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HOW TO RAISE CAPITAL DURING A CRISIS

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By Rick Brar, CEO of Brains Bioceutical

 

The ongoing Covid-19 pandemic has had a devastating impact on the global economy and financial markets will take a long time to recover. In fact, the International Monetary Fund (IMF) has reported that the ongoing crisis has triggered the worst economic slump since the Great Depression and have predicted resultant losses of up to $9 trillion in global GDP figures over the next two years.

Whilst raising capital for a new business venture has never been easy, securing investment will undoubtedly seem like a near impossible task amid such turbulent and unpredictable market conditions.

However, despite widespread fear that venture-capitalists would postpone any new investment deals until the current economic conditions improve, deal activity only dropped by 6 percent in the first half of 2020, compared with the previous year.

One explanation for sustained investor interest is that many market leaders have been born out of a recession. For example, Apple and Amazon launched during the dot-com bubble burst and Uber, Airbnb and Slack all launched during the 2008 recession.

However, whilst this narrative offers hope, investors have still become extremely wary of the pandemic’s economic implications. Therefore, entrepreneurs and business leaders alike will need to continue to quickly react and adapt to changing market conditions, and adjust how they approach raising capital, if they are to be successful.

 

Rick Brar

Make it personal

For most companies, getting investors to back your vision can be challenging. For businesses in emerging industries, it can be particularly hard. Without such an established track record on sector returns, for most investors, it is easier to move on to the next opportunity, rather than taking the time to assess risk and rewards. The key in being able to capture the interest of a potential investor comes from your ability to connect with the individual you are pitching to on a personal level.

However, amid the current shift to doing business in a Covid-19 world, making a personal connection with someone you’ve never met can be extremely difficult. It is without a doubt that Zoom and phone calls have opened up new opportunities, but without gaining the trust of the person on the other end, you’ll never really have their full attention. Therefore, before you jump onto a call with a potential investor, make sure you’ve done your research and know who you are really talking to. Pitch on a personal level, get to know them and learn what is important to them.

 

Consider your communication strategies

During periods of market downturn, it can be all too easy to get caught up in the hectic pace business demands and hold back on communicating with potential investors, especially out of fear of ‘rocking the boat’. However, during a crisis, it is especially important to communicate and be open with your contacts.

At the end of the day, we are all navigating the ongoing pandemic together. Remember that there are real people on the other side of the screen and that continued communication during the most uncertain times will help to strengthen your relationships and pave a way forward.

 

Embrace the rise of the digital network

With travel on pause, and social distancing set to stay for the foreseeable future, entrepreneurs and business leaders must develop their digital networks if they are serious about raising capital.

Whilst getting in front of investors may now require a more creative approach, the monumental shift online has opened up the opportunity to reach out to a much wider range of investors, irrespective of their locality. In order to have an edge over your competitors, establish an online relationship management system to ensure you are communicating effectively with potential investors and also use a data room to safeguard information. This extra step will not only help to protect you from any digital breaches, but it will also demonstrate to investors that you are proactive and well equipped to operate in this new digital era.

 

Prioritize the Covid-19 pivot

Before you approach any potential investors, it is crucial that you review the viability of your business model in the context of the current economic climate. Is your business still profitable amid the Covid-19 pandemic? Is it still scalable and what makes your business resilient?

Any serious investors will want to know how you are responding and adapting to the ongoing crisis. Be prepared to discuss what’s working – and what isn’t – but more importantly, demonstrate that you understand the current situation and show that you are making tactical adjustments and pivoting your business accordingly.

 

Assess & restructure your financial models

During uncertain times, it is important to be open to negotiations when it comes to valuations. Instead of setting your sights on an extremely high figure which may deter investors, consider setting a more achievable valuation. This will not only help to gain potential investors trust, but it may also help make your funding round more attractive.

Despite the ongoing market upheaval there are a number of industries that still going from strength to strength, for example; CBD and health & fitness brands to e-commerce disruptors and education platforms. Whilst there are opportunities to thrive, the key to success, is being honest with yourself. Is now the right time for your company to raise capital? If so, make sure to build in buffers to protect your business during these uncertain times. For example, investors may need more time between funding rounds and so adapt your financial models accordingly. Demonstrating to investors that you are on top of these considerations will go a long way.

 

Looking forward  

It is without a doubt that these are challenging times for all businesses and the processes to secure investment have changed significantly over the past 10 months. However, if you can identify mutually beneficial opportunities and demonstrate to investors that your business is well-positioned amid the current market conditions, you can still successfully raise capital.

If anything, periods of crisis create an opportunity to accelerate change at a much quicker pace. Now it will be interesting to see which entrepreneurs and business leaders adapt best to these changing market conditions and come out of this period with a renewed focus and strategy to succeed in the long term.

 

Rick Brar is the CEO of Brains Bioceutical. The company produces natural CBD as an Active Pharmaceutical Ingredient (API) for pharmaceutical applications, research & development and clinical trials. Brains Bioceutical are currently going through a £30 million funding round.

 

Finance

THREE STEPS TO ENSURE RECOVERY OF COVID LOANS GOES SMOOTHLY

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In the wake of the pandemic, the government acted quickly to provide financial Covid support packages to help struggling businesses. With the economy now recovering, Mike Hampson, CEO at Bishopsgate Financial explores the range of options available for banks to ensure that those loans are repaid.

 

Since the start of the pandemic, businesses have raised over £75bn[1] from banks and financial markets, through interest-free emergency support schemes. But the harsh reality is that not all loans will be honoured as the economy recuperates.

As a result, banking professionals with client relationship management experience and skills in supporting clients to repay loans in a challenging business environment, will be in high demand.

 

Mike Hampson

Setting up training capabilities for client support post-pandemic

Commercial bankers estimate 60% of new coronavirus scheme loans[4] will default or suffer other repayment issues that will drive previously unseen levels of non-performing loans. It’s a tough balancing act and one that demands careful management of the lending transaction lifecycle, from origination through to collection, recovery, and handling bad debts. Banks no doubt already have frameworks in place to manage these elements, but it’s highly important to make customer interactions as easy as possible and ensure their genuine concern for their customers is clear.

Subsequently, hundreds of workers at major banks including HSBC, NatWest and Metro Bank[5] are understood to be receiving training in how to deal with vulnerable customers and “demonstrate empathy” as the first wave of repayments for coronavirus loans fall due. Staff ‘sensitivity[6] training builds on client-support and workout capabilities, such as improving sensitivity to early-warning systems, developing short-term forbearance solutions and loan modifications, and providing guidance on alternative products.

This approach may further avoid the additional pressure on the UK’s mental health crisis as financial institutions prepare to call in loans issued during the pandemic.

HSBC, which now has 400 staff in its debt collection team,[7] said the aim was to ensure staff had a “consistent understanding of vulnerability” and are “aware of the factors that could make an individual vulnerable” when having repayment conversations with customers.

An executive at another bank said its expanded debt collection team was being trained in “empathy, vulnerability and listening skills”. The individual told The Telegraph: “Ultimately, we don’t want to damage the economy by being overly aggressive.”

A peculiarity of a crisis situation is that customers don’t always know what they will need until that need is pressing. Finding that their bank is prepared to help in unexpected ways will go a long way toward reassuring them.

[2] https://www.law360.com/articles/1355897/

[3] https://www.bishopsgate-financial.com/insights/the-change-perspective/the-change-perspective-2021

[4] https://www.grantthornton.co.uk/insights/how-to-manage-upcoming-non-performing-loans/

[5] https://industryslice.com/NewsLetter/8_33

[6] https://www.telegraph.co.uk/global-health/climate-and-people/covid-19-has-amplified-parallel-pandemic-poor-mental-health/

[7] https://www.msn.com/en-gb/money/other/bank-staff-get-sensitivity-training-before-calling-in-covid-debts/ar-BB1fNMte

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Finance

FOUR STEPS TO INTEGRATING INTELLIGENT AUTOMATION IN THE FINANCE DEPARTMENT

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Marieke Saeij, CEO of Visma | Onguard

 

It’s clear that Intelligent Automation (IA) is still very much an emerging technology, with one indication being that is has only been mentioned a handful of times on Twitter since the beginning of 2021. Results from our latest annual FinTech Barometer reveal a mixed picture in terms of awareness, with half of finance professionals having never heard the term before. Whilst this is unsurprising for a technology concept very much in the ‘early adopters’ stage, organisations can stand to gain real benefits from embracing Intelligent Automation now, particular within the finance department. With this in mind, we explore some of these benefits and share a step-by-step best practice to implementing it into business operations.

 

Intelligent Automation ensures a predictable order-to-cash process

Such is the speed of introduction of new technologies that it’s a challenge for businesses to keep pace. As the newest innovation in finance, Intelligent Automation is one that organisations can’t afford to let pass by. It truly takes financial process automation to the next level. In addition to helping maintain a high-quality customer service, it also complements the existing skillset of finance professionals in the industry.

Marieke Saeij

While Robotic Process Automation (RPA) and Big Data are key innovations for the sector, IA can be likened to an additional layer that enhances existing technologies. By combining applications, this layer is capable of independently assessing situations and determining the appropriate process sequence. It can, for example, fully determine the risk of a specific customer, and can also predict at an early stage which invoices will be paid late, or even not at all, ensuring that finance professionals can then plan accordingly. The result is a reliable and predictable order-to-cash process.

 

The four steps to an IA-proof organisation

While the benefits of IA are numerous, implementing the technology can prove complex, although some are already treading the IA path without knowing it. In this instance it’s crucial to become aware and begin the purposeful process to full integration. Below are the four key steps to becoming fully IA-proof.

  1. Exploring the potential: Brainstorm where automation can be applied

Step one is to examine the extent to which automation can help your organisation. Blue sky thinking is the key here. What is the ideal relationship with the customer? What does the ideal order-to-cash process look like? In this phase, involving multiple departments from within the organisation is key, from management to operations. The finance professionals who have the most contact with customers are likely to have the strongest knowledge of which processes they would like to see automated. With no limits to ideas, it’s best to explore all the opportunities in the entire order-to-cash process and describe broadly the potential value to the organisation.

 

  1. Decipher which data and technology is needed

The second step is to map out which data and technology is required. Working with a specialist, either external or from the internal IT department, is beneficial at this stage to see where the opportunities lie. In many cases, off-the-shelf solutions are already readily available to help make the difference, so it pays to do the research and gain advice where possible.

 

  1. Firm up the strategy

With the plan mapped out, it’s time to fit the pieces of the puzzle together. Which technology and accompanying software is proving most valuable? It’s vital at this stage to analyse the results the organisation is achieving from deploying the right technology and software. It’s also important to outline any limitations and emphasising the potential risk of failure. This is the business case and the basis for the elevator pitch that will be presented to internal stakeholders.

 

  1. Draw up the roadmap and start benefitting from agility

The fourth and final step is prioritisation. The roadmap will describe step-by-step how to move from the undesired current situation to the desired end goal. In the first step, choosing a subproject that is relatively easy to achieve will help gain support from other departments within the business, and provide invaluable experience that can be applied to the more complex components that follow later. This agile approach facilitates a learn-by-doing mindset and allows the following steps to be tackled in a smarter and simpler way.

 

Effective preparation is half the battle

Exploring the potential of automation, mapping the required data and technology, establishing the strategy and laying out the roadmap are the four crucial steps to ensure the foundation for Intelligent Automation. Effective preparation and estimating which technology and accompanying software is needed will help to create a streamlined and error-free order-to-cash process. To ultimately save time and costs, empower finance professionals and maintain customer loyalty, the time for Intelligent Automation is now.

 

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