InsightsFebruary 17, 2021
How to attract investors for your BV
If you’re looking to grow as a company, you can attract investors. Below, we’ll discuss a number of ways in which investors can invest in your business, and the pros and cons of these procedures.
The easiest way to raise money for your company is by lending. This can be done at a bank, but you can also get a loan from other companies or private individuals. In return, the person lending the money will charge an interest rate. This is usually a fixed interest rate, but it can also be linked to your profit or turnover, for example.
When you take out a loan when you’re only just starting out, the lender will often ask you to personally guarantee the debt. This means that, despite the fact that the BV (private limited company) is a legal entity, you’ll be personally liable for the debt.
The big advantage of lending money is that you don’t give away control of your company. In addition, in the case of a fixed interest rate, you’ll know exactly what costs will incur. On the other hand, investors will be less likely to invest larger amounts of money because they don’t share in the potential profits on their investment if the business grows.
A convertible loan is a loan that can be converted into equity in the BV at a certain time and under certain conditions. The investor doesn’t get his money back, but receives equity in the BV when the loan is converted. This construction can be very interesting for both the investor and shareholder.
The big advantage is that the investor also benefits from increases in the value of the company, should they occur. And the investor can also choose to get his investment back if the company’s value doesn't increase.
A convertible loan also has advantages for the BV. The investor has a financial interest in an increase in the value of the company and will therefore probably be more involved in the company. In addition, although issuing equity results in less control of the business, it also means that the loan doesn’t have to be repaid. This puts less financial pressure on the company.
As we wrote in the article ‘Allowing employees to share in the profits via STAK’, you can opt for a STAK (trust office foundation) to avoid having too many people with voting rights in your company. Putting convertible equity in a STAK can therefore be a good option.
When trying to attract investors, issuing shares will be one of the first things people think about. This is obviously a fairly simple way to raise capital. But always think carefully about what your reasons for issuing shares are before choosing to do so, because you’re also handing over control and a right to profit to shareholders. Is attracting an investment worth that?
Often the choice is made to attract an investor who, besides investing money, can be of value to the company in other ways. In the field of knowledge or networking for example. All the more reason to think carefully about who you attract as an investor.
An extra shareholder will thus lead to extra people with voting rights. As mentioned, you can prevent this by setting up a STAK. Another commonly used option is to issue equity without voting rights. This means that the new shareholder will have the same rights as all other shareholders, but doesn’t get to vote at the general meeting of shareholders.
Crowdfunding will allow you to raise money from a (large) group of people who all invest a small amount of money in order to raise the desired investment sum. These are usually investments between €1.000 and €20.000 per investor. Crowdfunding often takes place through an online platform. The platform usually receives a fee for the mediation between the BV and the investors.
The advantage of crowdfunding for companies is that it’s a very easy way to attract capital. For investors, the high returns can be very attractive. Returns between 6% and 10% are common. Being able to spread risks is also an argument for investors to opt for crowdfunding as it allows them to make multiple smaller investments.
On the other hand, it’s difficult for an investor to estimate how much risk the investment entails.
As you can see, there are several different options to attract investments. Always carefully consider in advance what the best option is for your business.