What could possibly go wrong?
You are about to raise some money for your brilliant growth company. Excellent. I wish you the very best. Now, how about we check to see that everything's in place to make that happen fast and smooth?
Whats underneath?
Every founder thinks they have built the perfect featherbed. Every accountant knows that if they look deeper they will find a wasps nest. The image above is from personal experience!
There are a million reasons that can trip up investors. No list will cover them all, but this is my quick checklist My advice is always to find the hard problems at the beginning, not the end, of the process.
How does your business stack up against these “hygiene” factors today?
Accounts and Finance
1. Is there an experienced CFO in place who has previously raised at least this much capital?
2. Are they filed and up to date?
a. Who else gets them?
b. Any queries or qualifications on accounts?
3. What did the last 3 years / 36 months of accounts show?
a. Turnover
b. EBITA
c. Net Assets
d. Fixed Assets
e. Debtors and credit risk of customers
4. Are management accounts available within 3 days of month end
5. Are budgets and forecasts being tracked every month?
Business plan and forecasts
1. Is there a fully written business plan
2. Is there a financial model that:
a. Includes balance sheet, profit and loss, reserves movements, cash flow?
b. Has all the assumptions for sales, costs, resources, activities, and external factors fully surfaced and variable?
c. Shows a clear “response to additional capital” and the rate of return to that capital?
d. Shows the various ‘usual’ scenarios required by equity and debt investors (changes in sales, costs, interest rates, taxation, security valuation changes, etc activity levels, etc)?
Corporate structure
1. What impact will that have on any potential investor?
a. What shares exist?
b. Who has them?
c. What rights do they have?
d. How is that recorded?
e. What unrecorded items exist?
2. Are there any persons of significant control?
3. Are there related companies that will attract investor interest if they do (or do not) invest or provide security or guarantees?
4. Is there a controlling mind or company that investors will want to understand?
Existing lenders
1. What impact will any existing loans have on any potential investor?
a. What loans exist?
i. Secured
ii. Unsecured
iii. Informal
iv. Trade
b. Who has them?
c. What rights and security do they have?
d. How is that recorded?
e. What unrecorded items exist?
Shareholders
1. What impact will the current shareholder structure have on any potential investor
a. How many people own the company?
b. How many are involved in running it?
c. What skills do they have?
d. Are they an issue for investors (personal history, media coverage, political exposure, secrecy, bankruptcy history, etc.)?
2. Will shareholders or directors be investing?
a. Will they follow their investment wholly or in part?
b. If they will not follow, why not?
3. Any plans or historic efforts to crowdfund, or raise on public markets?
Board
1. What impact will the current board have on any potential investor
a. How many people run the company?
b. What skills do they have?
c. How does that match to the ownership now and in future?
d. Have they signed contracts for service as well as any shareholder agreements?
Prior approaches to finance
1. What is the history of the company when raising external finance and paying it back?
a. Have they approached more than 3 investors in the last 3 years?
b. Have they been rejected by more than 3 investors in the last 3 years?
c. Have they been approached by any investors directly?
d. Have they ever defaulted on any loan?
e. Have there been any down rounds in equity investment
f. Any covenant breaches?
Tax and VAT
1. Any problems in tax or VAT
a. Is the company properly registered for tax and VAT
b. Are filings up to date and paid in full?
c. Are there any tax related disputes?
d. Any payment plans or defaults?
2. Is SEIS, or EIS, or BADR, or similar a key requirement for this raise?
a. Has advanced assurance been given?
b. What are the constraints of this?
Advisors
3. Are there high quality advisors in place for:
a. Banks
b. Lawyers
i. Strength of lawyers
ii. Experience with them
c. Accountants
i. History with them
ii. Their ability to help
d. Sales and marketing
e. Innovation and product development
Legal
1. Are there any legal issues?
a. Ownership of assets
b. Ownership of IPR
c. HR issues and employee disputes
d. Disputes and litigation with suppliers
e. Disputes and litigation with customers
HR and Employees
1. Are all employees on contracts
2. Are there any employee disputes?
a. Any issues with data or IPR and ex- or new- hires
b. Any issues with hiring agencies
c. Any gaps in structure and hires
3. Are any key employees, creators, NEDS not on employment contracts?
IP and Trademarks
1. Are all patents and trademarks fully up to date and paid in all jurisdiction?
a. Any challenges
b. Are searches and infringements up to date
c. All registered to company as opposed to individuals or assigned
1. Is there a defensive legal insurance plan in place?
2. Is there a risk plan
Health and Safety
1. Any outstanding issues
a. Accident history
b. Surveys for dangerous materials and risks
c. Insurance and so on?
Environment and Risk
1. Any outstanding issues
a. Risks history
b. Surveys for dangerous materials and risks
c. Insurance in place?
Insurance and Security
1. Insurance and breach history?
a. Any notes and codicils in our policies
b. Risk and review of insurance by the right people to spot gaps
Brand and PR
1. If we go online today, and search for the company, its directors, and its sector, what sentiment will we find?
2. What brand power does the company have on any independent measure?
3. How does this compare to competitors?
Documentation
1. Is all of the above readily available online in a controlled and secure folder structure?
Not planning is planning to fail, right?
We can help you plan to succeed in your fund raising before you approach any funders and before expend valuable executive time and reputation with investors.
If you are thinking of raising finance this year, or next, do please give us a call now. We will bring the wasp spray.