Here you will learn everything you need to know about fundraising, such as what fundraising is and how fundraising works. 

What is fundraising?

Capital raising is a process whereby companies seek and obtain new capital to finance the needs of their business. This can include making investments, expanding into new markets, or strengthening growth within an existing market. Capital can be raised through various methods, such as new share issues, loans, IPOs and crowdfunding.

How to raise capital

Here we describe some of the most common methods of raising capital. 

Bring in venture capital

By raising venture capital from, for example business angels or private equity firm companies can access not only capital, but also networks and expertise. This is particularly common among technology companies and start-ups that need external funding to grow.

Benefits and advantages: Access to both capital and valuable contacts.

Disadvantages: Venture capitalists often demand influence in the company, which can reduce the control of existing owners.

How to raise venture capital?

To attract venture capital, companies must present a clear business idea and a well-developed business plan. If investors are interested, negotiations take place on shareholding and company valuation.

Raising venture capital is particularly common among startups who have a well thought-out business plan, but need more money to achieve their goals. 

Make a new share issue

In new issue means that the company issues new shares to raise more capital. It is a common method of raising capital, both for unlisted and listed companies.

Benefits and advantages: Capital is raised without the company having to take out a loan. The new shareholders can also contribute knowledge and networks.
Disadvantages: Dilution of the shareholdings of existing shareholders. If the market interprets the rights issue as an emergency solution, the share price may be negatively affected.

How to make a new share issue?

The process starts with the company setting the terms of the issue, such as the number of shares and the price per share. After completion, the new capital is reported to the Swedish Companies Registration Office.

Borrow money

Companies can also raise capital through loans, which often provide quick access to money. However, loans require the company to pay interest and principal, which can put a strain on cash flow.

Benefits and advantages: Ownership stakes are not diluted, allowing existing owners to retain control of the company.
Disadvantages: Interest and repayment can reduce a company's financial flexibility.

How to take out a business loan?

For a company to be granted a business loan, it is normally required that they have good profitability and good prospects. If the company has not yet been able to prove its profitability, it is common for the founders of the company to put a property as collateral for the loan. A good alternative to business loans, which larger companies can use, is to issue bonds. 

Initial public offering

An Initial Public Offering (IPO) is a process whereby a company goes from being unlisted to being noted on a stock exchange, such as Nasdaq. An IPO allows companies to sell shares to the public and thereby access new capital.

IPOs are common for companies looking to grow and broaden their shareholder base, but both smaller and larger companies can undertake an IPO, depending on the requirements of the marketplace.

Advantages of an IPO

• Increased visibility and credibility in the market, which can attract more customers and business partners.
• Access to new capital through the sale of shares.
• Increased liquidity, as shares are easier to buy and sell on a stock exchange.

Disadvantages of an IPO

• The IPO process is often complex, time-consuming and costly, with high advisory, legal and prospectus costs.
• Increased reporting and transparency requirements, leading to ongoing administrative and financial costs.
• The company is exposed to greater scrutiny from the stock exchange, the media and investors, which could mean risks of increased public criticism.

How to list your company on the stock exchange?

Very simply, an IPO starts with banks and lawyers preparing a prospectus with important information about the company. If the company meets the requirements of the stock exchange, and an initial share price is presented, the company can go public. 

Crowdfunding

Crowdfunding is when a company turns to a large group of small investors to raise money. It usually uses an online crowdfunding platform such as Indiegogo or Kickstarter. 

Examples of advantages include the possibility of raising a lot of capital without having to rely on actors such as banks or venture capitalists. The company also gains a large initial customer base if many choose to back the project presented by the company. 

Potential drawbacks include the fact that crowdfunding takes time, requires a lot of marketing effort and there is no guarantee that the capital requested will be raised. Other disadvantages of crowdfunding are that many serious investors see this method as a bit "frivolous" and think that it is only a method companies use if they fail to attract serious investors. 

How to use crowdfunding?

Normally, the company registers on a crowdfunding platform where they present their project and explain how the money will be used. If enough capital is raised, the project becomes a reality, if not, the money is usually paid back to the investors. 

Crowdfunding is particularly popular among small businesses and start-ups developing innovative products that have a wide target audience. 

Frequently asked questions

Below we answer frequently asked questions on the topic of fundraising. 

What does fundraising mean?

Raising capital means that a company takes an action, such as issuing new shares or going public, to raise more money for its business. 

What is the process of raising capital?

The process of raising capital depends on the method used. To give you an example, the process for a rights issue is completely different from the process for crowdfunding and IPOs. 

How should limited liability companies raise capital?

Larger limited companies can usually issue new shares, bonds, go public or take out loans. Business angels are rarely interested in larger companies, and crowdfunding is generally seen as frivolous for larger companies. 

How should startups raise capital?

For start-ups, crowdfunding and venture capital are normally two good methods of raising capital. Loans are difficult to obtain because creditworthiness is usually low, and startups are almost always too small to go public. 

Are there good networks for raising capital?

Yes, we at Eqvor have a large network of investors for raising capital. You are welcome to contact us and we will set up a plan for your company to reach serious investors. It is worth noting that we carefully review all companies before we choose to present it to investors in our network. Send us an email [email protected] if you are interested in raising capital for your business.