Why Last Month’s Funding Strategies Won’t Work Today


Last week, I wrote about what to do if current economic conditions get derailed by a softening stock market, rising interest rates, and ongoing government dysfunction.

But for companies contemplating raising growth capital, or selling all or part of their businesses, it is already too late.


This is already happening in the IPO market with very prominent companies like Airbnb and Uber considering either lowering pricing or delaying their long overdue public offerings.


For smaller companies, fearful capital markets are a double whammy - they make investors and buyers a) even more skeptical as to a company’s financial projections, and b) less willing to invest at an attractive multiple for those projections.

Now hopefully things will stabilize and markets will re-glide into 2019 with optimistic and bullish energy.

But we can’t depend on it, so companies entering the capital markets now need to make the following adjustments:

1. Be Clear on the Worst Case. In weakening markets, it is critical to map out the various “worst case” business and financial scenarios and how a company will win in all of them.


Sometimes this winning is simply hanging on until conditions improve while competitors falter and fail.


Other times it is a flexible and variable cost structure, where we are able to make money even with contracted revenues.


And then there is proving the “it doesn’t matter” kind of winning, where we show no matter what goes on in the economy as a whole, it will not affect our growth plans.

Understanding and communicating these various “negative scenarios” is liberating, as it is so good to know that no matter what happens in the wider world that our businesses will thrive and prosper.


And differentiating as too many companies - out of a “lazy pollyannism” - never do it.
2. Play Offense! Especially in threatening markets, it is easy for analysts (especially financial service types) to point out why a business won't make it and grow.

While it is normally best to just ignore the critics, every now and then it can be very energizing and effective to “turn the tables” and ask them what great business and money making ideas they have.

Usually they have none, or the ideas they do have are so theoretical - i.e. build a business with proprietary IP and stable EBITDA in a growing market - as to have no actionable value in the real world.


In addition to just feeling good to stand up for yourself and your business, a rhetorical gambit like this often can “flip the script” to a more productive and moving forward tone and course.

3. Buy. Warren Buffet became one of the richest people in the world with fundamentally a contrarian approach to business and investing.

He welcomed uncertain and down markets because they availed him the blessed opportunity to buy quality assets and businesses at discounted prices.

Even and especially for smaller companies, “storm clouds are gathering” times like these are often ideal to explore a growth-by-acquisition strategy.


Yes most executives and business owners have never bought another company, but so what?

Like most everything else in business, its success boils down to quality research and due diligence, intelligent risk-taking, and then just a lot of patience, hard work and grit to pull it off.

And there is a lot of “other people’s money” out there seeking to back quality “buyside” growth strategies across industries and markets.


So yes tough times don't really last, but tough people do.


And in tougher times, tough people easily outpace more fearful and timid competitors.

Because we don't need to outrun the bear, just those around us. :)

Looking to Raise Money or Sell Your Businesses in these Toughening Markets?


Then click here to calculate your company’s All Star Rating.


With it, you will be able to assess your company’s likelihood, at varying prices and valuations, of raising capital and / or attracting a buyer.


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