You have a great idea! Next step is to turn your idea into a business. A business that makes money. A lot of money! Sounds great but, as most of you probably know, it’s not as easy as it sounds (in fact its much much much harder).
There are a number of paths to business success and sometimes those paths include a micro-cap public company. Those of you on the micro-cap path probably followed it thinking it would lead to easy money. Depending on how far down the road you’ve gotten, you may have realized raising capital as a micro-cap is anything but easy. So now that you are here, how do you make the best of it?
In 99% of cases, an idea alone isn’t going to be enough to get you the capital you need (under half decent terms) to grow your business. If you still think someone is going to give you a big check at a strong valuation for you to attempt to execute on your idea, you haven’t been at this long enough! If you are willing to accept that a $10 million check at $1 billion valuation for your idea isn’t coming, I have a solution for you.
The solution – acquire a profitable business! While it may be hard to find funding for your idea, it is easier to find capital to acquire a profitable business with assets, employees, customers, revenues, etc. It’s even easier if your great idea is synergistic with the business you are acquiring (and seller financing can play a large role). Once acquired, you can leverage an acquired business’ assets to implement your great idea while leveraging its financial strength to raise growth capital.
While this strategy works well for private companies, it works even better for micro-cap public companies. Micro-cap public companies are uniquely positioned to grow through acquisitions (see my previous post: “Micro-Cap Acquisition Funding – 5 Ways for MicroCaps to Fund Acquisitions.“). Further, if your idea is as good as you think it is, seller financing could help you close a large acquisition with limited outside financing (see my previous post: “Do your Targets Believe? The Key to Micro-Cap Acquisition Financing.“).
As an added bonus to the micro-cap CEOs concerned about their share price and liquidity, acquisitions are usually very good for a micro-cap’s stock. For micro-cap IR teams trying to avoid “fluff”, an acquisition is a big tangible event. A good acquisition can take a company’s market value from a fragile abstract concept balancing on an idea to a value based on tangible financial metrics (plus the added market value from the great idea).
Ben Kotch is a managing director and investment committee member at Acquis Capital, LLC, a private investment firm that specializes in acquisition funding. He has extensive experience with both private and public companies. Ben graduated with an economics degree from Bentley University where he concentrated in entrepreneurship and law.
For more, please follow on Twitter.