*Please note that this series of articles provides a general guide to navigating a typical capital raise process. While this is based on our experience in previous capital raise matters, it will not be relevant in all circumstances and should not be treated as legal advice.

Much like a good heist movie, the first step in raising capital is to assemble the right team to fill crucial roles and help you navigate this complex process.

Of course, based on the resources and experience of your business, it may not be feasible or necessary to fill all these roles, however this is a good way of ensuring competency across the most important areas of the capital raise process.

Key roles

Founder (you!)

As founder, you hold the key to ensuring a successful capital raise. Investors are drawn towards founders who have the right skills, experience, and motivation to grow their business and make an impact for the investor.

Founders need to understand the gaps in their team. We see many clients who appoint strategic co-founders prior to the capital raise process. For instance, you may consider adding a tech co-founder that can assist you to focus on your skill set. Understand this may not be achievable for every founder, but it’s important to have a solution if an investor asks how you will solve this gap. Having a detailed understanding of how your business operates, and the key drivers of revenue, is therefore imperative.

Advisor

Advisors provide several different services, including (among other things):

Undertaking an assessment of the business and providing strategic advice with respect to issues and opportunities in scaling the business.
Assisting you to prepare a pitch deck (here’s Uber’s first pitch deck (one of our favourites).
Assisting you in preparing an information memorandum (IM).
Assisting you in putting together an advisory board.
Introducing you to investors and preparing you for pitching to these investors; and
Providing guidance and advice through the capital raising process and beyond.

Engaging an advisor will not be appropriate for all businesses, given that their professional fees are often substantial, and it may be more appropriate for businesses to allocate resources elsewhere. In this respect, advisors will often accept equity in the business as an alternative to a cash payment, allowing businesses to afford their services where they otherwise could not. These relationships can also ensure that the advisor is sharing risk with you and has more of a long-term engagement rather than on a project basis. However, such arrangements can be risky, and it is therefore crucial that a favourable remuneration structure is put in place with stipulations surrounding the quality and practical value of the services to be provided. The last thing you want to do is give away too much equity to someone that really isn’t providing any value to the business.

Accountant

If you have been running your business for some time, chances are you will already have an accountant. Accountants play a pivotal role in the capital raising journey, particularly in relation to assisting investors with conducting due diligence into your business. Accountants can also help you choose the right investment structure to maximise growth. Therefore, even if you already have an accountant, you may wish to discuss with them whether they have the necessary experience and skills to take you through the capital raise process.

Lawyer

When choosing a lawyer to represent you through the capital raising process, some key traits to look for are:

Undertaking an assessment of the business and providing strategic advice with respect to issues and opportunities in scaling the business.

Skill and experience working directly with founders.
Personal experience in the capital raising process (as founders).
Experience working with high-net worth investors, angel investors, family offices, VCs, and private equity funds.
Knowledge of typical investment structures and methods and the ability to advise you on the best structure for your specific needs.
Flexibility on legal fees, when these are paid and ensuring the costs are kept as low as possible (you don’t want your hard-earned capital eaten up with legal costs).

A good lawyer will be able to advise you as to the best method of raising capital - whether this be subscription agreements, convertible notes, or debt capital for your business. They will be able to assist in reviewing your existing contracts, updating documents, improving employment practices, and assisting you to understand your legal obligations.

Key questions

It is impossible to know for sure whether someone will be a good fit for your business. To minimise the risk of engaging the wrong person, it is important to vet potential candidates, just as prospective investors will vet your business. In doing so, some key questions to consider are:

What experience have you had in raising capital or growing a business?
Can you give examples of other founders, investors, or businesses you have worked with in this process?
How do you see yourself fitting with me and my business?

Merton Lawyers’ Corporate Team is well placed to assist founders from pre-seed to IPO. Anthony Curtin leads our corporate team and has a strong track record in founding, growing, and advising many businesses. Book a complimentary meeting today with Merton Lawyers to discuss your upcoming Capital Raise meeting.

Book a meeting

In our next entry in the Journal, the Merton Lawyers Corporate Team will be discussing the investment process – what type of investment is right for you?

Key contacts