What’s happening in investor land?

Don’t think that there is no money around – there is. But the competition for it is intense.

I was at a meeting last week and we were talking about how investors are reacting and the impact on companies looking for capital.

 

Here is a summary…

 

Investment money is contracting:

Reduced returns on shares, property, etc means that fewer funds are available to investors.

Their current investments are not moving forward with further rounds. That means that investment funds are being tied up in older investments because the investors cannot exit.

 

The total value of funds is reducing because of people are being more conservative.

There are fewer listings so investors are committed for longer than planned in existing investments.

 

Existing investments are more problematical:

Many companies are experiencing reduced sales. That means profits are down and, therefore, investors are not getting the returns they expected just 12 months ago.

In these tougher times their investee companies need more attention. That ties up resources of investors and limits their ability to seek out new investments.

Most entrepreneurs have operated in good times and don’t really understand what they need to do to make sure they survive when the economy is slowing. That’s causing investors some big headaches.

 

It’s harder to get government grants/funding:

The Rudd Government killed Commercial Ready and reduced a number of other grant schemes. Many entrepreneurs used that funding to leverage investor funds. That is not an option now.

R&D costs still need to be met and with reduced cashflow and with no assistance this is much harder to do.

New product development has slowed and more cashed up competitors are causing big problems for the newcomers.

 

I know of three venture capital funds that were promised in total $110 million that has just been withdrawn. That means many entrepreneurs will not get funded. The money is just not there.

 

And that’s just in my own network.

 

What does this mean for you?

 

Now, I’m not saying that there is no money around, there is. But the competition for that money will increase and it will get harder to access that money.

 

Keep up your contacts with investors. Get out and about and make sure that you know what’s happening. Have a read of some previous blogs about how to build good relationships with prospective investors.

 

If you do need capital then you will need to work harder to get your hands on cash. This won’t change for many months. But your persistence will be rewarded so stay in there and keep talking about the great things your company is achieving.

 

Good companies will get funding.

 

Till next week…

 

 

 

Gail Geronimos, is the founder of Achaeus, which helps entrepreneurs develop their businesses and she has just started a new site www.pitchingtoinvestors.com with tools and tips about how to develop killer presentations to raise capital.

To read more Gail Geronimos blogs, click here.

 

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