The Story
It’s no secret that, like fashion, industries and sectors have trends. Fundraising follows a similar pattern. What’s “hot” one year may not be hot the next year, and so forth. Trends come and go, sometimes very quickly. Back in 2021 when the pandemic was raging, people were staying home and ordering tons of stuff online. Logistics / fulfillment was a hot and rapidly growing sector. Ecommerce companies, large and small, were clamoring for solutions to get their goods delivered quickly and efficiently to their customers. Logistics was booming! And investors were eager to get a healthy slice of the action.

Enter company “XYZ” that provided last-mile logistics services. XYZ was a family business that had grown modestly over the years. When the pandemic hit, their business exploded overnight, rapidly adding new ecommerce customers (including a very large one). With the need for expanded, bi-coastal facilities and the desire to ‘take some chips off the table’ the family decided by mid-2022 that it was time to seek an equity capital infusion.

So, What Happened?
Around that time, company XYZ was working with a new commercial bank, one of the largest in the nation. When XYZ shared their plans for an equity capital raise, their new commercial banker offered that he was a good “matchmaker” and could make a few introductions to private equity investors, since they were bankers to many of the big private equity firms and could help them for free. Seemed like a no-brainer. What could go wrong?

Well, unfortunately, a lot went wrong. Sure, the commercial banker made a few introductions for XYZ. But with little support and the lack of a focused, dedicated process, XYZ was left to fend for themselves. XYZ management-owners ended up spending the better part of 2023 having many dead-end conversations with a host of randomly selected private equity investors (i.e. customers of the commercial bank), wasting a lot of time, with no deal in the end! In the meantime, the demand for logistics services had cooled considerably as pandemic-induced buying behavior plummeted, with the return to pre-pandemic levels. XYZ ‘s business dropped, including the loss of one major ecommerce customer. For the first time, XYZ was going to show a loss. Investor appetites for logistics by this time had also cooled considerably. Logistics was no longer the ‘hot’ investment sector. Sadly, XYZ “missed the window” and since then has been working hard to rebuild its business in a tougher environment.

So, what’s the lesson here?
Is your company considering a capital raise or M&A deal, and just might benefit from expert advice? Are you in a sector that might be considered “hot” for 2024, with time-to-market critical (e.g. AI)? How can you be sure you are getting to the right investors, efficiently and effectively? What if you “miss the window” like company XYZ?

Please give us a call if you’d like to discuss your company’s situation and plans you may have for an M&A event or capital raise. We’d be happy to listen to your story and see if we can help.

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