Compiling an Information Package for the Capital Raising Process

Our last post suggested conducting your own due diligence on potential financiers before engaging them to discuss the capital needs of your organization.  In addition to conducting research as preparation for those discussions, another question to be addressed is what information potential financiers will require to make a decision on your request for capital.

A financier's due diligence process can generally be categorized in the following stages:

• Introductory meeting
• Initial due diligence
• Final due diligence
• Negotiation of terms and conditions

Each stage of the financier's due diligence process requires an increased level of information from your organization.  In that regard, it is prudent to compile an information package for your organization before engaging potential financiers.  Creating an information package prior to engaging financiers will allow for more efficient interactions throughout your capital raising process; particularly as you are likely to interact with many different parties, each with different processes.  Developing a strong package allows you to streamline those interactions and more effectively address potential questions.

The content of an information package typically include the following:

• Business Plan (Word)
• Financial Projections (Excel)
• Company Overview presentation (PowerPoint)
• Frequently Asked Questions (Word)

A business plan is the most crucial element of an information package.  While we could dedicate multiple blog posts to the drafting of a solid business plan, I want to simply highlight here the key areas to be addressed, and provide an outline including those topics of most interest to financiers.  A solid business plan can be drafted in 15-25 pages, and while it should present the optimism inherent in your vision, it should offer a considerate view of both the opportunity and challenges ahead.  For social enterprises you should also ensure that your business plan appropriately addresses the social (or environmental) impact created by your organization, along with potential metrics by which you can assess that performance.

1.  Executive Summary

    a.  This should include one brief paragraph from at least each of the following sections; the sections should read generally in the order listed below, and total 1-2 pages.

        i.  Company Overview  (this i and ii are purposefully switched relative to the order that follows below as 2 and 3)               

       ii.  Market Opportunity and Competitive Landscape

      iii.  Products and Services

      iv.  Management Team and Governance

       v.  Financial Plan

2.  Market Opportunity and Competitive Landscape

    a.  This section tends to be data intensive; use tables, charts and graphs wherever possible in order to more effectively convey such information; examples include charts/graphs exhibiting market size, and tables outlining certain attributes of your organization relative to your competition

3.  Company Overview

    a.  Background on the company

    b.  Historical performance

4.  Products and Services

    a.  Examples/profiles of target customers

    b.  Summary of product offering (tabular format)

    c.  Discussion of operational structure (can also be included as separate section)

5.  Growth Strategy

     a.  Strategic plan (major goals, and the initiatives that will allow you to reach those goals)

6.  Management Team and Governance

    a.  Bios of key senior management and board of directors

    b.  Organizational chart

7.  Financial Plan

    a.  Summary 3-5 year financial projections including income statement, balance sheet and cash flow; include a table of key assumptions and perhaps a high and low case scenario in addition to the base case

    b.  Key performance metrics (tabular format)

8.  Risk Analysis

    a.  Identify the key challenges, or risks, that may be incurred in attempting to achieve your goals.  There is no need to hide this information from potential financiers.  They are going to ask the question regardless of whether it is offered to them so it is better to be well prepared, and to exhibit that you have considered such challenges, and have plans to mitigate such issues.

Financial projections are a similarly important piece of an information package, and as noted above, should be included in summary form in the business plan.  As mentioned in our previous post, for most financings five year projections are ideal, however shorter term projections can be appropriate for shorter term financings.  As also noted previously, you should be prepared to back up the key assumptions used to generate the projections.

We have referenced the need for a strong elevator pitch several times on this blog.  While a solid two minute pitch may be enough to obtain a meeting with a potential financier, certain organizations may request that you send materials briefly summarizing your organization and the financing opportunity prior to agreeing to a meeting.  This is where the company overview presentation offers value.

In compiling an information package, we typically recommend creating a comprehensive PowerPoint presentation that provides a solid overview of the organization in 15-25 slides (for larger organizations, or more complex financings, you can add additional information in appendices if necessary).  The benefit of using PowerPoint is the ability to then easily customize this large presentation into other forms, including an "introductory" presentation which can be created by cutting down the comprehensive presentation to 5-10 slides.  A PowerPoint presentation is also beneficial both in providing a document that can be walked through or projected on a screen during a meeting, and it allows data/charts to be more easily digested in a less text intensive format as compared to a Word document.  The categories that should be addressed in the company overview presentation are similar to those noted above in the business plan.

A frequently asked questions document is not necessary when compiling an information package, but we do recommend keeping a comprehensive list of all questions asked by potential financiers.  If certain questions continue surfacing, and they are not appropriately included in the other documents within the information package, then you may want to create a brief FAQ document to provide responses to those particular queries.

Solid drafts of each of the aforementioned documents will provide an immense benefit in streamlining your interactions throughout the capital raising process.  We hear from many of the CEOs with whom we work that raising capital is the most time intensive of their many responsibilities; hopefully some of the information here will help make that process a bit more productive.  In our next post we will advise as to how you can run a competitive tender process in order to obtain the best terms and conditions when raising debt or equity capital.