How Do I Secure the Right Investment for My SME?
Securing investment is a complex process. You’ll need professional advice in finding investors, as well as help in finalising arrangements with investors, but it will always be up to you to discern which investors you truly want to back your venture, and finding the right investor, as opposed to any investor, is crucial.
There are no right or wrong choices, but there are some that are more helpful than others. Take the time to figure out exactly what you want your investor to be like, take the necessary steps to prepare, and then approach your goals with intent and purpose that go beyond the pursuit of financial backing.
To discuss the two main avenues of securing investment for an SME, we’ve taken a look at the operations of Buxeros Capital, a public and private social impact investment fund, and used its methods of securing investment for up and coming start-ups in the emerging markets landscape as an example of good practice in finding the right investor for you.
Private Equity Funds
Private equity funds are investment firms that operate outside of the public stock exchange and arrange transaction-based investments on behalf of investors and private firms looking for investment. They are the gateway to securing longer-term more cash heavy individual investors that are willing to take a risk with your business and deliver cash on the back of a promise that they will see returns within a certain time frame.
Buxeros is a both public and private equity fund that does this, however in order to approach a more niche investment sphere, it secures funding for small to medium enterprises that specifically aim to have a positive impact on local economies within emerging markets. The Buxeros team, like other private equity firms you might find, includes private equity veterans, seasoned entrepreneurs and strong partners in each region across the globe. One of its largest partners is Ramphastos Investments, an investment firm owned by Marcel Boekhoorn. This means that combined with its partners, Buxeros has the professional expertise, contacts and know-how you will need to not only secure investment but secure the right investment.
One recent investment deal that Buxeros struck was with Profort, a business that provides orthopaedic care for people who need prosthetics or other low-cost limb treatment in Colombia and neighbouring developing countries. The firm is set to launch its first branch in Tunja this year and has secured the funds necessary to expand into other decentralised areas that will need and benefit from their services. Without an investment fund to help Profort reach the correct local contacts and without the specificity of Buxeros’ client remit to have a positive impact on local economies, this may have not been possible, which goes to emphasize how necessary it is to find investors that make sense and can help you with more than just the money.
Buxeros Capital was established in 2016 and has since operated in conjunction with the Dutch Good Growth Fund (DGGF), a government backed project form the Ministry of Foreign Affairs which aims to match each investment Buxeros secures for small to medium enterprises in emerging markets.
Numerous governments around the world have similar initiatives and have capital dedicated to investment, particularly in emerging markets and developing countries. In this case, the DGGF provides half of the investment funds Buxeros’ aims to secure for its client. However, it won’t always be necessary for a government backed investment project to be conjoined with a private equity fund in order to secure the government’s investment, so have a dig and find out what your local government offers and how you can make the most of this.
A firm that has truly benefitted from the backing of the DGGF, alongside Buxeros’ input, is Blue 21, a Dutch enterprise focused on the research and development of floating architecture and urban development, particularly in areas affected by rising tides and where living on the waters is central to the locality’s lifestyle. By working alongside the Dutch government, and with the local authorities being corporately invested in the venture, the combination of expertise, cooperation and unified drive holds great promise for success and in this case has provided great confidence in delivering results that have positively affected Dutch localities on the waters.
Having a combination of government backing and a private equity firm like Buxeros behind their venture has been incredibly useful, not just because they have the funds to move forward, but because they are now within arm’s reach of new opportunities and the prospect of expanding into more developing nations and making a difference in more and more places that need their help.
Karina Czapiewska, expert developer at Blue 21, put it like this: “The products that Blue21 develops are very complex; a floating building, district, town or even a city. Therefore, each product that is being developed cannot exist without a location, which in turn must consider the local context, local rules and regulations and often even the lack of context, rules or regulations that still need to be created along the way.
“To arrange this, a strong collaboration with the local authorities is needed. These collaborations start at a very early stage and it can often take a long time before anything is developed at all. Buxeros has a large network and plenty of experience in several parts of the world, and they have proven to be crucial in finding the right contacts, the right network and the right funding.”
“Each product that is being developed cannot exist without a location, which in turn must consider the local context, local rules and regulations and often even the lack of context, rules or regulations that still need to be created along the way.”
In terms of expertise, cashflow, international rapports, know-how, contacts and support (all of the things you will need to grow and expand your business), finding the right combination of government help, whether it’s financial or not, and investor backing, whether it’s through a peer to peer arrangement or a private equity fund, will be ideal for your plans.
Securing investment is difficult and can take months if not years at a time, but if you have something you know will work, then find the people who will and more so, want to back you financially because they believe in it and because they too wish to see it succeed.
For Buxeros, the approach to securing investment for SMEs in emerging markets has meant that the firms looking to be funded got more bang for their buck. They set out to secure the necessary funds they needed to expand but walked away with the addition of investment partners that can connect them to the right people, government help and support from local authorities, as well as a partner that is 100% intent on seeing the positive impact of their venture succeed.