Preparing for new investment
Prior to the pandemic, we took a deep dive into things a business needed to consider when they reached a stage of their operating life cycle where there was a need to source outside capital (see Preparing your business for a capital raise, including tax considerations, February 2020). While the basics discussed in this article have not changed too much, the pandemic has seemingly driven more momentum than ever before for funding early-stage investment opportunities.
Investors seem to place a premium on company targets that have a solid accounting and finance function. In the past, potential investors may have shown more tolerance and flexibility funding a target that had not properly built out its back-office accounting function to support growth. With many target companies to choose from these days, however, investors are showing less patience and interest in funding companies that have not taken the time to invest in upgrading and automating their accounting and tax planning systems.