Welcome to the Robert Clegg blog. Raising investment for your startup is a lengthy, time-consuming, complicated and yet indispensable and exciting process. It can also be confusing about the order of events in obtaining funding, so we have put together a step-by-step account of what to expect on your journey to investment.
You will need to prepare a pitch deck which you can provide to potential investors. The pitch deck will need to set out the key details about the business including what the problem is addressing, how it will solve that problem, the market opportunity, competitors in the market and how you are different, details of your business model, financials, details of the team and your expertise and how much money you want to raise, for how much equity and what you are going to spend the investment on. If the business has had any good press, or you have had any good scientific peer reviews, or the like, it is good to mention this here too.
Next is due diligence. It is the term given to the investigatory work done around a transaction such as investment where the investor conducts detailed research into the financial, corporate and contractual status of your company. Your investors will usually make a preliminary request for you to provide documents which will include your corporate information, budgets, forecasts, key supplier/ customer contracts in place, employees and employment contracts, schedule of intellectual property, a schedule of property or leases, a list of equipment owned by the company, details of other investors, shareholders, and bank loans, any existing or future litigation, tax and VAT filings and insurance documentation, and, if applicable, your data protection policies.
Once the headline terms have been agreed and the due diligence has been completed, your (or the investor’s) solicitor will start to prepare the long form documentation which will implement the funding arrangement. This will set out the agreed terms in the term sheet in more detail. Future investors may want to see this agreement to know how much control other investors have in your company.
Once all the specific conditions of investment have been met, the documents have been prepared and terms agreed, a closing date will be scheduled for the signing of the agreements and the transfer of the shares and funds. Congratulations – you have successfully secured your first round of funding.