Seven in 10 (70%) Welsh businesses that have attempted to raise capital have failed at least once, according to the new Dream Bigger: Funding ambition* report from Smith & Williamson, the financial and professional services firm.
Securing funding is often critical to helping businesses scale quickly and maximise their potential. However, it’s often not plain sailing. Two in five (40%) Welsh businesses seeking investment have failed to secure funding more than three or more times and 18% have made five or more unsuccessful attempts.
The reasons behind this are varied. The most common explanation given by Welsh founders is that their management team wasn’t strong enough (43%), far exceeding the number of firms which said their business model wasn’t good enough (13%). Two in five (38%) founders said their business didn’t meet the criteria for investment and 35% said there was an issue with their credit history.
As a consequence, a third (33%) of businesses in Wales had to add someone to their management team and a third (33%) had to remove or replace a senior employee.
The main motivators behind Welsh businesses looking to secure finance include; funding new product development (35%), improving operational efficiency (33%) and increasing employee headcount (30%). However, of the various funding routes available, the majority of Welsh founders aren’t confident accessing private equity (62%), venture capital (61%) and despite the rise of peer-to-peer lending platforms in recent years, 67% still aren’t confident in accessing them.
John Morris, Partner at Smith & Williamson LLP, said:
“Securing business investment shouldn’t be a blind leap of faith. Preparation is key. To be investor-ready, Welsh businesses must ask themselves difficult questions and demonstrate they have a strong management team in place, something that is crucial for investors. Equally important is the level of ambition displayed and a degree of certainty on future plans and objectives.
“Even with these measures in place, securing investment is never easy. Getting high-quality and relevant advice right from the outset can significantly improve the chances of Welsh businesses securing funding. This mind-set will see the number of firms successfully raise external finance increase and, importantly, reduce the number of those experiencing funding regret.”
The full report and further information can be found here: www.smithandwilliamson.com/dreambigger
*The findings in this report come from a survey of the founders of 501 scale-up companies, and more than 500 non-scale-up SMEs in 2018. Total sample size in Wales was 46 companies.