How To Raise The Friendliest Capital

When entrepreneurs raise capital, there are two things that are generally thought of as being most important: valuation and amount of capital raised. One attribute that is commonly forgotten is how friendly the capital is.

By “friendliness” we are referring to the covenants, adjustments, and resets attached to that capital.

Are there resets if you don’t hit certain milestones? Are there equity adjustments? How much control can this investor or these investors assert over your business? Do they have to consent to any major decisions?

In our opinion, the answers to these questions are far more important than valuation or the amount of capital being raised. Over the years, we have seen countless deals that start out 70/30 favoring the entrepreneur, and end 70/30 favoring the investor. We’ve seen entrepreneurs own less than 5% of their companies when they exited. ClearThink was founded to prevent these kinds of financial transactions.

When we founded our firm, we made the conscious decision to only be on the entrepreneur’s side of the table, allowing us to have no conflicts of interest when finding the friendliest capital for an entrepreneur.

What to Consider to Raise the Friendliest Capital

Whose Capital is it?

Does your capital source make investment decisions on behalf of a group of investors to which they answer or are they investing their own money? If they are making investment decisions on behalf of others, they are usually held to a higher standard with regard to the structure of their investments. Chances are, they will want more protection that an individual or family office investing their own capital.

We match our clients with our network of lenders and advise them through the credit financing process. Learn more ►

Explore Your Alternatives

We have found that many entrepreneurs, executives, and founders do not know all the funding alternatives that exist for your companies. Whether your company has no revenue or over $100M in revenue, chances are there are several different routes your company can take with regard to financing. We are always glad to discuss the potential options with a company.

Plan an Exit

This is the most important thing a company can do to raise friendly capital. Every investor’s fear is that they will become a captive minority in a private company and that management will keep increasing their salaries, and never plan any sort of liquidity event, thus making the investor’s shares in the company worthless. As a result, investors attach all kinds of adjustments to their investments.

The way to mitigate this fear, and thus raise capital on friendlier terms, is to plan a near-term, attainable exit. When appropriate, we like to structure capital raises in the public market. This gives investors the option to sell whenever they want and removes that fear of being a captive minority. That freedom makes them comfortable giving friendlier terms to companies.

Avoid Conflicts of Interest

Many people engaged to identify potential capital partners are receiving a commission from that capital source, as well as from the client company. As a result, they may be biased and bring you to entities that give them the highest commission, rather than the entities that give you the best terms, or be the best fit for your company.

At the inception of our firm, we made the conscious decision to only be on the entrepreneur’s side of the table. We do not receive any compensation from capital on transactions. This allows our interests to align with a company’s interests and allows us to be agnostic with regard to the capital source for a transaction.

Seeking capital? Let’s discuss how we can help. We are always happy to discuss the funding and growth options available to a company. Get in touch with our team below.

Valuing SaaS Companies

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What Makes a Public Company Succeed

The public market provides a unique opportunity for companies to secure capital while maintaining more control over their operations compared to private funding. Unlike private equity or venture capital, public market capital tends to come with fewer restrictions or covenants, allowing business leaders more flexibility in executing their growth strategies. Publicly traded companies also typically enjoy higher valuations than their privately held counterparts, which can enhance a company’s ability to raise larger amounts of funding.

In addition, going public offers significant benefits to shareholders, such as the ability to capitalize on increases in the company’s valuation and to gain liquidity for their investments. Shareholders can buy and sell shares on public exchanges, providing a clear path to exit when needed. Moreover, the visibility and credibility that come with being a publicly traded company often improve the perception of the company in the eyes of potential clients, partners, and investors.

At ClearThink, our principals have years of experience in navigating public transactions, giving us firsthand insight into the factors that contribute to public market success. Whether listing on OTC Markets, Nasdaq, NYSE, or another exchange, we have observed that certain key factors consistently determine a company’s potential for success in the public market. Let’s discuss how we can assist with your transaction. Get in touch ►

Succeed as a Public Company

Under Promise and Over Deliver

One of the most critical principles for public companies is managing investor expectations. Setting overly optimistic expectations can create short-term excitement but ultimately damage investor trust if targets are missed. Conversely, companies that set realistic or slightly conservative expectations are in a better position to exceed those targets, delighting investors and building long-term confidence.

When a company consistently delivers better-than-expected results, it creates positive momentum and fosters a reputation for reliability. Public markets reward this kind of performance, often leading to increased trading activity and stock price appreciation. Under-promising and over-delivering also cushions the company in times of unexpected challenges, as investors are less likely to panic if the company has a track record of meeting or exceeding expectations. This principle is critical for maintaining investor loyalty and ensuring the company’s long-term success.

At ClearThink, we emphasize this strategy with our clients, helping them craft realistic projections and avoid the pitfalls of over-promising. This practice helps build a stable and supportive shareholder base that will stand by the company through its growth journey.

News Flow

In the public markets, perception is as important as performance. A consistent flow of news is vital to keep investors informed, engaged, and confident in the company’s progress. News flow serves as a lifeline between the company and its shareholders, offering insights into new developments such as client wins, strategic partnerships, product launches, or significant hires. Industry developments that position the company as a key player in its market can also be leveraged to generate positive news flow.

Frequent and meaningful updates help maintain investor interest and ensure that the company stays top of mind. Public companies that can produce weekly or bi-weekly updates are generally more successful at retaining engaged shareholders and attracting new ones. This regular stream of information also helps to stabilize the stock price, as consistent communication reduces uncertainty and speculation among investors.

Investor Relations

A strong investor relations (IR) program is one of the most crucial components of public market success. While public relations (PR) focuses on building brand awareness and engaging customers, investor relations is specifically targeted at attracting and retaining investors. The goal of an IR program is to communicate the company’s story, performance, and growth potential effectively to the investment community.

Choosing the right investor relations group is a key decision that can significantly impact a company’s public market success. An effective IR team understands how to build relationships with institutional investors, analysts, and retail shareholders. They help maintain investor confidence through consistent and transparent communication, including earnings calls, shareholder meetings, and investor presentations.

Growth and the Use of Proceeds

Public market investors are keenly interested in how a company plans to use the capital it raises. Companies that can present a clear, well-reasoned plan for deploying funds to fuel growth and increase shareholder value are more likely to attract and retain investors. Whether the proceeds will be used to develop new products, expand into new markets, enhance operational capacity, or acquire complementary businesses, investors want to see a roadmap that demonstrates a direct connection between the capital raised and the company’s growth trajectory.

Failing to execute on growth plans or mismanaging funds can have devastating consequences. When a company doesn’t meet the expectations it set for its use of proceeds, investors may lose confidence, leading to a sell-off and a decline in stock price. This, in turn, can make it more difficult for the company to raise additional capital in the future.

At ClearThink, we work closely with our clients to develop and refine their growth strategies, ensuring that their use-of-proceeds plan aligns with investor expectations and maximizes shareholder value. By helping companies articulate a clear vision for growth, we position them for success in the public markets.

In conclusion, while the public markets offer significant opportunities for companies to raise entrepreneur-friendly capital, achieving success requires careful planning, disciplined execution, and a strategic approach to investor communication. By focusing on managing expectations, maintaining a strong news flow, building an effective investor relations program, and demonstrating a clear path for growth, companies can unlock the full potential of the public markets. At ClearThink, we’re here to guide companies through every step of this journey, helping them achieve their capital-raising goals while building lasting value for their shareholders.

Let’s discuss how we can be if assistance to your company. Get in touch with our team below.

Commercial Credit: What Alternative Lenders Are Offering

When companies are exploring credit financing, they are often overwhelmed by the different options available. Most companies find that their traditional bank does not offer financing that meets their needs and turn to alternative lenders.

Alternative lenders are typically family offices, private equity funds, or other funds that silo off a portion of their capital to lend to growing companies. Depending on the lender, each alternative lender offers slightly different financing structures. These are the most common commercial credit financing structures available to companies:

Commercial Credit Financing Structures Available to Companies

Term Loans

Term Loans are typically secured loans with a fixed interest rate. Generally, Term Loans are paid back over a set period of time. Term Loans can range anywhere from a few months to as long as 10 years depending on a company’s situation.

Cash Flow Loans

Cash Flow Loans are term loans based on a company’s revenue and gross profit. The lender uses the company’s cash flow as collateral for the loan.

Learn more about how we assist companies seeking credit financing ►

M&A Financing

Some alternative lenders focus on M&A Financing. M&A Financing provides a company the capital it needs to complete an acquisition. The structures for M&A Financing can vary drastically depending on the situation. Some lenders will request an equity position as well, while some prefer to lend on a purely debt basis.

Factoring

Factoring loans are structured as credit lines, as opposed to term loans. With a Factoring loan, the lender purchases a company’s receivables at a discount, resulting in the company receives payment from their sales far quicker. The credit strength of the counterparty is highly important to the lender.

Accounts Receivable Financing

Accounts Receivable Financing is similar to Factoring, the main difference being that Accounts Receivable Financing does not involve the purchase of a receivable. Instead, Accounts Receivable Financing is a loan utilizing the company’s eligible accounts receivable as collateral. Just like with Factoring, the credit worthiness of the counterparty is very important.

Mezzanine

Mezzanine Finance is indebtedness that’s junior to the senior indebtedness but is senior to equity. Mezzanine Finance is usually employed in connection with transactions where senior lenders won’t provide the full amount of financing, and there’s a gap between the amount of equity and senior that can be provided and the ultimate purchase price.

Mezzanine Finance is characterized by high interest rates, from the mid teens up to the low twenties, including an equity component generally in the form of warrants or stock. Learn more about Mezzanine Finance ►

ClearThink Capital guides companies through the credit financing process. We put our credit expertise and extensive network of lenders to use for our clients. Get in touch with our team below.

Debt or Equity Capital? Deciding Which Is Best For Your Business

Depending on your company’s situation, different forms of capital may be better than others. This blog will help you decide what form is best for your business.

The Types of Capital

Equity Capital

Equity capital transactions involve an individual or entity purchasing ownership in a company. The company receives funds from the investor, and in return, the investor owns part of your company.

Typical transaction types include:

  • Alternative Public Offerings
  • Self-Listings
  • IPO
  • PIPEs
  • Venture Capital
  • Private Equity
  • Family Offices
  • Private Placements
  • M&A Financings

Advantages:

  • The capital a company receives is permanent capital, and generally does not have to be paid back
  • Equity capital has great flexibility with regard to structure

Disadvantages:

  • Dilution
  • Often used to give preferential or disproportionate rights to investor as opposed to existing stockholders
  • Difficult to remove or eliminate troublesome equity holders

Debt Capital

Debt capital transactions involve borrowing money from a lender, and paying that money back to the lender over a set period of time, as well as interest.

Learn more about what alternative lenders are offering: Commercial Credit: What Alternative Lenders Are Offering

Typical transaction types include:

  • Alternative Commercial Credit
  • Asset-Based Loans
  • Cash Flow Loans
  • M&A Financings
  • Term Loans
  • Factoring
  • Mezzanine

Advantages:

  • Lender does not have vote with regard to corporate matters
  • No dilution
  • The fixed return permits a company to arbitrage between the increase in value the capital will create, and the fixed price they have to pay for that capital

Disadvantages:

  • Has to be paid back
  • Is senior to all equity
  • May restrict actions by existing stockholders

Convertible Debt

Convertible debt transactions involve a loan with the ability for that lender to convert into equity.

Typical transaction types include:

  • Convertible Debt
  • Bridge Financings
  • Mezzanine
  • M&A Financings

Advantages: 

  • Fixed current return
  • Under the right circumstances, does not have to be paid back
  • Very attractive to risk-averse investors

Disadvantages:

  • Dilution
  • Until converted, may restrict corporate actions by stockholders
  • Senior to all equity holders until converted

Wondering what capital is best for your company? Let’s discuss. Get in touch with our team below.

Debt Financing In 2025: Your Two Options

These are the two options for a growing company seeking commercial credit in 2025.

Traditional Banks

While traditional bank financing can be great, emerging growth companies typically cannot obtain traditional bank financing. When a bank reviews a company with high growth, the bank sees risk, but fails to see opportunity. Banks prefer stability to growth, and, as a result, dynamic companies are provided inadequate financing alternatives or no financing at all. In the rare case when traditional bank financing has been made available, it is often insufficient in amount and includes substantial covenant protections, including stringent earnings to fixed charges and financial coverage ratios, and many others.

Learn more about how we assist companies with their credit financings ►

Summary

  • Stability over growth
  • Restrictive, covenant heavy
  • Slow with regard to approval and business development

Alternative Lenders

Alternative lenders are quite different than traditional banks. Alternative lenders are often family offices or funds that have set aside capital to lend to growing companies. Contrary to traditional banks, alternative lenders enjoy working with high growth companies. They provide flexible financing solutions through ABL, purchase order, invoice, inventory, equipment, term loan, and other forms of credit, as well as merger and acquisition finance. Additionally, as they are typically unregulated, they act substantially more quickly and are more nimble with respect to business developments.

Summary

  • Covenant free or light
  • Fast approval
  • Flexible
  • Enjoy working with growing companies

We have been fortunate to meet and develop extensive relationships with a large number of the alternative lenders in the United States. If your company is looking for credit financing, we would love to discuss how we can help you secure the best possible financing for your needs. As ClearThink Capital is generally compensated solely by our client companies and generally does not accept referral fees or commissions from lenders, we, unlike our competitors, are highly incentivized to provide access to credit financing on superior terms with limited or no covenant coverage.

Let’s discuss how we can assist you with your credit financing. Get in touch with our team below.

The Top 5 Reasons Investors Say No

Throughout our careers, we have been pitched by thousands of companies and worked with countless companies to prepare them for and match them with the right capital partners. Here are the top five reasons we’ve seen why investors say no.

The 5 Most Common Reasons Investors Say No

Management’s inability to tell the story

If you can’t get your point across in the time it takes to ride up 20 floors in an elevator, you should refine your pitch. We’ve had calls with companies after which we could not even tell you what the company’s business is. It’s important to be clear and concise when pitching investors, and to make clear the benefit of your company to your target market

Valuation too high

Often, companies will approach us with an unjustifiably high valuation. They often say that these valuations were verified by third parties. Our response is: “Great, then have them invest at that valuation.” The most important valuation is the valuation that gets your transaction done. It does not matter what you think your company is worth if investors don’t agree.

No plan to liquidity event

What is the biggest fear of an investor in a private company? The biggest fear is that the company will succeed, but there will never be a liquidity event, thus making the investors captive minority stockholders, and their shares worthless. It’s important to have a clear path to a liquidity event, whether it is a public offering or a buyout. We like to structure our transactions as public-market based transactions when appropriate. This allows for higher valuations, friendlier terms, and happier investors.

Unattractive industry

As a management team, you could be doing everything right and hitting the ball out of the park within your market segment, however if the industry in which you operate is not attractive to investors, they will likely not take a chance on your company. An industry can seem unattractive to investors for a number of reasons: the industry could be highly competitive, the industry could be in decline, or the industry could be out of their area of expertise. You may be the highest grossing frozen fish distributor in the world, but if you approach a technology investor, chances are they will pass on the investment.

Uncertainty as to management’s ability to execute

Convincing investors of your ability to lead your company is just as important as convincing them of your company’s ability to succeed. Although an investor is purchasing a stake in your company, they are purchasing a stake in you as well.

Seeking financing? Let us help. Get in touch with our team below.