Explained: Four ways growth capital can accelerate your business

One of the most pressing issues for business owners is deciding how to finance their growth – specifically, when to borrow (debt funding) or when to raise (equity funding).

While debt funding plays an important role in certain circumstances, it’s likely many businesses will require a mix of both sources at some point to grow sustainably. Growth capital is particularly useful for entrepreneurs with a high-growth bias. While the process of raising external growth capital may be less familiar to some business owners, there are significant benefits in doing so – particularly with the right investor.

Here are four potential benefits of securing equity-based growth capital.

1. Move into the fast lane

As the saying goes, timing is everything. Business owners must act decisively to capitalise on new opportunities, maintain momentum and gain market share. Securing an injection of growth capital from a high-quality investor can be a gamechanger for any business.

At opportune times, external investment can enable you to move more quickly compared with ‘bootstrapping’ your business. With capital at your disposal, you could be better positioned to claim a first mover advantage and win new customers; enter a new geography or launch new products and services. For business owners looking down the road to their eventual exit strategy, securing growth capital (including when used in conjunction with other sources of funding) could help you achieve your goals even faster than you originally planned.

2. Open new growth possibilities

Running a business is a constant juggling act – you’re either focused on getting more cash in the door or putting the cash you have to best use. And when the purse strings are tight, business owners often need to take a binary ‘this or that’ approach to spending. Raising capital enables business owners to expand their thinking and proactively invest in the areas most likely to drive exponential growth – freeing them from having to choose between multiple areas of equal importance.

Unlike other sources of funding, growth capital also provides businesses with more flexibility on where and how to spend their money – not just on typical capital expenditures, such as machinery or equipment, but also on operational costs, such as hiring staff or boosting marketing expenditures to drive sales.

3. Free up resources

Entrepreneurs need to wear many hats, especially in the early stages. However, as the business grows in size and complexity, this becomes quickly sub-optimal. As a result, many business owners wait too long to hire the capabilities they need to continue growing. Soon enough, they are diverting most of their time and energy toward burdensome administrative tasks and away from other critical areas that energise and excite them.

Forward looking business owners utilise growth capital to make key hires.

Bringing in leadership talent can supercharge critical growth areas and free up owners to delegate, and focus on what they are best at and love doing most.

4. Access additional expertise

When an entrepreneur secures growth capital from a quality investor, they should be receiving much more than just a cheque. Active and experienced investors provide business owners with much-needed support – serving as a sherpa on the journey by offering additional resources and advice and opening doors along the way.

Having access to external investors eases the burden of growing a business. They may participate on your company board, facilitate introductions to potential customers and talent networks, and assist in navigating strategic roadblocks, succession planning and operational challenges. This support enables businesses to not only avoid unnecessary mistakes but also maximise their valuations for future funding rounds or for an eventual sell-out.

Learn more about DIY Blinds’ growth capital journey