Embarking on fundraising involves strategic considerations across key stages for success. Let’s explore these phases:
1. Termsheet:
The foundation is laid with the termsheet, a preliminary, non-binding document outlining fundamental terms like valuation, investment amount, and governance structures. It sets the stage for negotiations and provides a blueprint for subsequent steps.
2. Due Diligence:
Legal Diligence:
Examining legal standing, identifying risks, and ensuring compliance.
Financial Diligence:
Reviewing financial statements, tax, and accounting for accuracy and transparency.
Commercial Diligence:
Assessing market positioning and growth potential.
Thorough due diligence is crucial for informed decision-making, risk mitigation, and building trust.
3. Contracts:
- SSA (Share Subscription Agreements): Defining rights and responsibilities of investors and founders.
- SHA (Shareholder Agreements): Providing a legal framework for collaboration.
- Employment Agreements: Ensuring alignment of interests and commitment to success.
4. Condition Precedent Completion:
A critical juncture ensuring all specified conditions are met before investment. Resolving outstanding issues identified during due diligence is crucial for moving forward.
5. Funding:
With conditions precedent satisfied, the actual funding phase begins, involving the transfer of committed capital. Coordination among legal, financial, and operational teams is paramount for a smooth execution, fostering trust among stakeholders.
6. Closing:
The culmination of the fundraising journey involves finalizing all agreements and documents, including allotment formalities. Attention to detail is crucial to avoid last-minute discrepancies, setting the stage for an enduring partnership.
In conclusion, successfully navigating fundraising demands meticulous planning, effective communication, and a commitment to transparency. Understanding and navigating these essential phases is key for entrepreneurs seeking capital and investors aiming for a mutually beneficial collaboration.
Author: Prashant Kumar Jain, Managing Partner
Disclaimer: The content of this article is intended to provide a general guide to the subject matter and that the same shall not be treated as legal advice. For any queries, the author can be reached at info@samistilegal.in
