As a registered business on Fundnel, a variety of fundraising options are available to you. Their suitability is dependent on your type of business, stage of company development, and end-goal requirements. Below explains the features and merits of each fundraising model:
Equity
Merits
- Receive long-term funding from investors with no fixed time frame to return the principal amount of investment
- No ongoing interest rate
Features
- Increase the number of shareholders in exchange for investment
- Issue voting / information rights to all investors
- Shares usually carry an entitlement to dividends if and when declared
Convertible Bond
Merits
- Ability to price the share at a premium compared to pure stock sale
- Lower interest rate as compared to pure bonds as in some cases, it can be a zero-coupon CB
- Flexibility to structure the CB based on maturity period, conversion premium etc, to achieve desired objectives of business owners
Features
- Delayed dilution of existing shareholders
- Interests payments to be made to investors at a pre-determined interval
- Interest will typically be added to the value of convertible bond before conversion
Bonds / Debt Structures (incl. Loans)
Merits
- No dilution to existing shareholders
Features
- Interests payments to be made to investors at a pre-determined interval, typically every six months
- Principal has to be repaid to investors upon maturity of the bonds
- Financial covenants may be applicable
Revenue Sharing
Business owners agree to share a percentage of its gross revenue with investors
Merits
- No dilution to existing shareholders
- Flexible payments as a proportion of revenue
- Flexibility to cap the return to investors to either; a predetermined "investment multiple" on their investment is achieved, or a predefined duration in accordance with its associated terms (e.g. after a certain time frame)
Features
- A strong admin process is required to track and fulfil pre-determined regular pay-outs