RFisher Laws Process
We understand that setting out to raise capital can be a harrowing experience. In reality there are few success stories of businessmen or women who found this to be either a delightful, or easy process. However, all things considered the volume of those who do actually reach the targets they are seeking reaches into the hundreds. To break down the numbers, it is worth understanding that approx. 25% of investors that shown an interest at the outset actually move on to complete the due diligence aspect of the transaction. 10% of these people will put forward a genuine offer of funds, of which only a further 25% reach the stage of making their investment. As you can see, these odds paint a pretty bleak picture. So what actually prevents the success of raising capital?
The stages of raising capital, be it equity or debt will involve the following important elements:
- The production of the business plan along with other due diligence documents including the memoranda.
- The creation of a highly targeted investor list covering all prospective investors.
- Responding to all due diligence enquiries relating to contacts made to the list.
- To negotiate the best deal around the investment offer.
It is essential for the client to understand the time commitment they must make, in addition the time commitment that the advisory firm will also have to put aside for success. It is not uncommon to see time frames stretching up to 12 months, this covers the initial implementation right through to receipt of funds. Budgeting for both the time and resources need to cover these periods are vital for success. It is not unusual to see the time element reaching between 500 to 1000 working hours.
Past experience tells us that at least 200 working hours are needed for business plans. These hours will include conducting in-depth market research, business financial reviews, complement development of the financial model. In addition we will also work on determining the best way to structure the business strategy and then proofing the overall plan. It should be noted that an advisory firm are also responsible for producing the proposal of a memorandum with the plan and taking care of all due diligence aspects.
Only once the above has been completed can we turn our attention to the process of raising the capital. This is commenced with the development of a highly targeted prospective investor list. It is very likely that there would be contact made with in excess of 160 pre-qualified potential investors.
The type of potential investors that are selected are determined by which companies may be interested in the offer we can make.
Relationships are the core to a successful investor list and we work hard to build the strongest ones at the initial stages. Very often investors are offered information on a potential deal by way of an earlier introduction by mutual connections.
At RFisher Law we place huge importance of the building of these relationships as part of what we do every day. Our dealings with potential investment companies ensures that it is likely we are already dealing with the people that you want to contact.
Discussions around any potential offer can take time. The following aspects should give assistance in understanding what is done and when, which ultimately can help you to complete the process of funding:-
- Initial Introductions – This involves providing the prospect with your executive summary and business plan.
- First Pitch – Reaching this point means that you are already ahead of many other capital investment seekers.
- Due Diligence – This is where you understand if the references you have provided are being contact by the potential investors. You should aim to understand what they are being asked, what extra information could help and what are their real interests in your business or organization.
- Full Partner Pitch – It is sensible to understand that now your business is being taken very seriously, some refer to this as the last lap. It is essential that any potential investor confirms what potential information that they might need to review – you must be fully prepared on this. It is important that as soon as the meeting is concluded that you get full feedback and then take positive action on any issues that may have arisen.
- Terms Sheet – Don’t worry or get nervous, you have succeeded, but there is likely to be an element of time prior to the full partner meeting.
- Syndication – It might be that you could require additional investment from other sources, this very often depends on variables and conditions. As expected this could be an involved process, or it could be something that is easily remedied.
Closing – Depending on the way that the deal is structured this could easily last over a month, it is vital to stay focused and maintain your energy during this important period.