Private investor, ex-vice-minister of industry and trade Nurbek Raev notes that businessmen often start thinking about turning to investors after visiting banks. The impossibility of obtaining a loan without collateral and the need for money to further develop the business make it necessary to look for an alternative.
To make it easier for businessmen to orient themselves, Nurbek Raev divided the types of investors in the increasing gradation in accordance with the size of the financing. These are private individuals, such as family, friends, acquaintances, etc., who can provide a small amount of investments up to $1 million, equipment vendors and construction companies such as General Electric, Siemens and others, can invest up to $5 million, private equity funds such as ADM, Aureous , Falah, CITIC, KIF and others, can provide $5-20 million, and institutional investors like EBRD, IFC, ADB, DEG, HERMES, fr om $20 million.
The appeal to this or that type of investor depends on the level and stage of business development. "At the start-up level, a small amount of investment is enough. If you, for example, open two or three stores or a mall after you have opened one, and feel that you have established a business and can scale, then go on to earlier financing, where private investors and business angels invest," he explained.
At this stage, it is important to grow quickly. If you are a producer of some product, you should immediately get on the shelves of effective stores, the retail network. "When the business is fixed, there is a certain growth model, you can switch to working with venture funds or private equity funds. You refer to them when, for example, you opened 10 stores with a private investor, went out to the income of several million dollar a year. Their task is further geographic expansion or reduction of the costs," Nurbek Raev advises.
At the next stage of maturity at a growth rate of 25-40% per year, the company either goes to an IPO, or is sold to a major strategist.
Speaking about the company's appraisal process, Nurbek Raev noted that it consists of a number of indicators and cannot be represented by one figure. This is the range of several types of valuation such as cost, income and comparative methods. At the same time, he stressed that when negotiating with an investor there is no one price. "When there is a dispute over figures, there is never an agreement. You have one vision, and the investor has another. There is no such crystal through which you can see and determine the price. So do not talk about one price. There must be several numbers, several scenarios, but they should be simple. We need to negotiate. For example, I buy the company at such a price, but if the situation changes, there will be a compensation. And the compensation formula should be discussed," the expert notes.
Nurbek Raev called on businessmen to be honest when communicating with investors. "Personally, I do not consider applications in which the necessary requirements are not met, the requested figures, indicators, for example, revenues for the last year are not indicated," he admitted. “If you want to be partners, you need to be honest to the end. It's like getting married, even more serious than getting married. There's money involved."
The speaker also advised entrepreneurs to master the ability to talk with investors in one language, to know and operate with a special professional terminology, and be prepared in general. There are many funds in Kazakhstan, there is money, but businessmen cannot get them, because they come unprepared.
Nurbek Raev pointed out the importance of packaging business. "Business packaging can be compared to buying a phone. If in the store, where you came for the purchase of a phone, someone will offer you to take the phone fr om hand, will you buy it? You ask wh ere is the charger, why is it not packed, wh ere are the accessories, warranty? Similarly, when you sell your business, you must sell not only the company, but the rest of the components, the product, the information memorandum, the yield guarantees, the infrastructure, the assets," he explains.
Nurbek Raev is convinced that it is a mistake to seek to find investors independently with the help of friends, acquaintances, colleagues, etc. The probability of finding the right one is small, besides it is fraught with time loss and negative consequences for business. For example, an investor may be almost bankrupt, information provided may go to competitors, etc. Professionals have a proven base with a clear industry focus of investors, they know the situation in funds, requirements, etc.
The investor shared the criteria for investing in his own iKapitalist site. These are an understandable business model, a steady growth of 5% per month, a stable team. By the way, out of 80 submitted applications iKapitalist invested only in one. In January of this year, KZT 30 million was invested in McRus, which sells and installs car covers for cars in Astana with revenue of 10 million per month, and monthly growth by 10%. As a result, in three months the company increased sales by 35% compared to the same period last year, expanded the range of goods three-fold, and opens a new trading and production site.
The process of attracting and receiving investments is long and complicated, Nurbek Raev admits. It is like preparation for the Olympic Games, but the reward is worth it. He gave an illustrative example from his experience. Somehow his acquaintance, the owner of the greenhouse, asked help to find an investor. The request was granted, but the applicant himself reversed, deciding to find, as it seemed to him, a more advantageous option. A few months later, the businessman made the same request again. But the foreign investor refused this time, since he has already invested more than 10 million euro in a similar project. Money was found, but the businessman got greedy when it was necessary to shoot. When the game goes on a grand scale, the stakes are high," Nurbek Raev said.
By Aliya Bekova for Kapital (Kazakhstan).
