Investor relationship


Background:

An online assessment business run by a young tech entrepreneur started up in 2007. This was launched with the support of family funding in the sum of £125,000. The company had also received their first round of external funding support from an Institutional Investor in the sum of £200,000. The business owner had originally approached a bank for investment but was unsuccessful. Malcolm Holloway was brought in to help support the financial management and growth of the company in 2011.

Challenges:

In 2011, the main challenges for the business included managing the relationship with the external investor and cash flow management, in particular, short-term forecasting.  Financial management was not the key issue.

By 2012-13, the client was facing challenges with their cash flow and still making a consistent loss. The company’s management team were refusing to accept failure, which then caused further problems across the company’s board. The company needed more cash investment to continue operating. The original investor injected another £400,000 into the company, but only after an agreement was made that the founders would also invest their money too.

Solutions:

  1. Develop proper relationships with an external investor based on reliable and timely information flow, but also getting the company’s founder to understand the external investors’ concerns.
  2. To instigate proper financial management especially around monthly reporting and income recognition.
  3. Initiate a robust short and medium term cash flow projection model to assist in understanding the cash burn, cash out and cash requirements not just on an annual basis.

Our approach:

To work with the founder of the company to encourage him to take ownership of the newly established process, which we helped to implement methodically. It would not have worked if it had just been us, without his buy-in or understanding of the numbers.

Benefits:

After completing the project, Malcolm identified that the main benefits included a stronger relationship and understanding between the stakeholders and the company founder. The owner progressively started to understand his business financials and this created more comfort for the board around short-term cash stability, rather than nasty surprises. As a sign of achievement, the business was sold to a trade buyer in a controlled manner. The client has also engaged us in two other new ventures.

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