1. Crafting and honing your business plan
Does your plan convey a business rather than a concept? Have you sold an investment story? Can your management team deliver? Are you speaking investor’s language? ICON will help ensure you tell a compelling investment story.
2. Identifying and targeting the right investor
All VCs are different, they have different sector preferences, investment preferences, track records and management styles, knowledge of the individual VC firms and the VCs within them means we can specifically identify and fast track you to the right investors.
3. VC Meetings
It’s important to remember that VCs spend their lives meeting management teams, they sit through meeting after meeting with potential new businesses. To be successful, you will need to show clarity of vision and strategic thought, great knowledge of the market and why you believe you have what it takes to create a successful business. ICON will help increase your chances of success by helping you articulate a compelling business proposition.
Getting the right valuation is critical to the success of the deal as it sets the platform for the future wealth of the shareholders. Fundamental to achieving the right valuation is negotiation expertise and the establishment of the right platform for these negotiations.
The VC knows how your business operates, the market and the technology. They may well have had an industry expert to take a close look at the sector and the technology. If they like the technology, then it’s all about the market and the routes into the market, the pricing model and what existing customers think. If this stage goes well then it gets to the term sheet – ICON knows how they make these decision and we have the ability to change a good deal into a great deal.
6. Term Sheet
This sets out the indicative offer and terms on which the VC will invest. ICON will assess the valuation, deal structure and deal terms. Skill and innovation in deal structuring counts but remember a term sheet is not a completed deal.
7. Selecting the preferred investor
The principle objective of running the VC process is to end up with the cash required to develop your business, with the right investor on the right terms. There are also other critical factors to consider, subjective issues like, does the chemistry feel right between the investor and the business, are there lengthy internal procedures on the part of the VC which could add risk into the deal completing, are they over-promising on what they can deliver on, where is the value add, how remote or how involved as investors do they become, how will they be through tough times, what do other investors think of them. The reputation of the VC could have implications for attracting new investors into the business, are they a good name to have on the shareholder register and do they have deep pockets for further funding rounds. ICON will assess the different ramifications of the potential investors and advise you.
8. Due Diligence
Once you have made the choice of investor the pendulum of control swings in favour of the VC. Up to this point they have been courting you to get preferred investor status. Once they become the preferred investor they get a period of exclusivity in which to complete the deal. From here on in to completion they have the power. If you fall out of bed during this final run in, it may be very difficult to go back to the other investors as they become suspicious of why the deal has not gone through, or they may be pre-occupied with another deal.
What can go wrong at this stage? Unfortunately quite a bit – ranging from a market shift in sentiment, some poor due diligence, bad references on the management team, disagreement over the raft of legal documents which underpin the deal, a decline in the trading performance of the business, a new unknown competitor emerging, problems with the development of the technology, alliance partners or reference customers not coming through as planned, problems over protection of the IP, key employee decides to leave – there are a huge amount of things that can derail a deal between choosing the preferred investor and closing the deal. The trick is to close a deal as fast as you can between choosing the VC investor and completion. This is prime risk time, heavy diligence is now being paid for, legals are kicking off, you are getting deal fatigue and just want to get back to your business, so it’s a time for toughing it out, keeping focused, determined and above all calm. ICON will manage all these issues for you, we are there to keep you focused, determined and above all calm. We will keep momentum in the deal and steer you through to completion.
Completion date set, reams of documents to be signed, money sent to your bank, then back to the real task and the hard work of turning the cash invested into a hugely successful business. ICON will manage and orchestrate the completion process, keeping momentum in the deal and steering it through to close.