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Posted on 10 April 2019
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Fundraising is a complex process that allows a company to obtain financing from investors. This operation enables to unlock the necessary financing to start, launch or develop a business. Discover the essential stages of a fundraising !
Before embarking on a fundraising process, you must ensure that your business plan and executive summary are solid. Indeed, these two documents are intended to convince investors of the potential and seriousness of your project.
Several criteria must be taken into account when targeting your future investors: their line of business, the companies in which they have already invested, their ability to accompany you and to follow you on the next rounds as well as the amount you want to raise .
Two axes are particularly important to dig:
Once the investors are selected, you will have to send your executive summary.
At Via ID, you can do it on our website by filling out a form or via an introduction. Once received, your application enters our analysis process and will be processed in the coming weeks.
If the investor is interested, he will organize an appointment in order to have more information about your project. This first exchange is decisive, because it is during this moment that the decision to follow or not the project will be made. If the investor is interested, you will have to send your business plan and possibly sign a NDA (non disclosure agreement).
At Via ID, the first appointment is usually by phone. This is a screening phase that validates our interest in your company. If necessary, other appointments will be organized to clarify certain points. Our analysts will thus establish an internal report gathering all the information related to your project.
Your project is then presented to partners at a committee. If the committee confirms its interest, your project is assigned to a partner. This person will lead the discussions and propose to make a new investment in your startup.
During this stage, investors will analyze your business plan more deeply. They will take a close look at your team, ask you for customer references, challenge your technology, study competition etc.
This study phase is the opportunity to identify your strengths and weaknesses and analyze the risks of your project.
It is at the end of the different committees and study phases that investors make their decision. The decision to invest is most often validated during an investment committee. You will have to pitch your project on this occasion.
The term sheet pre-defines the outlines of the shareholders’ agreement. As a reminder, the shareholders’ agreement makes it possible, among other things, to negotiate governance, securities (common stocks, preferred stocks, convertible bonds, etc.), cession rights and terms, the persons present at strategic committees, etc.
This document also defines the standard conditions precedent and the distribution of capital (cap table). Note that in case you have several investors, the lead investor will lead the discussions. It is also during the term sheet that the pre-money value is determined, which is the valuation of your startup.
The term sheet therefore marks the beginning of negotiations concerning the terms of the deal. Term sheet writing is iterative and evolves throughout the investment process.
During this stage, your business will be screened. A full audit will be carried out by experts, by the carrier of the deal and possibly by external firms if necessary.
A series of analyzes will be done: analysis of financial statements (cash flow, balance sheet, income statement etc.), your commercial agreements, your HR contracts, IT audit to verify that your IT architecture is reliable, secure and effective, legal audit, in particular to ensure that the startup owns the assets necessary to carry out its activity (eg trademark registration, patent) etc. Due diligence is also the opportunity to clarify legal and insurance terms.
The shareholders’ agreement is written on the basis of the term sheet previously negotiated. He will define and manage the relationships between the different shareholders of a company. The challenge is to find a balance between the defense of investors’ rights, the defense of historical shareholders and the company’s interests.
This agreement includes in particular the division of powers, the evolution of the shareholding, changes in the distribution of the share capital in case of cession, exit conditions etc.
This agreement is signed during the closing. This signature closes the lifting.
The closing is done during an extraordinary general meeting. It is during the closing that we sign the shareholder agreement.
Once everything is signed and the shares have been subscribed, investors provide the funds to the startup.
Fundraising is a complex process that takes a lot of time. It is therefore important to choose your investor (s), so they can become your partners and contribute fully to your development. In addition to providing funds, investors can also offer support, expertise and a good address book!
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