International capital flowing into U.S.  stock markets has exploded over the past two decades. The international private equity and institutional capital markets move vast sums of money into the United States on a regular basis. Some of this money is speculative "hot money," but most of these funds enter the country as direct investments into publicly held companies. And those types of investments can create unique opportunities for the management of such companies. 

In this economic environment, companies need to be creative when structuring a capital raise, but they also need to manage risk and carefully decide which type of securities are most advantageous for them to "go to market" with, in order to shore up their financial needs. Investments from international funds typically come in the form of convertible debt, equity, or a combination of both. 

Before a company goes to market, they need to define their realistic strategies for growth, investment needs and use of proceeds dialogue. Preparing a corporate profile and an executive summary for the business, which would be used in discussions with prospective candidates, is paramount to the program's success. It’s important to create documents that are easy to transmit and attract initial interest from potential investors. 

Identifying and contacting prospective investors or investment partners can be a daunting task, which often requires outside assistance from an experienced advisor or professional consultant. These professional service providers can assist in the creation of documents, the prospecting program and in advising the client on the structure of a potential transaction.

A few basic points to consider before you embark upon the capital raising process: 

Crafting The Right Message: The ultimate success of a funding program is determined by how well you define and articulate your growth strategies, objectives, and financial condition in the documents presented to the target audience. Professional consultants can help address these three critical areas and assist in the creation of the required documentation.

Defining Your Message: No one understands your business better than you do. You’re the expert. So find someone in your company that understands the company’s vision or hire an outside consultant familiar with the process. Outside contractors, working closely with senior management, can help you refine your message and develop your strategy, positioning and messaging materials.

Creating Your Team and Business Culture: To be effective in every aspect of your business, your management team and employees must be committed to the value creation process. So your message needs then be communicated throughout the entire company in an effort to create a positive culture within the organization. Through executive coaching and communications programs, consultants can work with you, helping you to focus your strategy, develop operational processes, communication protocols and execute on your growth strategies. Remember, investors buy into management more than any other aspect of your business, so make sure management is on board and aligned with your programs, goals and objectives.

Know Your Audience: A focused message, sound strategy, and motivated management team must still target the right audience in order to ensure the program's success. This is where industry experience comes into play. Consultants can use their personal contacts within the financial community to efficiently deliver your highly targeted message to the correct audience, every time. Their knowledge can save you time and money. 

Designing and implementing a funding program that provides a company with access to foreign capital is a prudent strategy right now because there’s virtually no risk capital available in our markets. Domestic investment capital is extremely expensive and hard to come by and business owners, large and small, across this country are suffering because of it. 

Attracting foreign investment into America, which would inevitably creates jobs at zero cost to the U.S. taxpayer, should be a high priority for our government. “Foreign investment increases the amount of capital equipment, buildings, land, patents, copyrights, trademarks, and goodwill in the host economy,” Economist Mack Ott recently stated. And the U.S. currently has economic development legislation before Congress, which could create a conduit for foreign investment capital to come into this country. But this is where economic development and immigration issues clash inside the beltway.

Conversely, the Canadian government has achieved a political balance with their immigrant investor program and the results are impressive. According to figures from Citizenship and Immigration, Canada,  under their immigrant investor programs, has attracted more than 11,000 investors during the last five years. So its not that it cant be done it just that it isn’t being encouraged. 

“The availability of foreign capital lowers the cost of capital to corporations. Lower cost of capital and, perhaps more importantly, availability of business capital at the present time is certainly a plus for the U.S. This makes additions to plant and equipment cheaper, permits some investment projects that otherwise would not be profitable, and raises the value of U.S.firms," Mack Ott.

There’s going to be billions of dollars thrown at the infrastructure of this country in an effort to create jobs and improve our ability to produce goods and services. None of that money will end up in the companies that create jobs at sustainable levels. In fact, foreign investment in this country may create more jobs than the stimulus package.

But how those benefits are realized depends entirely on the rules governing the capital flows across our borders. Many of the current rules and institutions in this country obviously need to be reformed and updated to properly manage the new reality of significantly increased flows of capital reaching the U.S. at an increasingly rapid pace. 

Foreign investment in the U.S. is not a trend that will end anytime soon, especially considering our long term economic issues, which essentially put America on sale, creating a compelling buying opportunity for foreign investors. Besides everyone knows it's a global economy, so think globally when addressing your company's capital needs. You're certainly not going to find affordable capital at your local bank, high profile hedge fund or private equity group.  Their checkbooks are closed.

If your company is interested in learning more about how to access foreign capital for your business,  give us a call. The phone call's free, which is almost like TARP money. Ronald J. Blekicki