Capital Raising – Process
Sourcing investment from Venture Capital, Private Equity or Family Office firms requires a structured approach with diligent preparation, planning and attention to detail all key to a positive outcome. In summary form we have broken down the process and at a high level, outlined our teams added value.
Our team will initially take a high level look at your core business fundamentals, progress to date and forward projections to help understand what capital you ideally require in the context of agreeing a realistic and appropriate raise that will attract positive interest in the market.
In parallel, we agree a pre money valuation that is both realistic and works for you. To ensure the valuation will be accepted by the investors we can help align the valuation rationale with a structured evidenced based exit projection focused on revenue or EBITDA multiples.
Understanding the detail and granularity expected we can guide, help prepare and often jointly develop the set of presentation materials critical to a successful capital raise. At a minimum, this will include a comprehensive and detailed Business Plan (Information Memorandum), detailed and granular financial forecasts, investor Power Point (for the investor face to face presentations), due diligence index (list of additional detail required during the due diligence phase) plus a one page or short deck ‘Teaser’ summary.
When independently embarking on a capital raise without strong advisory representation many CEOs will tell you that the most frustrating part of the process is locating and engaging the right potential investors. To compound this problem, of those they engage, much time is often wasted on what ultimately prove to be fruitless discussions.
Within the UK alone there are over 1000 private equity and venture capital firms managing funds specifically allocated for direct equity placement. In turn, each of these organisations have their own investment criteria based on a range of parameters including but not limited to, industry & niche focus, min/max placement, investee stage/maturity, appetite for risk, lead/co-invest, sector specific expertise etc. Key in achieving a strong investor shortlist is our knowledge of these focus parameters, ensuring we only engage organisations we know to have relevant and aligned investment criteria.
In addition to matching criteria, a stepped approach to qualification helps ensure only investors with genuine interest are brought forward. Following initial contact and baseline qualification we use the Teaser’s high level outline to determine early appetite. A positive response to the Teaser will typically solicit a request for further detail in the form of a comprehensive business plan and associated financials. An enthusiastic response to this additional detail and willingness to engage maximises the opportunity for a productive first meeting with your management team. Post meetings we will guide and help structure next steps.
Ideally the investor qualification process and management team discussions will encourage multiple parties into making an offer. Assuming this is the case and as initial pricing and terms will likely vary between each investor, we will help draw out the best offer with a view to receiving multiple Term Sheets and by definition, optimum terms for your organisation. In many cases we maybe familiar with key nuances of the target investors, further reinforcing our ability to advise and guide to a final decision.
In parallel with this process and if you haven’t already done so, it makes sense to appoint a law firm with relevant experience to act for you through to completion. We are happy to recommend firms we trust and have worked with in the past if this would be useful.
Assuming terms are agreed with acceptable structure, conditions and pricing with the preferred investor(s), Term Sheets will be signed locking the parties into a limited period exclusivity covering the anticipated duration of the due diligence phase, typically 60 to 90 days.
Depending on ready availability of the extensive detail required by the investors due diligence team, this can be a taxing process; a time where our extensive experience, council and knowledge gained through many previous successful transactions will likely be invaluable.