Here are answers to
some of the questions we are most often asked.
Most are
about fund raising exercises….
This is impossible
to answer. So much depends on how well you are organised, what the extent of
preparatory work is and whether the investor will need extensive due diligence.
Research suggests an average timescale of 16 weeks.
Fund-raising
exercises should be carefully planned (unless you need emergency finance) and
the fact that some thought has gone into a plan does give us comfort that our
prospective clients are approaching the task in the right way. So we always ask
that clients plan the fund-raising exercise well ahead. As any banker will tell
you, if the answer has to be quick, it has to be no! For our part, we work as
quickly as our clients - and the investors - allow us.
We will do our best
to keep you up to date with progress, though bear in mind that investors are
generally busy, see many proposals, get side-tracked by other things and do not
like to be hassled by us or by our clients. Everyone does need to have patience
when dealing with fund raising.
Apart from our fees, you should
plan for legal costs (get an estimate once Heads of
Agreement are reasonably
final), and accountant’s costs for personal tax advice and due diligence costs.
Nothing, except that
we will do everything we can to help you achieve your goals. Although we do not
agree to help a client unless we believe we can add value, we can never
guarantee success.
You don’t, and nor do we! If no one
is interested in your business,
this does not necessarily mean that we have not done our job, or you have not
done yours! It could simply
be seen as a valuable lesson for us both. Sometimes even we cannot persuade an
investor to meet our client; in those, happily rare, cases we both need to
re-examine the proposal and how it is presented to see what lessons can be
learned, and perhaps change the focus of our whole approach.
After our
pre-engagement discussions we will decide how we are best able to add value to
your business and what to do next. Potential clients need therefore to prepare
for these discussions.
Where we are assisting with raising funds, we
will quiz potential clients on the investment proposal and will seek answers to
the key aspects of the proposal that investors are looking for, i.e.
· Can
the management team demonstrate that it has the ability to turn investment into
profit? Is there anything in their track record that supports this?
· What
is the “differentiator”
in your business? What makes your company different from its competitors and
therefore more likely to succeed? Perhaps patent protections,
local knowledge,
proprietary information or other
factors that will give comfort to investors that you are “special”.
·
What is the potential exit route, when and where is it? Remember
investors are not looking for lifestyle businesses; they want to see growth,
perhaps followed by a trade sale, float, sale back to the management or
whatever.
· How
much is really needed, when and why? Can funding be phased? What is the new
money to be spent on – investors will not put money into a company merely to
repay shareholder/bank debt, or to fund a lifestyle.
· What
is the deal? How much equity are you prepared to sell? How did you arrive at the
figure? Is there a skills gap in the team that a suitable investor can help
fill?
· Are
there any time or other constraints (apart from “as soon as possible” –everyone
seems to come to us too late!) or other factors that we need to be aware of?
Investors
will want to make a profit out of their investment. This means that, at a
minimum, they will want to see the value of their investment double over, say,
three years. They will want to see an exit route – no-one wants to be locked
into an unlisted
investment for ever, so there needs to be a clear exit strategy. This can be
through a trade sale (who are the target buyers?) or a sale back to the
management if cash flow permits. They will want a seat on the Board; possibly
they will want to fill a part time role in the business.
They
are likely to have a range of skills and contacts that will be extremely useful
to your
business.
Investors invest in people first, businesses second, so they need to be able to
buy in to the proposal and to trust the team.
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