The overall goal of this article is to help in the match-making process between companies looking for an investor and Sofis Capital. To do so, I will first describe what kind of investment opportunities we are looking for. To help companies that are new to such a process I will add some suggestions and food for thought And finally, I will delve a bit more into why Sofis Capital could be a partner for you.
The article is structured into 5 sections. In order to keep the information concise and readable, please take into account that the data presented are guidelines and not absolute hard facts. The reason for this is that starting a business relationship cannot be based on just an arithmetic calculation. Many variables need to be taken into account; the more important ones cannot even be expressed as a number. So if you have further doubts after going through this article don´t hesitate in contacting us!
Sofis Capital investment space
We distinguish between 2 types of investments: Light touch and Management investment.
The main difference between the two is that for “Light touch” investments Sofis Capital will not be actively involved in the management of the company, while, as the name suggests, for “management investment” we will. In other words, Light touch investments are mainly capital oriented investments that assume that the company has a management team prepared to move independently forward and that their main need is capital.
Both types of investments share common parameters.
| Area | Sofis Capital space |
|---|---|
| Capital needed | €50.000 – € 500.000 |
| Status of company | Ideally operating 1-3 years |
| Gross Margin | 0,5 to 2 x nr of “employees” x average salary |
| Management Team | Dedicated. Entrepreneurial. |
| Products/Services | With net value add to society. |
High level parameters for Sofis Capital investments.
Again, the table above presents guidelines. However, it is unlikely that Sofis Capital will pursue an investment opportunity if the majority of the parameters are outside given space.
Translating the table into prosa: we are looking for companies that have proven demand for their products but have not been able yet to grow the business to its potential. In addition, Sofis Capital is looking for investments that contribute to the well-being of the society managed by a dedicated team that share these values.
Besides the common parameters, there are a few aspects that differ for the two investment types.
| Area | Light touch Investment | Management Investment |
|---|---|---|
| Industry | Any | IT or telecommunications |
| Management | Relatively Independent | Need complementary skills to grow |
| Organization | Independent | Open to be part of a global organization |
Light touch versus Management investment criteria
Your investment needs
Before you decide to engage with an investor, we suggest that you follow the same thought process as if you would be planning a trip:
- Where are you now ?
- Where do you want to be in 3-5 years time ?
- What do you think you will need to get there ?
Once you have analysed this, you have to seriously consider if you want to go solo or not. What would be the benefits to share? Can you arrive at your destination quicker? Can you reach more distant destinations ? Is it realistic to do it alone ?
After analyzing these questions, if you reach the conclusion that the support of an external party would help, I would suggest that you create a simple presentation covering the 3 “trip” topics suggested above and add what you expect from the investor.
On a more lighter note, I would also suggest to look at a number of “shark tank” episodes on youtube as part of your preparation. If you are not familiar with this TV program, it´s about new entrepreneurs that present their business and try to get funding from “financial sharks”.
Is Sofis Capital the right match for you ?
At Sofis Capital we envision long term relationships. We believe in ethical standards. We also understand that there will be ups and downs and that problems can be resolved with communication, respect and dedication.
For light touch investments, Sofis Capital will participate mainly with money. However, we will have reviewed the business and will support the company with strategic advise and general best practices to manage and operate a company. We can also use our network and local presence to help in making things happen. Being a stakeholder, we would provide critical and constructive advise, and we can lend a listening ear (or more) to bounce-off ideas.
For management investments, there will be considerable more involvement from Sofis Capital side. We will work together on a multi-year strategic plan and an operational 1-year plan. We will review processes, organization and help in setting up measurable objectives. From within Sofis Capital we won´t manage the day to day business, but will work together with our partners to improve their skills, or contract the resources required to meet set and agreed goals.
Company evaluation
There are many theories on how to perform an evaluation of a company. At Sofis Capital we first qualify and then quantify the company.
We first look at the management team and overall human resources. After that, we analyse the company”psyque” to ensure that we are compatible. Finally, we then review the business and its potential. If all lights show green, we do a high level 3-5 year financial analysis. This financial analysis includes estimates for the potential profit based on different scenarios, normally 3, ranging from conservative to optimistic.
With the estimated profits, associated costs, as well as needed cash-flow, most of the work is done. The value of the company is then calculated using a a profit multiplier and adding-in the generated assets. This gives us the expected value of the company.
The investment amount can then be calculated. We can part with a target initial investment or with a target participation (% of shares). Both calculations take into account compound interests and risk. In other words, if we calculate how much the business will be worth in a given number of years, we also have to calculate how much the money that we invest today should be worth at that time.
For management type investments, the target stake will be on the higher side (up to 51%), for light-touch investments this percentage will normally be considerably lower.
Next Steps
If you liked all you have seen, and seriously consider partnering with Sofis Capital, just send us an email with a brief description of what you do and what is in your mind.
We can sign an NDA (Non Disclosure agreement) before we get into too much depth to safe-guard your Intellectual Property.
If we see a potential match, we would be looking forward to receive your “trip” presentation and start talking! Just click on the link below to contact us.
Looking forward to hear from you!
Contact Sofis Capital