Fundraising Documents: What's Required?

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Fundraising Documents: What's Required?

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:

  1. CV of each founder and any members of key management. Also consider having an active LinkedIn profile.
  2. Description of your business – be concise about what you do (or will do), how you do it and what makes it different.
  3. 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.