Tomlinson Advisory: M&A and Capital Raising Law Firm

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Tips

The materials available at this website are for informational purposes only and not for the purpose of providing legal advice. 

TIPS TO GETTING YOUR FIRST INSTITUTIONAL MONEY

10/1/2018

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Tomlinson Advisory Group, LLC works with clients new or inexperienced in raising institutional money, whether from private equity, venture capital, high net worth individuals or otherwise.​
Here are tips to getting your first institutional money:

​ 1.       Raising Institutional Money is Plan B 
  • Expensive
  • Time Consuming
  • Path Uncertain
  • Strings are attached 

2.       3 Keys to Raising Outside Money:  Management, Management, Management
  • Business Plans are not unique, Management Teams are
  • Highlight Teams’ work Together, if possible, and separately, if necessary
  • Try to create a Team track record, even if different industry

3.       You are not Selling your Business, You are Raising Money
  • Selling a business implies owners are taking money off the table and exiting the running of the business
  • Raising Money is a natural part of the Investment Lifecycle

4.       MONEY:  How much do you need?  What do you need it for?  When do you need it?
  • Remember, you are raising money
  • You need a capital budget
  • Do not ask for too little, but do not ask for too much

5.       You are Selling a Balance Sheet
  • What are your business’ assets and liabilities
  • Financial statements need not be audited, but they need to be GAAP
  • Understand the effects of current and future indebtedness on your capital raise

6.       You are Making a Securities Offering
  • Informal:  Disclose everything relevant for an investment decision…Everything
  • Formal:  You need legal disclaimers
  • Avoid puffery

7.       Get Help with the Terms of Your Offering
  • Description of security
  • Governance
  • Board of directors
  • Veto powers
  • Transfer restrictions
  • Sale of the company

8.       Tie Valuation to Security Offering
  • Equity value is tied to exit at a higher valuation
  • Debt rate and terms are tied to risk and company’s ability to repay

9.       Conduct Reverse Diligence on Your Company
  • Intellectual Property:  All businesses have it
  • Contracts:  When do your contracts expire?
  • Corporate Diligence:  Have both stock and options been properly issued, transferred and terminated?
​
10.   What Role Do YOU Want?
  • Governance
  • Employment Agreement:  Terms are more than salary
  • Non-compete
  • Vesting on options
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