If you live and work in Silicon Valley or you are growing a Life Science Start-up, you’re probably thinking about venture funding for your business. But even if you’re not running a tech startup, there are many reasons why you might be eying venture capital. Venture capital brings needed funding for business expansion, expert advice and added marketplace legitimacy. It also is the surest way to take your business to the next level.
If you’ve performed a business analysis and determined that your organization is prime for venture funding (or if that was the plan all along), it is important to also prepare your company operations for venture capital.
Part of this preparation includes having the right financial picture in place, and having a backend system to support solid financial management after venture funding. For both needs, having an ERP system for your business helps.
Here are five ways that ERP can assist your business with attracting venture funding.
- Clear Revenue and Operational Forecasting
VCs are looking for opportunities for a healthy financial upside. Slow business growth or a limited market doesn’t support the type of financial returns that venture capitalists seek, so you need to show how your business could become the next “big thing” or dominate a healthy niche in the market.
Because ERP comes with robust analytics and reporting capabilities, your business can quickly and easily generate reports and revenue projections that factor in market conditions and the actual cost of raw materials, distribution, shipping and each step of the manufacturing and sales processes. Risk factors also can be analyzed and compared within the system.
With ERP, your business can slice and dice the numbers and show where your business is today—and where it will be in the next five years.
- Real-time Monitoring
Businesses that can monitor their operations in real-time are better able to make adjustments, limit risk and spot new opportunities as they grow. Cloud-based ERP helps businesses track all aspects of operations from web dashboards that make it easier to see where the business is today and where it is going.
Integrated quality management within ERP also brings visibility on how operations are scaling, so fast-growing companies backed by venture capital can ensure that expansion does not negatively impact quality.
Further, real-time monitoring benefits VCs directly, because they can track the companies they invest in at every stage of development, always knowing how their investment is performing.
- End-to-End Visibility
Many VCs take a hands-on approach with the companies they fund, providing guidance and advice so their investments reach their potential.
In addition to real-time monitoring, ERP systems capture all aspects of a company’s operation so both VCs and management have a complete picture of company performance. Instead of just financial reports, ERP systems show both a bird’s eye view and detailed operational data covering everything from sales and marketing, production, warehousing, distribution and human resources, among others.
ERP captures the full picture of a company, which is both useful during the venture funding assessment and after a VC has placed his bet with a company.
- Process Standardization
Continual improvement is a key component of scaling a business, and VCs will want a plan for standardizing operations and driving efficiency as a company gets larger.
ERP facilitates process standardization and continual system-level improvements to increase the accuracy, efficiency, speed and scale of business processes and procedures.
By having ERP as the nerve center for a business, companies also can take advantage of process automation for handling payments, shipping, production orders, stock refills, material orders and other business functions.
- System Scalability
Finally, VCs want businesses that scale. Businesses that get funded are expected to grow fast, and that includes not just revenue but also people and processes.
One advantage of cloud-based ERP is that it serves as the foundation for businesses when they’re small, but it also can scale as a business grows into a larger enterprise. ERP solutions such as SAP Business ByDesign are built for growing businesses that add volume and operational complexity over time.
So while ERP supports companies that start with one product sold in a single country and managed by a handful of staff, it also easily expands to cover complex supply chains, multi-currency situations, branch offices and hundreds of employees; businesses with 20 employees and annual revenue of $1 million and those with 800 employees and $600 million in annual revenue both comfortably can use the same cloud-based ERP system.
This systems scalability sets the right foundation for businesses planning for rapid growth, and it sends the right signal to VCs that might invest in them.
So ERP systems both help a business attract venture capital, and they support the continued growth of a business once it has received a capital injection. If you’re serious about seeking venture funding, you also should be serious about running your business with ERP.For more information about how ERP can help grow your business, download our free guide on Understanding Cloud ERP for Non-IT Executives