IOD NEWS article November/December 2008 issue – by John Knapton, Investment Manager, Crescent Capital
For small and medium enterprises planning expansion, or Management Buy Outs (MBOs) looking for initial investment or second stage financing, it’s certainly not the most conducive environment for finding capital funding.
Banks seem entrenched in self-preservation and are viewing funding requests through ultra-conservative spectables. So where, in this brave new world, do entrepreneurs and those still considering growth, go to fund their business plans?
Look at the costs
In the first case, sound advice would be to re-examine your cost base. Carefully and objectively consider which expenses are really adding value to your operation and which are redundant and may be redeployed in a manner that assists profitable growth. It is amazing what a crisis (albeit self-imposed) can do to focus the mind and assist us in looking at problems from a different perspective.
Once assured that you are indeed as efficient as is practicable, your expansion plans make sound economic sense and additional money is needed to drive the business forward, what other sources of funding are available to you? Using past experience as a guide to future trends, venture capital is one option worth exploring.
During the previous, significant stock market downturns, such as when the ‘dot.com bubble’ burst, there were some impressive accomplishments that bucked the trend. Benefiting from venture capital investments, btoh Skype and Google are examples of what can be achieved in the face of adversity.
Equity, as a component a total funding package, can also help leverage other funders such as banking and government backed grants.
The days of 100% debt funded MBOs and expansion are in the past. Venture capital funds have a current appetite to engage in buy-outs or buy-ins, bringing to the table a combination of capital that can unlock the transaction plus experience in change management, which can positively affect the new entity’s transition. Crescent Capital’s involvement with local companies suh as Andor, APT, Lagan Technologies and Nisoft are prime examples of how venture capital can work successfully.
Belfast based venture capital
Belfast based Crescent Capital specialises in funding local companies and understands the unique requirements of Northern Ireland firms. The company is well placed to advise and assist indigenous industry to effectively use their precious capital to create greatest value.
Venture Capital has an important part to play in economic growth, and in today’s atmosphere of parsimoniousbanking, it can play an even more significant role.