an investor. Be flexible, because investors do want to become activity involved in most cases.

Explain: An explanation of how the investors’ funds will be used is important.

More information on raising funds in Australia is listed here on the Australian Securities and Investment Commission (ASIC) website.