Steps to Take BEFORE Seeking Investors

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Steps to Take BEFORE Seeking Investors For Your Company Presented by: Dar’shun Kendrick, Esq./M.B.A. Kendrick Law Practice www.kendricklaw.net (678) 739-8109

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)