Analyst Brian Foley Says Big Investors Are Flocking To GA Companies

It may come as a surprise that there’s actually an overabundance of big investors literally tripping over one another to provide growth capital to general aviation companies or buy them. The discouraging fact is that they all seem to be cut from the same cloth, requiring the firm to have a good $20 million in annual revenues and $5 million in profits known as EBITDA.

“For the majority of “real world” general aviation entities, trying to raise equity capital has been seven years of bad luck, especially for those without an established track record,” notes industry analyst Brian Foley (pictured). In addition to tight capital markets, memories are long in the investment community from previous aviation startup failures which included such notables as Eclipse Aviation, Adam Aircraft, DayJet and others.

The fundraising strategy that seems to have worked best through this period for small or young aviation companies is the tried-and-true method of seeking funds from family, friends, angel investors and individual aviation enthusiasts. Having raised meaningful funds on one’s own before approaching the big investors is almost a must, as is having personally invested your own money, better known as having some “skin in the game”. Adding to an investee’s credibility and reducing an investor’s risk is having a working prototype of the idea. “Investors rarely put money into paper airplanes or clever concepts presented on PowerPoint.”

As the company becomes a little more established venture capitalists (VC) may be the next source of potential funding. One may also have success approaching larger companies in the aviation industry known as “strategics” who may view the product/service as complimentary to their business. China and other countries have also expressed interest in firms at this stage and are willing to take a longer term view than US companies.

As the company matures and begins to have revenues, larger financiers known as institutional investors can play a role. They include private equity (PE) funds, insurance companies, pension funds and family offices. Banks can come into play for debt financing if the company has valuable assets. Usually all look for a track record of at least 3 years of increasing revenues and profits. “For years now the financial community has steered away from all but the strongest, most well-established general aviation companies. It’s believed that we’re finally at the point that investors will begin returning. When interest rates eventually begin rising financial institutions will need to boost earnings by lending more and investing in high-yielding opportunities which just happens to be general aviation’s sweet spot.”

FMI: www.BRiFO.com