Capital Raising Verticals
There are a myriad of options when it comes to choosing the best verticals to raise capital for your fund or private company. This article will take a closer look at the most common and we explain the ins and outs of each.
Core Capital Raising Verticals:
Friends and Family investors are typically the initial resource upon the launch of a new fund or company idea. This stage of investment is considered very high risk due to the lack of proven track record and early stage entry. Often times, this stage of investment supersedes a true company/fund structure & set up. With the personal nature of this capital, the due diligence time is often less rigorous as you would find in the later stages. As with anything in the investment space, the higher the risk the higher potential return. No free lunches . . .
Angel Investors are high net-worth individuals with the ability to provide capital to fresh new opportunities. Angel investors tend to invest once the company has been formed and prefer to see an initial product/fund set up prior to peeling off investment capital. The average angel investment amount typically ranges from $25,000 to $100,000+ in size - with a due diligence process that can vary greatly.
Family Offices are very opportunistic by nature and tend to consider a wide range of investment opportunities. Typical family office investment sizes range greatly depending on the opportunity, track record and potential ROI. From an evaluation and sourcing angle, family offices often prefer investing capital to industries and verticals that they understand - often in areas for which their personal wealth was created. This stems from a pure understanding of the space and industry connections they possess which will further add value to the allocation. Family offices will often bridge the gap between the less sophisticated friends and family investor & the larger private equity/institutional players.
Venture Capital investments are another common source of investment capital. Venture investments differ from angel and family offices as they are typically offered via fund structures. Venture funds will carve out specific industries or verticals, making a number of selected investments across an array of companies, hoping to hit a long term winner.
Private Equity funds are similar to their venture counterparts, however their capital is typically deployed to more established opportunities. Although no investment is a sure thing, PE groups tend to focus on companies with a proven, growing, and repeatable process. Further to that point, an often stringent and rigorous due diligence process is deployed prior to allocating capital. The result is a larger investment ticket than the previously mentioned investor types, with an average of $20M+ per company invested.
What You Should Know
Trending Sectors With Growing Capital Flow:
- Cryptocurrency/Blockchain: Investments in the blockchain space continue to increase dramatically. Consider the crypto fund, Grayscale Capital, which despite the rough year for crypto related projects, raised $248M in capital in Q1 of 2018 alone.
- ESG (Environmental, Social and Government): Its no surprise that ESG investing is growing in popularity as the generational turnover in the family office space continues to take place. The younger generation of today simply has an increased awareness of where their capital is being deployed (mostly valid in the single family office space).
Capital raising can be a daunting task. Gaining increased clarity on your potential pools of capital can greatly enhance your success rate. At FINTRX, we focus on the family office space and the investment capital provided. We encourage you to dig in, find your best suitors, and get after it!