Capital Raising
The instrument sets the cost of capital.
The negotiation rarely changes it.
We raise private capital for privately held companies. Before determining whether the answer is equity, debt, or a structure between the two, we establish what the business can carry and what the investors who would fund it will accept.
The problem
A financing is priced long before it is negotiated
By the time a term sheet is issued, most of its terms were settled earlier: by the instrument selected, the structure it sits within, and the investors approached. Companies arrive at that point having already chosen, frequently for reasons that have little to do with what the business can carry.
The instrument is chosen on preference
Equity because dilution feels survivable, or debt because it does not. Equity introduces a partner and capital that need not be serviced, and where growth is the constraint it is generally the appropriate instrument. Debt costs less and preserves the capital structure, and is serviced irrespective of performance in any given period.
Neither is inherently the expensive one. The costly outcomes are the wrong instrument, and capital not raised while the opportunity remains open.
The market is approached before the structure is settled
A raise that reaches investors before the amount, the instrument and the structure agree with one another is priced on the first reading of it. Terms are then negotiated from a position that was set weeks earlier, and the participants who declined at the first pass are not available for a second.
This is the constraint companies discover last. It is the one that should be established first.
Instruments
What we raise
Capital is raised by private placement, offered to qualified investors under applicable exemptions and through definitive offering documents.
Equity
Priced rounds and structured equity, where growth is the constraint and the business requires capital it does not have to service. Dilution purchases time, a partner with an interest in the outcome, and capital that is not returned if a quarter is missed. For most companies raising institutionally for the first time, this is the appropriate instrument.
Debt
Senior and asset-backed facilities where the business generates predictable cash flow, and mezzanine where the business approaches but does not yet support senior debt, or where an owner will accept a higher coupon in preference to conceding ownership. Debt costs less than equity and leaves the capitalisation table intact, and it is serviced irrespective of performance in any given period.
Hybrid
Convertible instruments, preferred structures and layered facilities that sit between the two. Most transactions above a certain size are not a single instrument, and the structure is built backwards from the investors who would fund it rather than forwards from what the company requested.
Criteria
What each instrument requires
The instrument follows the business rather than the preference. These are the tests applied before a mandate is accepted.
Equity
Four criteria
01
Early traction
A product in market, early revenue, or pilot programmes with named counterparties. Institutional equity underwrites evidence of demand rather than a description of it, and the earliest commercial proof points carry more weight than the size of the opportunity described around them.
02
Differentiation and defensibility
Intellectual property, proprietary technology, or product differentiation that does not disappear the moment a larger competitor decides to enter. An investor will test what protects the position before testing what it is worth.
03
Team experience
Operators with genuine depth in the sector and, where it exists, a record of prior exits. The team is diligenced as closely as the numbers, and at this stage it frequently carries more of the decision.
04
Expansion mandate
A business looking beyond its current jurisdiction. Cross-border expansion is where the counterparties we cover are most active, and where the case for institutional equity over domestic alternatives is most readily made.
Debt
Six structures
Mezzanine financing
Subordinated debt for businesses that approach but do not yet support senior leverage, or where an owner will accept a higher coupon in preference to conceding ownership.
Equipment financing
Facilities secured against the machinery and plant they fund, where the asset itself carries the underwriting rather than the balance sheet around it.
Venture debt
Term facilities raised alongside or between equity rounds, extending runway without resetting the valuation the last round established.
Asset-based lending
Advanced against receivables, inventory and equipment. Availability moves with the asset base rather than with reported earnings in any given period.
Cash flow-based lending
Sized on what the business generates rather than on what it owns, for companies with contracted, recurring or otherwise predictable revenue.
Project financing
Raised against the economics of a defined project and repaid from its cash flows, ring-fenced from the sponsor’s other obligations.
We partner with companies generating revenue, with real assets, seeking financing of at least $5M, with debt multiples ranging from 2.5x to 3.5x EBITDA. While the process may extend to 120 days, most deals are closed in under 60, ensuring fast and efficient capital access.
Underwriting
How the instrument is determined
Four factors settle it, and none of them is the instrument the company would prefer to raise.
What the cash flows service
How much leverage the business can carry before the structure becomes fragile. This sets the ceiling on debt before anything else is considered.
What the balance sheet secures
Receivables, inventory, equipment and contracted revenue determine what a lender will advance against, and at what price.
What the capital structure can carry
Existing preferences, the option pool and the terms of prior rounds determine how much new equity is genuinely available before the round ceases to be fundable.
What the investors will fund
A well-structured raise still fails where no participant in the addressable universe writes that cheque, at that size, in that instrument. This is the constraint companies discover last and should have established first.
Once the instrument is settled, the mandate runs the firm’s eight stages: three before engagement, five after. They are set out in full under Our Approach. The counterparty categories a transaction is placed with are set out under Sources of Capital.
Selectivity
What we do not take
Sector familiarity matters less than two questions answered before a mandate is accepted: whether the cash flow can be underwritten, and whether we can identify what an investor will find before they find it. Where the answer to either is no, we say so.
A good fit
Privately held lower middle and middle market companies with a transaction that is executable as structured, and a management team prepared to work through diligence rather than around it.
Not a fit
A raise that is not executable at the amount, instrument or valuation the company has in mind, where the company is unwilling to revise any of the three. A business that requires operating work before it requires capital. That is a Growth Advisory conversation, and we will say so.