In partnership with Fox Rothschild, Attorneys at Law, FastPay hosted a NY roundtable discussion with managing directors from KPMG Investment Banking Group, Eastward Capital, and Quake Capital Partners.

The panel discussion was centered around Growth Capital and Exits in the Digital Media Space and included CEO and Co-Founder, Anne Kavanagh, of Steereo, who just completed her first-round equity raise.

Together, the panel navigated the challenges that go along with raising capital, managing a debt stack, and selling a company.

Below are some highlights and thoughts from the panel:

Raising Capital

The panel emphasized the importance of evaluating your needs when choosing capital. Amy Coveny, Managing Partner at Quake Capital, expressed the idea that founders should only take VC money if their business model is repeatable and ready for scale. She also explained how important it is that founders do their diligence on their investors. Referrals from past companies that have been both successful and unsuccessful are equally important.  

Chris Bodnar, investment partner from Eastward, highlighted how many financing options are available to companies today. He explained that this is a relatively new phenomenon and founders should take advantage of these new resources. Chris also highlighted the effectiveness of receivable financing as a resource far cheaper than dilution.

Conclusions:

  • Don’t give away equity if you have a strong balance sheet. Debt is always cheaper.
  • If you need to scale and grow quickly, identify investors who will give you more than just a check. You should expect your equity partners to add value!
  • Choose investors who work with companies you could partner with.

Managing Debt Stacks

In this segment the panel touched on the importance of good communication between capital partners of a company. Chris Bodnar shared his experiences on effective pairings between receivable and term lenders. He explained how pairing facilities like this can be beneficial for all parties involved, and bring down the overall blended cost of capital. Chris encouraged founders to facilitate meetings between their different capital partners in the mutual interest of seeing the company succeed.

The panel also agreed on the importance of not over-borrowing, maintaining a clean cap table, and maximizing runway.

Conclusions:

  • You can effectively pair a receivable lender and term lender through good communication! This will ultimately bring down your blended cost of capital and help the company remain liquid.
  • Be careful when raising money, don’t over borrow. Receivable financing is a great way to avoid a messy cap table and streamline operations.
  • Be careful of traps! Higher valuation offers may seem more attractive on the surface but often have caveats that make them more expensive in the long run.

Exit Strategies  

In the final segment, the group turned their attention towards exit strategies. Roddy Moon of KPMG stressed how important it was for companies, looking to exit, to hit their KPIs. He explained that missing projections in the quarters leading up to a sale can have a drastic impact on valuations and that CEOs should be mindful of this when beginning exit negotiations. Roddy also went on to say that founders should not try to time the market on an exit, but evaluate based on company specific conditions. Roddy finished with an overview of the M&A landscape, adding that the market continues to remain robust headed into 2019. The panel agreed founders should speak with multiple firms before picking an advisor to guide their exit.  

Conclusions:

  • Pay attention to how much capital you’ve raised.
  • Hit your numbers. Don’t miss your KPIs when looking to exit.
  • Don’t try to time the market on an exit.
  • M&A markets remain robust. Hire the right advisors, do your diligence and speak with multiple options before picking an investment bank. Smaller boutique firms may be less flashy but offer good value!

Thank you again to everyone who participated in the New York FastPay Roundtable!