Neu Capital Africa for the mid-market – a new chapter in alternative capital raising
In the age of instant connectivity, financial services are one of the few remaining sectors where entire transactions are often conducted in person from start to finish. Particularly in the mid-market, there is often minimal use of technology outside basic email and spreadsheets.
Why do companies and investors primarily rely on first or second-degree networks, limiting themselves to a small pool and missing potentially more suitable investors?
Why does first contact need to be in-person, when the vast majority of these meetings quickly – or even worse, slowly – amount to nothing?
Why do investment managers spend so much of their time drumming up leads, instead of applying their skills and experience to live deals?
Why is due diligence duplicated by each investor, when most of the information they request is the same?
Why do so many capital raising processes end up with only one (or no) offer?
These and many other questions have driven us to build Neu.Capital, a custom-built platform that seeks to revolutionise alternative finance by reducing the time, cost and difficulty currently facing companies, investors and advisors in the mid-market.
What is Alternative Capital vs Bank Lending?
To tell you what it is, let me start by telling you what it isn’t.
It’s not bank loans. Banks like stable, predictable, tangible-asset-rich companies and can offer them debt funding at very low rates – in many cases the lowest.
And because banks are entrusted with the life savings of mums and dads everywhere, regulators sensibly make it difficult for them to lend to statistically higher-risk companies. Banks do not invest equity.
Yet this may be a false economy in the long run. SME’s account for the vast majority of innovative businesses. The risks they take are good risks; calculated risks necessary to future growth and employment on a national (and international) scale.
What then, if these companies cannot satisfy the high (and rising) major bank standards of credit quality, and where do they turn to access non-bank debt or equity funding?
In the case of small companies needing funds in the tens or hundreds of thousands – and even one or two million – there are increasingly numerous technology-based options (invoice finance or crowdfunding for example), but these channels are simply unsuitable and unavailable for the larger transactions required by the mid-market.
How is Mid-Market Alternative Capital Different?
Raising five, ten, twenty or fifty million dollars of debt or equity outside the major banks involves different sets of investors with very different methods of doing business – and for good reason.
Private equity, venture capital, credit funds, hedge funds, asset backed lenders, high net worth individuals and others – be they local or international – have the resources and capabilities to not only solve large funding needs, but also provide non-financial support through their experience and networks.
However larger funding amounts equal larger risks and therefore a much greater attention to detail (due diligence) is required.
Put another way, compare the examination given to 50 pairs of $10 shoes (bought at the same time) versus a single pair of $500 shoes. Chances are the $500 pair receives considerably more attention, given the outlay. Investors call it concentration risk, and while they can stretch to the $500 pair, they unsurprisingly want to see the shoes in person, try them on, ask some questions, research the manufacturer and run a background check on the craftsman (that last part is a joke).
Technology + Mid-Market Alternative Capital
The moral of this dodgy metaphor is this; it is not possible to standardize large capital transactions and host them online, because the amount of money at stake is too high, the companies themselves are too complex and there must be direct contact.
Companies and investors in the mid-market need to look each other in the eye, perform their own brands of enquiry and negotiate a tailored agreement.
But what of the rest of the process… Finding suitable investors or companies? Qualifying each others’ interest? Duplicated aspects of due diligence?
All of these steps and more can – to a large, but not complete extent – be enormously streamlined for both sides using technology.
How Neu Capital Africa Works
Neu Capital Africa is powered by the Neu.Capital platform which is in its third year of operating successfully in the Australasian market. The platform has been custom built specifically to facilitate mid-market alternative capital transactions, whether the funding is needed for growth (organic or acquisitive), transition (family succession or investor exit), refinance (of existing bank facilities) or distress (urgent funding required).
We’ve drawn on the combined 20+ years of our founders’ experience in corporate finance, as well as feedback from numerous CEOs, CFOs, Investment Managers, Independent Directors, Accountants and Lawyers to design a formula that blends the best features of online and offline transactions – using technology where possible and avoiding it where necessary.
The formula is simple. Prepare high quality information upfront, engage a broad pool of counterparties, insist on indicative offers and then meet with a final few to work out a deal.
It sounds easy, and that’s exactly why it works.
Find out more for companies and investors.
Co Founder, Neu.Capital
Mazars corporate finance division and Neu Capital Africa – now rebranded as Cala Capital Africa – have announced the consolidation of their capital raising advisory capabilities to establish Africa’s leading mid-market capital raising practice. The partnership will see Mazars corporate finance division combine its technical skills and extensive footprint – which includes capabilities to service […]