Fundraising is an important step for any company that wants to grow and expand, but the process can be hard and confusing. For a smooth and successful fundraising journey, it’s important to know the different steps of the process and what documents are needed for each step. We will cover the essential documents needed for each stage, how to prepare them, and what to expect. With this information, companies can increase their chances of successfully raising the funds they need to achieve their goals. This guide will provide you with the knowledge and tools you need to navigate the fundraising process with confidence, from preparing your documents to closing the deal.
1. Prepration stage
The list of documents needed for the preparation stage of deal negotiation may include the following:
- Business plan
- Financial projections
- Information about the company and its management team
- Market research, including information about the industry, competitors, and customer demographics
- Information about any patents, trademarks, or other intellectual property owned by the company
- Overview of the company’s products or services and their key features and benefits
- Information about any existing contracts or agreements with suppliers, customers, or other key partners
- Information about the company’s target market and sales strategy
- Executive summary that highlights the company’s key strengths and unique selling points
- Information about the company’s organizational structure and management team
- Information about the company’s financials, including revenue, profit, and cash flow
- Information about any regulatory or compliance requirements that apply to the company
- Information about any potential challenges or risks facing the company
- Information about any existing or potential legal disputes or liabilities
2. Approaching investors
The list of documents that are needed for approaching investors may include:
- Executive summary: A document that provides a brief overview of the company and its key strengths and unique selling points, as well as the investment opportunity and the use of funds.
- Financial statements: Audited or unaudited financial statements, such as balance sheets, income statements, and cash flow statements, to provide investors with an understanding of the company’s financial performance and position.
- Business plan: A document that outlines the company’s products, services, target market, sales strategy, and financial projections, as well as the management team and the ownership structure.
- Pitch deck: A visual presentation that provides an overview of the company, its products or services, target market, and financial projections, as well as the investment opportunity.
- Information Memorandum (IM) : it’s a document that provides detailed information about the company, its products or services, market and financials, as well as the terms of the investment, and the use of funds, this document is usually provided to the interested investors after the initial screening of the company’s proposal.
3. Due diligence stage
The list of documents that should be provided in the due diligence stage of a fundraising process may include:
- Audited financial statements for the past three to five years: to provide investors with a clear and accurate picture of the company’s historical financial performance.
- Unaudited financial statements (e.g., interim statements) for the current year: to give investors an up-to-date view of the company’s current financial position.
- Tax returns for the past three to five years: to provide investors with information about the company’s tax history and compliance.
- Detailed information on any outstanding debt or liabilities: to give investors an understanding of the company’s financial obligations and potential liabilities.
- Contracts and agreements with suppliers, customers, and other key partners: to provide investors with information about the company’s relationships with key stakeholders.
- Information on any pending or potential legal disputes: to give investors insight into any legal issues the company may be facing or could face in the future.
- Information on any patents, trademarks, or other intellectual property: to provide investors with information about the company’s intellectual property assets.
- Details on the company’s management and ownership structure: to give investors an understanding of who is running the company and who has a stake in it.
- Information on any regulatory or compliance requirements that apply to the company: to provide investors with information about the company’s regulatory compliance history and any ongoing obligations.
- Environmental and safety reports: to provide investors with information about the company’s environmental and safety performance and compliance.
- Detailed information on the company’s key assets and equipment: to give investors an understanding of the company’s physical assets and their condition.
- Information on the company’s organizational chart, including its management and key personnel: to give investors an understanding of the company’s structure and key people.
- List of customer and supplier with contact information: to give investors an understanding of the company’s customer and supplier base.
- Business Plan and Projections: to provide investors with an understanding of the company’s future plans, strategies and expected results.
- Marketing and Sales materials: to provide investors with an understanding of the company’s marketing and sales strategies and their performance.
- Information on any permitting and regulatory requirements: to provide investors with information about the company’s permitting and regulatory compliance history and any ongoing obligations.
- Insurance coverage information: to provide investors with information about the company’s insurance coverage and risk management.
- IT and Cybersecurity information: to provide investors with information about the company’s IT systems and cybersecurity protocols.
- Lease agreements: to provide investors with information about the company’s leased assets and any ongoing obligations.
- Environmental assessments and remediation plans: to provide investors with information about the company’s environmental performance and compliance.
4. Legal and Negotiations stage
The next stage after the Term Sheet stage is typically the Legal and Negotiations stage. During this stage, the legal process of drafting and finalizing the investment documents will begin. The documents needed for this stage may include:
- Legal documents such as the investment agreement, shareholders agreement, and any other agreements required for the deal which are to be reviewed, negotiated and finalized by the parties involved in the transaction.
- Corporate documents such as the articles of incorporation, bylaws, and any other organizational documents that may be required.
- Other legal documents such as licenses, permits, and any other regulatory approvals that may be required.
- Any other legal documents that may be specific to the industry or the nature of the business.
- The legal documents will be reviewed and negotiated to ensure that they are legally binding and enforceable, and that the rights and obligations of the parties are clearly defined.
5. Closing stage
The next stage after the Legal and Negotiations stage is typically the Closing stage. During this stage, all the legal and financial documents are finalized, and the funds are transferred to the company. The documents needed for this stage may include:
- Finalized legal and financial documents such as the investment agreement, shareholders agreement, and any other agreements required for the deal.
- Closing documents such as the stock purchase agreement, the share transfer forms, and the share certificates.
- Wire transfer instructions or any other instructions for transferring the funds to the company.
- Any other documents that may be required by regulatory authorities, such as filing for new shares or registering the change of ownership.
- After the closing, the company will be expected to use the funds to achieve the milestones and targets agreed in the term sheet. It’s worth noting that, the closing stage is the final step in the fundraising process and it’s crucial to ensure that all the legal and financial documents are in order, and that all the parties have fulfilled their obligations before finalizing the deal.
6. Post-Closing stage
The next stage after the Closing stage is typically the Post-Closing stage, during this stage, the company is expected to use the funds to achieve the milestones and targets agreed in the term sheet. The documents needed for this stage may include:
- Reports on the use of funds: This includes financial statements and other reports that demonstrate how the funds were used and the progress of the company towards the milestones and targets agreed in the term sheet.
- Compliance reports: This includes reports that demonstrate the company’s compliance with any regulatory or legal requirements.
- Board meeting minutes: This includes minutes of the board meetings that were held to discuss the progress of the company and the use of funds.
- Any other reports or documents that may be required by regulatory authorities, such as filing for new shares or registering the change of ownership.
During this stage, the company will be expected to use the funds for the agreed purposes, and to provide regular updates and reports to the investors. This stage is important as it helps ensure that the company is using the funds effectively and that the investors are informed about the company’s progress. It’s worth noting that, the post-closing stage is an ongoing process, and that the company will need to maintain communication and provide updates to the investors throughout the life of the investment.
