When it comes to capital opportunities, timing, says Foro Capital Markets Managing Director, CFO and Chief Compliance Officer Mike Marr, can be everything.
In December of ‘21, the company raised some $8.1 million from family offices and venture capitalists. That allowed them to start working on and refining the technology side of their platform. Speaking at last year’s Charlotte Smart Business Dealmakers Conference, he said the company is likely to look for another raise in 2023, but they’ll be doing so in a much different environment than their previous raise.
The current market can be confusing, with all of the different metrics not necessarily fitting together into something that makes a lot of sense. He says as people read stories of unbelievable multiples with owners getting fabulously wealthy, it’s important to understand that there are many reasons for that, including timing. So, those considering a sale or a raise should temper their expectations.
“You have to be realistic about where you are in your lifecycle,” Marr says. “What does your customer concentration look like? What do your systems look like? Are you strong financially? Because if you don't have some of the blocking and tackling, basic issues, really addressed, somebody's going to extract value and it's probably going to be the person or group that ends up buying you. So go ahead and be proactive. You don't have to recreate Amazon or whatever. But, do the blocking and tackling. Spend some time, spend some money, get some people around you who know what the hell they're doing and lean on them.”
He says when a company is trying to grow, it should think about the team it builds, how to approach growth and the kind of resources it needs.
“You want to surround yourself with great people,” he says. “In a tough environment, in particular, I think that helps you out.”
He says at Foro, they took a proactive approach — generating revenue, going beyond proof of concept and signing up commercial lenders so that they’re in a stronger position heading into fundraising.
He says when commercial lending tightens up, the private credit market seems to fill the gap. But it’s a unique path.
“Going into private is different, and it's a different category of product,” he says. “But helping customers and clients really understand if they get blocked out of one route, what are my other routes of being able to access capital to grow my business or acquire other companies. And it just does ebb and flow with the economy. We’re probably coming into a little bit more of a conservative timeframe. (But) some of the best deals that can be done are in tough times — don't run under the covers, but you got to know where to go and you got to know where to go quickly and you got to have those access points.”
Still, he says he believes it's a great time to be active.
“If you’re a potential acquirer and you've got your ducks in a row and you’ve done some fundamental work on your financial and accounting side, your go-to-market strategy is pulling together — blocking and tackling kind of stuff — then when the market starts sending the signals that there’s fear out there, that's when I think it’s a great opportunity to strike,” Marr says. “But there are risks. You can catch a falling knife. It’s not for the faint of heart. But if you look at things historically, when folks are starting to run for cover is when there's a good time to strike.”