Global Capital Markets Review: 5 Key Takeaways for CFOs and Executive Teams
A notable trend over the past year has been the shift towards companies directly pitching capital raises to family offices and limited partners, bypassing traditional venture capital and private equity funds. While this allowed companies momentary access to new sources of capital, most family offices and LPs are not equipped to handle the volume of deal flow and lack the infrastructure to properly evaluate opportunities. As a result, we are beginning to see a return to normalcy with funds once again managing the majority of deals and capital deployment. This transition will likely take several months, but executives looking to raise capital can use this to their advantage. Hiring investor relations professionals who have experience at venture funds or family offices can provide valuable insight into successfully securing investments in the current climate. Their expertise in navigating between both worlds will be invaluable.
The global capital markets environment remains challenging for companies looking to raise, deploy, and preserve capital. Here are 5 major priorities and takeaways for CFOs and executive teams to consider:
Focus on sales and marketing and get honest about your real customer acquisition cost (CAC) using data from July forward. If you are still profitable, you'll be fine. If not, you must fix this or nothing else will matter.
Take a strategic approach to capital allocation. With fewer options for raising new capital, capital allocation discipline is key. Review all growth projects and prioritize only the highest return investments. Divest non-core assets if needed to raise funds. Say no to marginal growth opportunities.
Consider approaching your largest and most strategic customers or partners to invest, especially if you are planning a new product or initiative that could benefit them. Many have corporate development and VC arms.
Don't worry about borrowing costs for now. Once rates start dropping you can refinance everything. As long as your all-in cost of capital doesn't invert your CAC, you're in good shape.
Communicate clearly with investors and shareholders. Provide realistic updates on company performance and outlook. Maintain strong governance and clearly articulate how you will navigate market challenges and uncertainties. Transparency and trust are vital.
In today's turbulent capital markets, a sharp focus on sales, marketing, CAC, capital allocation discipline, strategic partnerships, and investor communications will be key priorities for executive teams looking to steer their companies through uncertainty. Careful capital management allows companies to play offense during downturns and emerge stronger when conditions improve.