Venture Capital is not the only answer. But it’s one of the few answers if you want to take your business to a materially different level. Many other financial routes are closed in the current climate and non-financial adjustments, while potentially positive, will not have the same impact.
Recruitment attracts entrepreneurs. The UK is undoubtedly one of the world’s recruitment hubs. There are more agencies in London than in the entire United States, but that makes it hard to stand out from the crowd.
Venture capital vs. bank loans
Taking a significant step with a business usually requires some type of investment and, in general, there are 2 recognized financial routes. The first is a bank loan and the other is venture capital (or private equity).
If you go the bank loan route, keep in mind that since a contracting firm is not an asset-backed business (apart from its debtors, who typically attract financing for working capital), borrowing money has never been easy. against a recruiting company’s future earnings, given that assets leave the office at 6 pm every night and hopefully return the next day.
Traditional banking has never been more difficult than it is now. There are many cases reported in recent years in which companies have borrowed from a bank, have been able to pay the interest but have breached the long list of bank agreements. These deals are closely scrutinized by overzealous analysts, who seem all too ready to ring the alarm bell and send in the bank’s friendly business support team. In turn, this often leads them to call administrators… and the rest is history… in many cases.
To be sure, the dangers of getting bank loans have never been greater, peppered with high fees, conditions, key ratios, and draconian penalties, if you can get over the hurdle of getting one in the first place.
The alternative method of obtaining financing is to attract an investor such as a venture capitalist, whereby you sell a portion of your capital in exchange for a long-term investment. However, this is not a piece of cake either. However, it is generally considered the best credible alternative to a bank loan.
Venture Capital Specialist Benefits;
Knowledge; If you choose a venture capitalist with experience, or preferably a focus, in your chosen market you will get a partner with considerable knowledge and hands-on experience.
Counseling and Tutoring; His experience will be extremely useful in terms of acquisition or strategic advice, management infrastructure, succession planning and of course exit. If you haven’t been part of an outlet before, an experienced partner will be invaluable, both with practical advice, business preparation, and market contacts. So not only will they add overall value, but they’ll unlock equity value, a specific skill that many owners don’t have yet, because they haven’t needed it.
Comprehension; The right venture capital partner will take the time to understand your business. If they have experience in the recruiting industry, they will understand the cause and effect of specific recruiting issues such as seasonality, pay cycles, and churn. Therefore, they will make more informed decisions and understand that the assets of the business are the people.
Additional Financing; If additional funding is required in the future, then a VC will provide significant support either by increasing bank loans or by investing more themselves.
Contacts and Networks An investor, especially one well connected to the recruiting industry, must be able to utilize his wide range of contacts through his business networks, from public relations agencies to banks, from accountants to marketers. Everyone who can help take your business to a new level and beyond.
Summary
Attracting investment can exponentially accelerate the growth of your company. If chosen wisely, it can help support your plans and take some of the pressure off upper management.
Traditional bank loans are difficult to obtain now and are inflexible. I’d also say they’re light on added benefits. Venture capitalists can add real value from their experience and contacts, especially if they are experienced industry professionals who have held executive management positions and have practical experience adding value. Also, when a VC is investing their own money, you can be sure that their commitment to creating wealth for all equity shareholders will be 100%.
