Who are the other parties involved?
All aspiring entrepreneurs and existing businesses start at a different point.
Taking a start up example, you have a good idea and need to write a business plan, and perhaps you are able to protect your idea with a patent or trade mark.
There are several organizations that can give you general help in becoming investment ready.
You will often have the product or service knowledge for your business and you will need the help of an accountant or your Finance Director to develop financial forecasts that are based on market potential and create an attractive business proposition.
You will find support organizations that provide workshops or more specific coaching that can help to prepare you, your team and your plan to attract investor interest.
You will need the help of an adviser to guide you through the process:
Refine and challenge your plan … to anticipate the questions and issues that investors will raise
Seek out potential investors and prepare for presentations to investors.
You will inevitably have to agree a valuation of the business as it stands pre-investment. There is no one formula, everyone will have a view from their own perspective. You will have your own view and your FD, adviser and accountant will be able to help you understand what the investors are seeking.
Once you have investor interest, you will need to agree Heads of Terms. This document is completed early on to outline the basis of the agreement between the parties.
If you have not already engaged a solicitor , you will need to do so.
After the Heads of Terms document has been signed you will be working exclusively with one potential investor to reach a full investment agreement. There are many legal aspects that need to be agreed and set out that relate to the investment, the company and how the parties will work together in the years ahead.
It is extremely important that this is thought through with people who have legal and practical business experience. You will be closely involved and it is vital that you have independent advice.
The investor(s) will have an experienced lawyer looking after their interests so you need to have your interests protected as well.
Whilst this is progressing, the investors will carry out due diligence, that is checking what you have told them and also investigating any other aspects of your business proposition that they wish to review. There will be a number of questions raised by the investor and your solicitor, Finance Director or accountant can help you respond.
There are many legal documents required to complete the deal, including the final investment agreement, shareholders agreement etc.
Completion: it will usually take several weeks to complete an investment deal after Heads of Terms have been signed, so be prepared. It is a very time consuming process and we recommend you find an experienced solicitor to protect your interests along the way.