Fundraising Documents: What's Required?
Stage 1: Initial Conversations Pre-Pitch
When you’re having initial conversations with potential investors, with a view to such conversations leading to the opportunity to pitch for funding, we suggest you go armed being able to talk about / have the following ready to use:
- CV of each founder and any members of key management. Also consider having an active LinkedIn profile.
- Description of your business – be concise about what you do (or will do), how you do it and what makes it different.
- Pitch deck:
- Introduction: who are you and why are you here?
- Team: who are the key people that are going to drive this business forward and what is their role?
- Problem: what problem have you identified / are you trying to solve?
- Solution: what is your solution to the problem you’ve identified?
- Demonstration: how does your product or service work? If a product, have examples to hand.
- Market: demonstrate a demand for your product / services; what is the level of demand; who are your clients going to be; how is this going to grow?
- Competition: who else is trying to solve this problem; what is it about your company over others out there that will make people buy your product / services?
- Business plan: how are you making money?
- Investment: what level of funding are you looking for; what will this money be used for?
- Contact: how can investors contact you quickly?
Stage 2: Pitch
Good news: you’ve got a potential investor interested and now have the opportunity to pitch. We suggest you have the following ready to use (in addition to the documents at stage 1 above):
- Business plan: building on information provided in the pitch deck.
- Ideally 3 years financials, to include: P&L, balance sheet and cash flow forecast, or, if operational data isn’t available, realistic projections and estimates.
- Management accounts: either actual management accounts or ability to produce management accounts.
- IP: demonstrate an understanding of the IP needed and the steps you’ve taken to date to protect it.
- Marketing plan: how does your product / services get to market; what advertising are you doing / going to do.
- Funding: how does the level of funding you’re looking for translate into a percentage of your company?
- Exit strategy: how are investors going their investment (and, hopefully, a profit!) back.
Stage 3: Term-Sheet
Great news: you’ve got potential investors actually wanting to invest. You now need to negotiate a term sheet. We suggest you include the following:
- Structure of financing: how does the amount you’re seeking translate into shares? What’s the minimum level you accept? What’s the subscription price? Include a share cap table.
- Demonstration of SEIS / EIS: copy of HMRC advance assurance.
- Timescale: when do you want to close this round?
- Board: who will be on the board and how will board decisions be made?
- Dividends: are investors going to get regular returns by way of dividends?
- Financial information: what financial information are you going to provide investors with?
- Warranties / undertakings: what comfort are you going to provide your investors with?
Stage 4: Documenting the Investment
Wonderful news: you’ve successfully negotiated the term sheet and you’ve secured investment. This now needs to be documented as follows:
- Articles: documents the way in which a company is going to be operated.
- Investment agreement: sets out the terms of the investment.
- Disclosure letter: opportunity to explain why the warranties may not be able to be given.
- Service agreement: every founder and all key members of management should formalise their engagement with the company, particularly in relation to restrictive covenants – investors will be keen that their money isn’t used to set up a company in competition in which they don’t hold shares.
- Suite of ancillary documents to include: share subscription letter; written resolution containing resolution(s) to adopt new articles, authorise directors to allot shares to investors; board minutes; Companies House forms.
Hopefully you will find this checklist helpful. If you have any questions contact Kirsty Simmonds or you can call us on 0345 070 6000.