Sam Smith, CEO of finnCap on debt versus equity options for growth companies

You may have noticed that the UK and London, in particular, has become a mecca for start-ups and growth companies disrupting industries through fintech.

But what happens when you’ve done that and your business is ready for the next step? The pot of gold at the end of the rainbow… The public listing or trade sale exit.

Then you need a corporate finance house like like finnCap who can advise on debt versus equity growth, mergers, listings, M&A and corporate broking.

We spoke to Sam Smith the CEO of finnCap, who’s been through building a business, getting funded, an MBO and listing on the AIM market.

Here’s what Sam has to say about what it was like and her views on the different types of ways to grow your business.

With the growth of equity crowdfunding, it would seem that entrepreneurs have better access to raising capital than ever before. Having raised money yourself, should you worry about letting external investors have an equity stake in your business?

Raising money is a big issue and the actual or perceived loss of control in the business you founded is one of the biggest issues to get your head around.

For me it is all about getting the right investor that is totally on board with your vision for the business and there is a good relationship where you feel there is a benefit to having the investor on board that means you can create something bigger together.

It is difficult to grow over a long period without some fundraising event. The timing of this is crucial as the dilution at a certain valuation is something you need to be happy with. Where the investor/ceo relationship works well growth can be accelerated and it can be a crucial part of the growth journey.

Getting the wrong investor can cause big issues so it is right to take this decision very carefully.

Do you have a preference between debt and equity finance for entrepreneurs wanting to grow their business?

At a certain point in your growth journey debt is a useful source of capital but my view is that for most growth businesses, particularly at the early stage, equity is generally the right form of capital as it is permanent and allows the business flexibility to achieve a plan.

There are many different forms of equity finance now available so finding the right investor for you has become a bit easier with the right advice.

Debt is a good form of capital when you have more visibility of earnings and cash flow is more measurable.

What would you say is the most important part of pitching for investment?

Getting prepared and having a really good knowledge of your financials and your investment story – this is not the same as pitching your product or service.

You were until recently the only female CEO of a UK stock broker. What do you think can be done within the financial services industry to encourage women to join at the ground floor?

A culture of diversity is the most important thing that encourages women to want to work at a firm. Many financial services firms in my view pay lip service to diversity while not actually realising it is also culture an attitude that need to change.

We now have a 40% female workforce and I believe that is because of the culture and career progression opportunities people can get.

Another arm of Finncap is sales trading and market making. What are your typical clients for this service and what’s the main focus of the trading desk?

Our clients are largely small/mid company institutional funds and wealth managers who want to trade on small and mid cap shares. We market make in around 200 small and mid size quoted companies as well as investment companies.

What do you enjoy most about running Finncap and what have been the best moments?

The constant changing nature of the role and watching it grow and the team progress. Our buy out and IPO where some of the best bits but every deal, client win, team promotion is always a real highlight.

And the worst moments?

Getting ready for the buyout and getting ready for the acquisition and IPO!

And finally, we always ask this – what would be your top three online resources that can help investors understand the market more. Be it a book, website or service… 

The British Business Banks new website is really good for looking at funding options

Otherwise, it is very difficult as information is full of jargon and difficult to find. speaking to companies and going to events where examples are given of how companies have done it are the most useful for me so learning events and podcasts are the best for me.

They also give a bit of inspiration

Sam Smith is founder and CEO of finnCap

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