Should I use my lawyer or a corporate finance house to raise finance?
I’m looking to raise £1.5m of expansion finance through venture capital. My solicitors say they can arrange introductory meetings with a number of VCs, while other people are advising I use corporate finance advisers who will want a slice of any deal. Which is the best option?
A. Eren Ali of Las Iguanas writes:
When looking to raise finance to expand your business, it is essential to find the right adviser. A good corporate finance adviser will not only be able to help you with your business development strategy, but will help to fine-tune your position in advance of an approach. Having a well-respected adviser on your team will also let the VC or investor know you are serious about the project.
The key to selecting the right adviser is to make sure that they know your marketplace and can work at the levels of finance you require. This might be the difference between opting for a corporate financier within your existing law or accountancy firm, or a deal broker with expertise in your business arena.
Sector specialists tend to operate on a no-deal, no-fee basis, and that is what we opted for to raise capital for the Las Iguanas chain expansion. You may end up paying more money in fees in the long run – but you will not find yourself £30,000 down the line without a deal at the end of it.
We worked with angel network Beer & Partners, which also provide corporate finance services and are well known within the restaurant industry sector, and charged us 3% of money raised on a no-win, no-fee basis. For Las Iguanas, that meant a £1.5m deal cost £45,000 in fees; but it felt like the best £45,000 we could have spent.
When looking for an adviser, it is important to realise that the best one may not always be the most visible one. To ensure you select a good adviser, you need to engage with companies in your sector who have been successful in finding one themselves. This means meeting with entrepreneurs and asking who they have used in the past; a handful of phone calls could be all you need to get your business on track.