Len Williams has a few words of wisdom for entrepreneurs looking to raise venture capital. "It doesn't come easy, but believe me, it's doable! Just be sure you understand exactly what's in front of you and plan ahead," says the President of Progressive Solutions.
Today, this Richmond, B.C.-based firm is living proof that careful planning and getting the right investors involved in your company at the right time can drive exponential growth. After a humble start in the late 80s, Progressive Solutions is now a highly successful business with a client list that includes some of the top players in the forestry industry and up to 40-per-cent annual growth on the horizon. Rooted in the wood products supply chain, the company offers sophisticated business software solutions that manage buying, selling, inventory, logistics and reporting for wood products producers and building materials suppliers.
When asked what advice he has about raising venture capital, Williams replies, "It all starts by instilling confidence in investors." While other software companies were drowning in the late 90s, he is proud that Progressive Solutions managed to successfully ride the high tech wave by focusing on its vertical market – the wood products industry. "We stuck to what we knew and where we saw the most growth potential," he explains. For Williams that meant "being the best in a smaller marketplace, but still being the best!"
When the time came to expand, his team raised several million dollars with BDC's Venture Capital Group largely used to drive market and product line expansion through its acquisition of Software Aspects Limited of Cheshire, U.K. The funds facilitated Progressive Solutions' expansion into the U.K., a key growth area, and the addition of a new product for the building materials industry.
"Throughout the whole process, we were very focused on what we wanted and where we were going," emphasizes the President of the company. "Our investors recognized early on that although we were not going to be a multi-million dollar success overnight, we were definitely going to meet our objectives," he says. "And in the end, we've exceeded them."
Know your W5
So what advice does Williams have for other companies considering venture capital to start up or expand a business? At the top of his list is ensuring that entrepreneurs clearly articulate theirs strategies to win investors. "That means giving them the basic W5 – the who, what, where, when and why of your project," he says. For example, one of the key company strengths that business owners should demonstrate to investors is that they have a highly-skilled and committed management team in place. "We were able to show our investors that our people knew this sector inside-out," he says. Progressive Solutions also carefully prepared a clearly defined and comprehensive business plan. "We had the right mix of qualitative and quantitative information," he says. "Make sure you're realistic about your goals. Demonstrate that you're frugal and that you can maintain solid, long-term growth."
Williams also strongly urges business owners to provide a clear exit strategy for investors. "The basic premise is that they want to see a way to get their money back," he says. Typically, an exit is conducted through an Initial Public Offering (IP0) or in the case of businesses with a strong recurring cash flow that don't want to sell or list their company, a leveraged management buyout.
Put time and money on your side
A common obstacle for entrepreneurs, adds Williams, is ensuring that they stay focused on running their business profitably while raising capital. "You can't lose sight of your company goals. It's best to raise money during a period that you least need it. It's all about looking for investments and not cash that you need to survive," he emphasizes.
Williams also encourages business owners to make sure they have planned sufficient time to raise their capital –a minimum of 9 to 18 months. The president of Progressive Solutions believes that entrepreneurs should allow at least 2 to 3 months to prepare the necessary groundwork, write a comprehensive business plan and have it reviewed by experts before submission to investors.
Shop for the right investors
A large part of the time remaining will likely be dedicated to identifying the right profile of investor and working out the specific details, says Williams. "It's like a good marriage, so you want to meet a few possible partners first," he adds. Entrepreneurs should be sure that their venture capital investors have weathered up and down economical cycles, and understand their specific market and industry. "When you're striking up a relationship, you want to know about your venture capitalists' expectations, the type of return they expect and the timeframe," he says. "After all, your venture capital partner has to meet your set of needs too," he says.
In the end, Williams believes that the venture capital experience has been a highly positive one for Progressive Solutions. "We have always felt more confident about securing investments instead of debt," he concludes. "And our future now looks very promising."
Content in this section is provided in partnership with the Business Development Bank of Canada. BDC provides entrepreneurs with financing, venture capital and consulting services. To find out more go to BDC.ca.