Our Framework
Maintain an overview. With our approach, we find the right financing instruments for your company.
With the Iacobus Cycle© we have developed a method that allows us to derive the most suitable financing possibilities of a company from the respective company phase. Typically, the company phases can be divided into four sections.
Corporate Phases
Phase 1
Innovation
We call the first stage the Innovation Phase. This always begins with an entrepreneurial idea. In the first step of the Iacobus Cycle©, this idea will be detailed out in the form of a business plan.
Actions
Business Plan
The business plan documents the product, the market, the business model, the competitors, the sales and marketing approach and other relevant information. Assumptions are made and fundamental hypotheses are formulated which show that such a company can successfully exist in the market. It is important in this phase that all the qualitative statements are also presented in the form of a valid and comprehensible business case. For future financing partners, it is important to understand how the business model works, what the drivers are and how the business can be expanded. With these documents, financing partners can be approached.
The first step in the Iacobus Cycle© is characterised by laying the groundwork. The founding team or management prepares the first documents and is primarily concerned with creating the administrative framework. Often the initial financing is the determining issue. It is advisable to develop a Minimum Viable Product (MVP) early on in order to convince potential investors. The entrepreneurial idea is the decisive criterion for successfully raising initial investor funds. Relevant investor groups are business angels and early-stage venture capital funds (VC).
Seed
In the second step of the innovation phase, significant work is done on the product or service. The focus is on development work. The MVP results in a first version of the product or service, which is used to win the first paying customers. The team expands, as employees can be hired with the help of the first funding. At this point, the company is founded and its own premises are rented.
It is particularly important to collect experience, data and customer feedback in order to incorporate it into further development. A close exchange with customers serves to align the product or service with customer needs. This means that each customer request is handled individually and internal processes have to be newly created or adapted. Due to the small number, the customers are often known to the team. On the financing side, business angels and VCs are also the main capital providers in this phase.
Product-Market Fit
The innovation phase ends with achieving product-market fit. At this point, the company has developed a product or service that meets the demand of a particular market. This is reflected in the fact that demand is clearly increasing and feedback is largely positive. Internal processes have been standardised to a high level, leading to a degree of professionalisation that allows strong management of the core business. Product-market fit is characterised by the fact that the company has found a suitable business model. The main task is to manage growth and allocate the limited resources in a targeted manner.
Formal hierarchies and an increasing degree of specialisation in the different departments of the business have now developed. It is particularly challenging to maintain or prudently adapt the corporate culture in this phase. From this point on, opportunities for debt financing open up for the first time. Bank loans, factoring or other forms of revenue-based financing can be used. In addition, VC funds, family offices and strategic investors are available as potential equity providers.
Summary Innovation Phase
- Team / Founder(s) / Management
- Market size
- Cap table
Turnover
- No or low turnover
Cost
- High unit cost
- High development cost
Cash flow
- Negative cash flow
Capital needs
- High
Number of competitors
- Low, few competitors
Risk
- High
Strategic focus
- Market entry
Number of customers
- Low
Funding sources
- Business Angels
- Venture Capital
- Revenue based financing (ARR) / Factoring
Phase 2
Expansion
The second phase in the Iacobus Cycle© is called the expansion phase. As the name suggests, the focus is on growth. Different types of debt contribute to a company’s ability to gain market share and expand geographically.
Actions
Growth
The expansion phase is the second part of the Iacobus Cycle©. After the product-market fit has been successfully mastered, the focus is on growth. In this phase, the company grows in all areas. The number of employees increases, the number of customers grows significantly and so does the turnover. It is important for the management to maintain a balance between healthy growth and overstretching the organisation.
In the course of the growth phase, debt capital becomes more important. Financial instruments such as asset-based financing or classic bank loans can now be used. In addition, VCs, family offices and strategists remain the preferred partners for equity financing.
Internationalisation
As part of the growth, geographical expansion of the core business to other markets usually plays an important role, posing new challenges. The legal, economic and cultural framework conditions in other countries, even within the EU, are often different from those in the home market. The business also needs to learn about customer behaviour in other markets and may need local infrastructure to ensure operations. In addition, pricing may have to be adapted to the respective purchasing power. At this stage, management has to steer and navigate all these parameters efficiently and effectively.
During the internationalisation phase, turnover and the number of employees continue to grow. Competitive pressure becomes noticeable for the first time. In parallel, unit costs decrease as a result of economies of scale.
Because of the high capital requirements, debt capital continues to gain importance. Besides venture debt, asset-based financing instruments remain relevant. Due to the size and the associated company valuation, VCs are taking a back seat and growth funds are becoming more important. Some private equity funds (PE) also invest in companies at this stage.
Summary Expansion Phase
Most important factors for investors (KPIs)
- Unit economics
- Industry
- Customer contracts
- Assets
Turnover
- Growing (strongly)
Cost
- Decreasing unit costs
- High personnel cost
Cash flow
- Negative
Capital needs
- High
Number of competitors
- Strongly increasing
Risk
- Medium
Strategic focus
- Growth
Number of customers
- Strongly growing
Funding sources
- VC-Funds
- Growth-Funds
- Family Offices
- Strategic investors
- PE
- Asset based financing
- Venture debt
Phase 3
Maturity
We call the third phase of a company the Maturity Phase. It is characterised by the desire to optimise. In this phase, new financing instruments become available as the company operates profitably.
Actions
Operational Excellence
In this phase, internationalisation continues to progress. The company has established itself in the market and is at its peak. The demand for the respective products and services is high. The first symptoms of saturation occur and competitors try to gain market share. In order to continue to expand, inorganic growth becomes more important. The number of employees is high and increasingly specialised divisions are emerging. This development leads to an increase in efficiency.
The focus of this phase is on operational excellence. This means that internal processes are continuously optimised to drive profitability. Through M&A activities, already existing consolidation tendencies are accelerated. The acquisition of companies brings new challenges, first and foremost the integration into the existing organisational structure. This post-merger integration (PMI) requires management resources across many levels. This stage of the business is financed primarily from cash flow. For M&A transactions, growth capital is brought in to leverage equity. Other equity financing partners include strategists, PE funds and family offices. Numerous partners, such as banks, leasing companies or investment banks, are available for debt capital.
IPO
A potential next step in the company’s development is the Initial Public Offering (IPO). At this point, the organisation has reached a high degree of maturity and professionalisation. The shareholders have the opportunity to sell their shares in an IPO and thus realise the returns they have built up over many years.
The company has professional management structures and well-practised processes. Business development can be forecast for several months. The company operates confidently in the market and has an overview of all relevant competitors. The management’s focus is now on preparing for the IPO. Numerous processes have to be controlled, documents prepared and scenarios modelled. Special emphasis is placed on strong communication with the capital market players.
Several partners are needed to finance an IPO. This step is steered and partly co-financed by investment banks. The core operating business is financed from cash flow and existing financing partnerships.
Summary Maturity Phase
Most important factors for investors (KPIs)
- Profitability
- Margins
Turnover
- High / stagnating
Cost
- Minimally decreasing unit cost
Cash flow
- Positive
Capital needs
- Low
Number of competitors
- Declining
Risk
- Low
Strategic focus
- Maintaining market share
- Consolidation
Number of customers
- High, stagnating
Funding sources
- Growth-Funds
- Family Offices
- Strategic investors
- PE
- Debt Funds
- Investment banks
Phase 4
Exit
The final phase in the Iacobus Cycle© is the exit phase. The founders or entrepreneurs are at a point where they leave the company, either through a sale or a succession plan. Structuring and financing this step is crucial for the further development of the company. After a successful departure of the founders or the respective key personnel, a company can receive new impetus to work towards a new goal or take the business in a new direction.
Actions
Exit & Succession
In the last step of the company’s development, the founders or the management might leave the company. This can take place through the sale of shares or through a handover. In the case of a sale of the shares, an external management team is often appointed by the buyer. The aim is to continue the business, realise synergies between the acquisition target and the buyer and to build on the positive development of the company. In the case of a succession arrangement, this can be done externally or internally. The life’s work of the founders should be continued and preserved. Emotional concerns often play a role. In both cases, it is important to manage the process smoothly and prudently, otherwise the company can be damaged.
In this phase, the saturation effects become apparent. Growth stagnates or declines. The company has established brand recognition. At the same time, young competitors (start-ups) enter the market and begin to disrupt it. The development of new products and services comes into focus. Operational business is stable and predictable. Management focuses on incremental optimisation of structures and processes.
Corporate financing is mainly secured from internal funding sources, the cash flow. Investments and M&A transactions are financed by debt capital from banks, debt funds or investment banks. The exit or succession, on the other hand, requires separate financing in order not to endanger the existence of the company. Depending on whether there is a strategic buyer or a management buy-out or management buy-in, there are financing partners who accompany this step.
Summary Exit Phase
Most important factors for investors (KPIs)
- Cash flow
Turnover
- Stagnating or declining
Cost
- Constant
Cash flow
- Positive, declining
Capital needs
- Low
Number of competitors
- Low
Risk
- Low
Strategic focus
- Continuation of business
Number of customers
- Stagnating
Funding sources
- Cash flow
- Banks
- Debt Funds
About Iacobus advisory
We are convinced that our passion distinguishes us from our competition.
Iacobus is a corporate finance boutique with roots in the start-up scene and German SMEs. At our headquarters in Berlin, we founded Iacobus with the aim of offering entrepreneurs practical expertise across the entire spectrum of corporate finance.
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Iacobus GmbH
Schönhauser Allee 113
10439 Berlin
info (at) iacobus.de
+49 30 7544 3106
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