One of the key takeaways from the recent business climate in the United States is that raising capital during an economic downturn is much more difficult than it was during a boom in the past. Many small business owners were able to raise equity or other forms of debt during good economic times, but these sources of capital are no longer available.
Companies are finding it increasingly difficult to raise debt or equity due to their inability to attract enough qualified buyers. In many cases, potential business owners are simply not interested in raising capital.
In addition to the difficulty of raising capital, many VC firms are discovering that making an investment in a webinar for investor relations and further marketing of products and services is much more cost-effective than they previously perceived.
This is due in large part to the increased sophistication of automated webinar tools such as the PowerPoint presentations that are becoming sophisticated and accessible to VC firms through their webinars. There are other key takeaways that investors and business owners should be aware of as the economic outlook remains dim and uncertainty looms.
Listed below are three key takeaways that should impact the way you conduct yourself and your business during this uncertain time.
Capitalizing On Investors’ Emotions
One of the keys to maximizing your investment return from your webinar is to do so when the investor’s emotions are neutral or even positive. During the COVID-19, the general mood of the investor community is considered to be “future”. It’s important for VC firms to remember that the economy is undergoing change, just like the markets and their portfolios.
For example, although the Dow Jones Industrial Average has been in a decline for several months, it’s expected to bounce back. As such, the VC market is currently “future”, meaning that there is a strong chance that the prices will continue to rise.
Be Prepared For Higher Costs
With the assumption that the economy is still “future”, it’s expected that the cost of doing business will continue to rise. The good news for us and investors is that they can benefit from this by taking advantage of the market to increase at an opportune time.
At present, equity financing fees are at an all-time low, and many investors are taking advantage of the low price by utilizing their money with a long-term capital agreement with a VC. This is one of the advantages of covid-19; investors are able to obtain the lowest capital rates, which in turn allows them to obtain higher dividends.
Increase Equity Prices
Although the economy is “future”, it’s also expected that equity-financing rates will continue to increase. Historically, equity costs have decreased over time. However, as the economy enters into recession and economic growth is forecasted to resume over the next several months, equity financing fees are expected to increase.
While equity finance rates are at an all-time low, another advantage to using this method is that there are no longer any exclusive or captive markets. This enables investors to access equity financing from any number of sources. This is especially advantageous to new or small-dollar private investors. For more on how to raise capital during the pandemic, we highly suggest that you check out this informative post.
Another method of raising capital during COVID-19 is by securing agreements with third parties for the purchase of fixed assets. These are assets such as land, buildings, and machinery that cannot be produced commercially in the immediate future. The agreement allows investors to lease the assets to another company for a set period of time.
During this time, the investor receives a lump sum of capital for purchasing the asset. This is an attractive option to investors considering that these assets often yield higher profits than conventional financing options.
Many private companies are arranging leveraged buyouts during the equity financing crisis. For investors interested in raising capital during this time, this is a great option. Private placements can be used for both domestic and foreign companies. When private placements are used, investors receive priority tax status and are not subject to the usual statutory reporting requirements.