A year ago, Adrian Ballintine had a problem. To raise the money to help his company, NewSat, launch a satellite, he needed no less than $600 million.
But NewSat’s market capitalisation was just $60 million.
“Initially, we were laughed out of everyone’s offices in Australia,” the CEO recently told SmartCompany. But somehow, he pulled it off. NewSat’s satellite should go up in 2015. The company expects an 80% profit margin on its gamble.
We asked Ballintine for his best fundraising tips.
1. Go to the experts
This time last year, it was very hard to get investors keen on his plans, Ballintine says.
So he went to the experts – offshore funds that had a reputation for investing in similar companies.
“I’ve always found that if you pitch your idea to the most sophisticated people you can possibly get to pitch to, and if you have a value proposition, sophisticated investors will continue to probe. They’ll ask sophisticated questions, and in our case, they concluded it was a very good proposition.”
If you go to an investor who isn’t familiar with your area, Ballintine says, it’s extremely hard for them to get their head around what you’re offering. And while due diligence from the experts is exhausting, it’s a better use of your time than explaining the basics to an investor unfamiliar with companies like yours, who’ll probably be too cautious to invest in something they don’t understand at the end anyway.
2. Go offshore
In Australia, Ballintine, admits, it was hard to get investors interested.
“Australia is really about mining,” he says. “The analysts here know about resources, and digging holes. But if you’re not doing that, it’s hard for people to get their head around your projects.
“We accepted that, so we had to work extra hard overseas to bring in funds that understand our value proposition.
Once 90% of the funds were raised overseas, Ballintine returned to Australia and did a very limited capital-raising. Once he had other international investors on board, he says, Australian funds were keener to have a look.
3. Go to government
Of the $600 million NewSat raised, $400 million came on loan from the American and French governments.
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And that’s because of the jobs NewSat’s satellite will create. In America, there’ll be 600 jobs created at Lockheed Martin, who are building the satellite. In France, where Arianespace is building a launcher, another 1000 jobs are being created.
With all of this economic activity, Ballintine went to see the bureaucrats, and secured $400 million at terms of just 2% interest a year.
“We showed them our forward orders, and the jobs we were creating.”
After a year of gruelling due diligence, both governments agreed to the loan.
“Export money is the best money you can get,” he says. “It’s cheap money, because you’re providing jobs.”