Steps to Take BEFORE Seeking Investors
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Transcript of Steps to Take BEFORE Seeking Investors
Steps to Take BEFORE Seeking
Investors For Your Company
Presented by: Dar’shun Kendrick, Esq./M.B.A.Kendrick Law Practicewww.kendricklaw.net
(678) 739-8109
Kendrick Law Practice * www.kendricklaw.net * (678) 739-8109
First, who are we?• Private Equity
Attorneys/Crowdfunding Experts• We keep the S.E.C. and state off
your back so you can run your business and raise money.• Specialties: *Legal compliance
(filing paperwork) *Securities Regulation *Document Drafting & Reviewing (investor agreements, PPMs, etc.)
• Sources: My LinkedIn Profile or SlideShare Presentation (Who Are We?)
Kendrick Law Practice * www.kendricklaw.net * (678) 739-8109
Disclaimer! Please read!
We do NOT find investors for clients.
Why? Section 3(a)(4)(A) of the 1933 Securities Act prohibits us from acting as “broker-dealers” unless we register as such; this includes “finders” or those that find investors for “issuers”, even if it is in a “consulting” capacity.Source: http://www.sec.gov/divisions/marketreg/bdguide.htm
Kendrick Law Practice * www.kendricklaw.net * (678) 739-8109
Why Take These Steps BEFORE seeking investors?
It’s simple….
Kendrick Law Practice * www.kendricklaw.net * (678) 739-8109
Step 1: Decide what is the CORE competency/advantage of your business.
• Your business is NOT your product or service but your overall business model. (Investors invest in businesses, not products or services.)• What do you DO the BEST
as a business? (Core competency)• What do you do BETTER or
DIFFERENT as a business? (Strategic competitive advantage)
Kendrick Law Practice * www.kendricklaw.net * (678) 739-8109
Step 2: Figure out what is the VALUE of your business. (“Valuation”)
• There are several methods that can be used:• Discounted Cash Flow (DCF)
Analysis• Multiples Method• Market Valuation• Comparable Transactions
Method• Source:
https://blog.udemy.com/business-valuation-methods/
• We will label this dollar amount “V” for later use.
Kendrick Law Practice * www.kendricklaw.net * (678) 739-8109
Step 3: Calculate much money do you need to raise?
• We will label this dollar amount “C” for later use.• The LAST thing you want
to do is be UNDERCAPITALIZED (i.e., without enough cash to grow your business or run out of cash too soon)
• Take into account operations, infrastructure, marketing and advertising costs, payroll expenses, etc.
Kendrick Law Practice * www.kendricklaw.net * (678) 739-8109
Step 4: Decide how much equity you need to give to investors.
• Take the amount of equity you own (it’s less if you have finished a round of financing) and this will be labeled “Y” for later use.• Let’s do some math:• C/V= E (the amount of
equity you need to give). • Y-E= X (the amount of equity
or ownership you will have left after the equity financing round)
Kendrick Law Practice * www.kendricklaw.net * (678) 739-8109
Step 5: Target the type of investor s that will be attracted to your business.• What investors are attracted to your
industry?• Some investors focus on specific
industries; some diversify more than others.
• What investors are attracted to your funding request?• Angels- $100k-$500k• VC- $5M or more• PE firms- $100M-$500M• Institutions- PE firms and above
• What investors will be attracted to your equity offering?• Some investors only are interested in
20% or more equity; others 5% is enough if it’s a HOT or high growth market.
Kendrick Law Practice * www.kendricklaw.net * (678) 739-8109
Step 6: Plan BEFORE you start solicitations….
1. Get your “Dream Team” together (Private Equity attorney, banker, accountant, management team, etc.)
2. Put together your Business Plan, including and especially financials (Be thorough and honest. Sell your business and know your numbers.)
3. Prepare your family and fellow founders for the “road show” (The “Road show” is when you pitch to various investors. It can be up to 6 months of hard work and long nights.)
4. List “ideal” equity partners (Don’t base on who gives you the highest valuation; you are looking for the RIGHT partner.)
Kendrick Law Practice * www.kendricklaw.net * (678) 739-8109
How can we help?• Legal Advice and counseling at
the very BEGINNING of your capital fundraising campaign• Refer investors and inquiries to
“your lawyer” and make an impression
• Legal compliance throughout your fundraising process• Securities law is tricky on the
federal and state level.
• We also offer consultations (Let’s decide what offering works for you)