creating the investment pitch investors want to hear, andrew sloane morisons solicitors
DESCRIPTION
Andrew Sloane of Morisons Solicitors LLP. Andrew is a partner with the Corporate team at Morisons Solicitors and formerly led the investment activity of the funds at the Scottish Investment Bank. Andrew will provide a practical guide to identifying prospective investors, approaching them with an investment proposition, raising funds, executing the deal and on-going investor engagement.TRANSCRIPT
A Practical Guide to Equity Investment
Andrew Sloane
7th November 2013
Why Raise Investment?
→ Develop Technology / Product
→ Gain Market Entry
→ Grow Market Presence
↓
Generate Value for Founders & Investors
Fundraising Process
Business Idea
Business Plan &
Financial Model
Executive Summary
Investment Presentation
Planning for Investment
• Understand Funding Landscape (Private & Public)
• Map Funding Sources to Business Model
• Identify Funding Requirement (Equity vs Grants)
• Plan Fundraising Strategy
• “Smart Money Squared”
• “Investor Readiness”
Engaging Investors
• Investors receive 100s of propositions/pitches a year
• Catch the Eye
• Articulate the Business Proposition / Opportunity
• Deliver Investors’ Needs – Capital Play
• Target Specialist Investors
• Introductions – Credibility
What are Investors Looking For?
• People even better, a Team• Solutions to real problems / issues• Innovation new approaches via Technology or Business Model• Growth opportunity significant / growing markets
Spell it Out – the 5Ps
• Pain A real need to have? Paid for?• Premise Business Model How is it sold?!• Proof Sold it before? To whom? Prove the market!• People Experience
Technical / Market / Growth / Management / Exit / Failure
Recognise Skills & Experience Gaps• Purpose Funding required - now and future
What for! Value milestones
Exit planning
The 6TH “P” – PitfallsBe Realistic
• Overestimating the Opportunity
• Underestimating the Competition
• Over / Under “Cooking” Financial Model
• Manage Valuation Expectation
• Technology Looking For A Problem
Investment Steps
• Investment Proposition• Presentation• Term Sheet• Diligence / Appraisal / Approval
Test business plan
IP / Technology
Finance
Market/Competition
People Referencing
• Legals• Completion
Doing the Deal
Deal Structures • Equity (Angel Investment vs. Venture Capital) or• Debt (secured or unsecured)or• Combination - Convertible Loan Notes (Secured and Unsecured)
• Advantages & Disadvantages - Balance Sheet (strengthen/weaken)
- Alignment / Commitment- Dilution / Loss of Control /
Documentation- Security- Valuation- Personal / Commercial Restrictions
Legal Documents (equity funding)
Investment Agreement
Key Provisions:-
• Conditions Precedent to release of funding• Lump sum or tranched?• Warranties:
- Granted by management and the company?- Limitations on liability?
• Investor rights:- Director & Observer appointments- Information rights- Investor majority/investor director veto rights- Restrictive covenants on management (geography and duration?)
Legal Documents (cont.)Articles of Association
Key provisions:-
• Share classes & rights (voting, dividends, return of capital)
• Board composition (number of directors, quorum, investor director(s))
• Pre-emption provisions: allotment, transfer
• “Drag-along” and “Tag-along” thresholds
• Good Leaver or Bad Leaver
Other Documentation• Disclosure Letter
• Service Contracts
• Board Minutes & Shareholder Resolutions
Completing the Deal
• Draft documents circulated, revised and negotiated among solicitors until agreed • Investors’ funds sent to lead investors’ or company’s solicitors ahead of completion • Documents executed by parties, funds released to company & investment completes!!
However……..
