"Essential Guide to Raising Capital"
Essential Guide to Raising Capital Workshop – Work Book Rev 1.0 October 2008 For more information refer www.escalator.co.nz or phone 0800-822-748 Escalator - Capital Raising (V1) Page 1 of 73 Blank Page Escalator - Capital Raising (V1) Page 2 of 73 Essential Guide to Capital Raising - Notes to participants Dear workshop participant, Welcome to the Essential Guide to Capital Raising. We strive to deliver condensed and pragmatic workshops tailored to entrepreneurs and welcome your honest and frank feedback. To access post workshop Escalator services such as an Investment Needs Assessment or Deal Preparation services, apply online at www.Escalator.co.nz. The online application process is as easy as filling in a Angel Soft drop sheet. If you have any difficulties please contact our help desk 0800-822-748. Escalator services are also available to help you with other growth strategies including Joint Ventures and Strategic Alliances. The “Power Pitching” is the follow on workshop from this workshop to this workshop. It is a combination of theory, hands on learning and critique. The material provided to you in today’s workshop is a collation of information sourced from NZTE , Growth Management Consulting Ltd and a number of other industry players for your benefit. We are thankful of NZTE’s funding to allow us to work in this exciting space and to be able to offer you services at an affordable rate. Your presenter today will be either (or both dependant on location): Mark Robotham, GM Escalator and founder Growth Management Consulting Ltd Growth Management Consulting LTD (GMC) is a consultancy service targeted at advisory services for high growth potential businesses , strategy and creation of succinct stories - pitches. www.GrowthManagement.co.nz www.succinctstories.com John Cunningham Escalator Broker and founder Ignition Partner Ltd Ignition Partner Limited advises companies on strategies for growth from innovation, with an emphasis on Technology, IP, Structure and Capital Planning. www.Ignitionpartner.com The Escalator Service also offers other specialist workshops on capital raising and strategic Alliances. Please refer to www.escalator.co.nz for an up to date training calendar. We rely on your feedback to ensure we are continuing to deliver a quality service to our clients, so please take the time to fill out the evaluation form enclosed with the workbooks, at the end of the session If you would like to discuss the next step for your business following this workshop, or for more information, please contact the Escalator Client Services Team on 0800-822-748. Yours sincerely, The Escalator Client Services Team Escalator - Capital Raising (V1) Page 3 of 73 Agenda Part One: Capital Investment 101 (9am – 10:30am) 1. Growth Options – Why raise capital? 2. What is Investment ready? - Help available - Escalator 3. Investment Process 4. Break Part Two: Deal Mechanics (10:30am – 12:30) 5. Valuation Methods 6. Deal Structures 7. Session Wrap Up (12:30 – 1pm) Part Three: Power Pitching (1pm – 5pm) 8. Refer Separate Work Book Workbook Contents • Presentation slides o Part One: Capital Investment 101 – Capital for Growth o Part Two: Valuation & Deal Structures’ • Handouts/exercises o Investment Flyer o Non Disclosure Agreement o Information Memorandum – format o Term Sheet o Due Diligence o Shareholders Agreement o Successful Escalator deals: Derceto , Smarter Than Jack (avocado press ltd) o Valuation evaluation worksheet o Exit valuation example for Company XYZ o Case Studies: Gunner Circuit Systems, Axado Pharmaceuticals, Analytic • Escalator o Investment Drop sheet o Power Pitching Workshop Flyer Escalator - Capital Raising (V1) Page 4 of 73 Part One: Capital Investment 101 Escalator - Capital Raising (V1) Page 5 of 73 Essential Guide to Capital Raising Mark Robotham email@example.com 021 61 8850 www.Escalator.co.nz Welcome - Please sign register Agenda Essential Guide Pitching Workshop (Separate Workshop) to Capital Raising Part One: Capital Investment 101 Part Three : – Growth Options – Why raise capital? Your Succinct Story – Investment ready? Investment Story • Help available - Escalator On Stage – Investment Process Part Two: Deal Mechanics – Valuation methods – Deal structures – negotiation tools www.growthmanagement.co.nz Introductions • 1 Minute - Introduction – Your name – Company name – What does you company do for its customers? – Have you raised capital before? – What do you want out of today? www.growthmanagement.co.nz Escalator - Capital Raising (V1) Page 6 of 73 1 Part one: Capital Investment 101 “Capital for Growth ?” www.growthmanagement.co.nz Growth Finance Options • FFFF – Founders, Friends, Family & Fools • Boot Strapping – Creative cash flow funded • Cash Flow Management – CAPEX, Debtor Mgt, Invoice factoring… • Strategic Alliances – Strategic partnerships, Joint venture, Licensing • Bank Debt • Merger & Acquisitions • Capital Investment • Grants • Exit Growth vs Control Strategy? www.growthmanagement.co.nz Why Raise Capital? Net Cash Flow ts en stm s ve turn r in re pe at ee r gre D o f Time www.growthmanagement.co.nz Escalator - Capital Raising (V1) Page 7 of 73 2 Failure to Get Investment • Top 3 – Individual Un-investable • Eg No Need for Help or to Late – No Succinct Story or Pitch • What do you do? • No Compelling Need – No Attractive Business Model • No money in it • Doesn’t easily scale www.growthmanagement.co.nz Do I need Investment? The emotive change cycle Denial Commitment “We don’t need to change” “OK so its happening” “Lets get on with it” “What happens now?” “I am not going to change” “What are my options” Resistance Exploration www.growthmanagement.co.nz Business or Hobby? www.growthmanagement.co.nz Escalator - Capital Raising (V1) Page 8 of 73 3 Investment Proposition Money in… Increase Value …Money out www.growthmanagement.co.nz Types of Investors • High Net worth's • Angel groups • Organised Groups • Funds • Customers • Suppliers www.growthmanagement.co.nz NZ Funds Map KOneWOne Size of Fund (Tindall) DCP (Estimate) New BPV Economy Tappenden West Coast Development Fund Holdings $million No. 8 Todd 200 TMT Ventures 150 Capital West Coast 110 Endeavour Rangatira Direct Development Fund O& Capital E 100 I-Cap Limited Active 60 I-Globe Equities 40 ANZ 30 Edinburgh J B Were Private Pencarrow 25 Trust Equity Old AMP Private Equity Economy GS Capital 0 5 10 15 20 25 30 Average Size of Transactions ($million) www.growthmanagement.co.nz Escalator - Capital Raising (V1) Page 9 of 73 4 Know your audience? Two Way Due Diligence • People - www.linkedin.com • Check out the investor carefully: • Directors - www.companies.govt.nz – Check their Web Site and Annual Report – Talk with other companies they have invested in – Find common acquaintances • What can they contribute beyond money? • How have they performed? • Are your ethics and styles compatible • Understand the features of other deals they have done (Board representation? Control?) • Understand their decision making process • See if there is a personal fit www.growthmanagement.co.nz What and for how much? Valuation: Idea ! An estimate of the businesses ability Risk to make money in the future. e Valu Prototype Trial customer “A risky business that makes $100 Sales – Early adopters is usually worth less than a non- risky business that makes $100.” Cash flow positive Time www.growthmanagement.co.nz Inventors vs Entrepreneurs Investible Inventors: • Make Money – (note: Web Businesses) • Patent applications filed • Engaged with a significant strategic partner • Track record of selling ideas • Some form of market feasibility study completed and specific to the product – service offering • Identified investment partners • Skin in game - significant prior cash investment • Can communicate • Acknowledge Gaps www.growthmanagement.co.nz Escalator - Capital Raising (V1) Page 10 of 73 5 Investible Web • Revenue – Cash flow positive a plus • Significant community membership (10,000+ UB per month) • True unique offering… – no one else already owns the community • Not paying external party to develop code • Investors interested • Strategic partner identified and documented www.growthmanagement.co.nz Valuation Inputs Financials – Current & Forecast Balance Sheet Cash flow P&L Variables + Benchmarking + Assumptions + Risk Assets: IP Misc People Model Track record Market Scalability Etc... Valuation www.growthmanagement.co.nz Validated Sales & P&L Forecast • Growth Companies use forward looking valuation models • Sales Forecast Validation = huge effect on final valuation of business • Inputs have a huge effect on the profitability of the business. • Validation helps to see how valid the inputs are and how a change in inputs can have an effect on the profitability and other business metrics. • Major Areas – Level of sales – Average price of sales – Cost of sales – Overheads Deal Killer- “Fantasy Factored Forecast” • Relatively small changes can lead to a significant improvement or decline www.growthmanagement.co.nz Escalator - Capital Raising (V1) Page 11 of 73 6 Required Returns vs Stage Company Stage ROI 5-year Increase in Capital SEED 60%+ 10x + STARTUP 50% 8x EARLY STAGE 40% 5x 2nd STAGE 30% 4x NEAR EXIT 25% 3x Eg 60% increase in value for 5 compounded years = 1,000% Increase = 10X www.growthmanagement.co.nz Standing out from the crowd • Investment ready www.growthmanagement.co.nz Selling Product or Company? Business Investment Model Opportunity Product www.growthmanagement.co.nz Escalator - Capital Raising (V1) Page 12 of 73 7 Great Companies Are Investible Companies Investment Negotiable Ready Realistic Valuation Based on logic Realistic Deal Compatible Coachable People Magnets Potential Exits Identified Effective Team People Creditability, Exit Culture & Attitude Product Business Model Scalable Business Quantified Value Exit Options Makes money Systems & Partners Barrier to Entry Market Simple Succinct Story Measured Customer Value Growth Market Validated Sustainable Value Unique Can handle 1000x production ROI IP strategy – freedom to operate Core competencies identified Simple Structure Validated Market Effective Partnerships www.growthmanagement.co.nz Investors View Adapted from – Tom McKaskill www.growthmanagement.co.nz Are you ready? – Bell Mason Diagnostic 4. Business Plan 3. Manufacturing 5. Marketing 2.Product PRODUCT MARKET 1. Technology 6. Sales Business Innovation 12. Control 7. CEO SYSTEMS PEOPLE 7. Team 11. Financeability 10. Cash 8. Board www.BellMasongroup.com www.growthmanagement.co.nz Escalator - Capital Raising (V1) Page 13 of 73 8 Business Model INFRASTRUCTURE OFFER CUSTOMER Customer Problem Partner Network Customer Relationships Core Capabilities Target Market Value Proposition Value Distribution Differentiators Channel FINANCE Cost Structure Revenue Streams Return (Profit) Components of a Business Model www.growthmanagement.co.nz Business Model • Classify • Revenue Streams • Margin vs. Volume • Describe • Cash flow -Break Even • Scalability - Overheads • Quantify www.growthmanagement.co.nz Getting Your Story Right! Its not what you say, Its what they remember. And what can they be bothered to pass on! You can not see your self Getting your succinct story right needs external help – Escalator Power Pitching Workshop - www.succinctstories.com www.growthmanagement.co.nz Escalator - Capital Raising (V1) Page 14 of 73 9 No Compelling Value Value Value Cost 30% Value - Gain www.growthmanagement.co.nz Pre – Post Investment Issues Post Investment Shareholder Investment Ready Transition Mind Set Growth Options Analysis New Governance Product Marketing, Growth Strategy Brand & Pitch Investment Leveraging Shareholders Vs Balance Sheet - Financials Control Strategy Growth Strategy Contracts & Compliance $ Implementing Investment Projects (people, suppliers, IP, companies act) Sales & Marketing SHAG (share holders agreement) Management Exit & Partners www.Escalator.co.nz www.growthmanagement.co.nz www.growthmanagement.co.nz Escalator - Capital Raising (V1) Page 15 of 73 10 Securities Act • A proposal for investment that involves offering securities to the public is subject to Securities Act disclosure regime. Must have registered prospectus. Heavy penalties for non compliance. • “Eligible Investors” – Relatives or close business associates of the issuer – Habitual investors (principal business is investment) – Selected otherwise than as a member of public – Wealthy and experienced (>$2m net assets & $200k income for 2 years) – Requires minimum subscription of at least $500,000 • Securities Act (Local Authority and Other Venture Capital Schemes) Exemption Notice 2003 e.g. EDANZ scheme, BizAngels – Must act under code of practice – register with scheme operator – Certain disclosure still required, but not as full or expensive. – Maximum funds raised $5m www.growthmanagement.co.nz Selecting Your Advisors • Use 2+ • Compatible experience • Forward looking challengers • Use a Advisory Board – Enterprise Capability Grant – Small business advisory board – http://www.nzte.govt.nz/section/14185.aspx • Kea • NZTE – Beachhead • NZTE - Escalator www.growthmanagement.co.nz Tidying the House • Company File – Share register, Board minutes etc • Contracts – Employment – Suppliers – Sales – Channel or Alliance Partners • Accounts – Clean Balance sheet • SHAG – Share Holders Agreement • Advisory Board www.growthmanagement.co.nz Escalator - Capital Raising (V1) Page 16 of 73 11 600 Training ? Deal- Investment Readiness Phase Education – Assessment – Deal Phase Training – Management 25 $20M 60 75 Needs Assessment 300 www.growthmanagement.co.nz Why Escalator? • Software developer by day – expert broker by night … yeah right – $20K professional services at your calling • 100% at Risk fee (no 50-50) – No client payment unless deal done • Analysis of options – Capital, JV , licensing, boot strap, debt finance www.growthmanagement.co.nz Acknowledgements • Bell Mason Diagnostic www.bellmasongroup.com • Tom McKaskill – www.tommckaskill.com • Jim Collins – Good to great www.jimcollins.com • Mark Robotham firstname.lastname@example.org www.growthmanagement.co.nz www.succinctstories.com • John Cunningham email@example.com www.growthmanagement.co.nz Escalator - Capital Raising (V1) Page 17 of 73 12 www.growthmanagement.co.nz Escalator - Capital Raising (V1) Page 18 of 73 Great Companies Are Investible Companies Investment Negotiable Ready Realistic Valuation Based on logic Realistic Deal Compatible Coachable People Magnets Potential Exits Identified Effective Team People Creditability, Exit Culture & Attitude Product Business Model Scalable Business Quantified Value Exit Options Makes money Systems & Partners Barrier to Entry Market Simple Succinct Story Measured Customer Value Growth Market Validated Sustainable Value Unique Can handle 1000x production ROI IP strategy – freedom to operate Core competencies identified Simple Structure Validated Market Effective Partnerships www.growthmanagement.co.nz Escalator - Capital Raising (V1) Page 19 of 73 600 Essential Guide to Capital Raising Workshop Training Misc Workshops Pitching Workshop* Contracts Escalator Service July 2008 - 2009 Strategic Partnerships Stage Initial Assessment Investor Ready & Education Preparation Panel Review Deal Prep Milestone Deal Broking Review Training & Advisory Services Peer Review 2nd Opinion Investor Drop Sheet & Approaches Investment Flyer, Milestone Broker Gating Negotiation Gap Analysis: Gating - Review Memorandum Deal Business Model Review Product Proposition Deal Potential or as agreed Outcome Base Line Growth Potential Deal Mandate 25 Assessment Referral -Acceptance Expectation Mgt $20M Recommendation 60 75 Raised Not Ready -Short NA Escalator Client Bi Monthly Reviews Young Company Finance YCF Angel Clubs - NZ Angel Assoc, NZVIF - Escalator 175 Assistance Re-Entry Bypass 300 Education & Deal Readiness Phase & Management Deal Phase Escalator - Capital Raising (V1) Page 20 of 73 Part Two: Valuation Deal Mechanics Escalator - Capital Raising (V1) Page 21 of 73 Part Two: Essential Guide to Capital Raising Mark Robotham firstname.lastname@example.org 021 61 8850 www.Escalator.co.nz Welcome - Please sign register VALUATION Deal Killer- “Unrealistic Valuation” www.growthmanagement.co.nz Valuation Defined Idea ! Valuation: An estimate of the businesses Risk ability to make money in the e Valu future. Prototype Trial customer Sales – Early adopters A risky business that makes $100 is usually worth less than a non-risky Cash flow positive business that makes $100. Time www.growthmanagement.co.nz Escalator - Capital Raising (V1) Page 22 of 73 1 How Much is your Business Worth? You need $1,000,000 dollars to develop a new export market… You are prepared to give up 20% of your business for the $1,000,000… This implies a pre-money (before the investment) valuation of $4,000,000! www.growthmanagement.co.nz Returns • Stages of Companies – Seed – Start up – Early Sales (“First Stage”) – Expanding Sales (“Second Stage”) – Exploding Sales (“Third Stage) • Required Returns – The value of the company depends upon the perceived risk of the business venture. – As the risk is a lot higher at the seed and start up stage a higher return is required and therefore the company value is reduced. www.growthmanagement.co.nz Required Returns vs Stage Company Stage ROI 5-year Increase in Capital SEED 60%+ 10x + STARTUP 50% 8x EARLY STAGE 40% 5x 2nd STAGE 30% 4x NEAR EXIT 25% 3x Eg 60% increase in value for 5 compounded years = 1,000% Increase = 10X www.growthmanagement.co.nz Escalator - Capital Raising (V1) Page 23 of 73 2 Pre – Post Money Valuation • Pre –Post Money – Pre-money: Value of the company before the investment – Post-money: Value after the investment • Example: If an investor invests 1 million for a 20% share the implied valuation post-money is 5 million dollars, 1/5 = 20% www.growthmanagement.co.nz Founder Dilution with Capital Raising – TRADE ME (estimated) Founders Total Founders Source Shares Shares Value Share Sam 1999 Morgan 100% Concept only Company Sam 13-08-99 Formed Morgan 75,000 50% 150,000 $150,000???? $75,000??? Sam 30-08-02 Annual return Morgan 60,000 31% 194,730 Something Sam 23-07-03 Annual return Morgan 60,000 31% 194,730 Something more Sam Something more 27-07-04 Annual return Morgan 63,171 32% 194,730 still… Sam 16-08-05 Annual return Morgan 63,171 32% 194,730 $ 700,000,000 227,082,114 Which would you rather own - 100% of something small or 32% of something Worth $700 million! www.growthmanagement.co.nz Information Requirements • Business Plan – Internal and external analysis of the business and environment – Strategies in place Financials – Current & Forecast Balance Sheet • Forecast Cash flow P&L Variables + Benchmarking + Assumptions + Risk – P&L Assets: – Balance Sheet IP – Cash Flows Misc People Model Track record Market • Information will support your Scalability Etc... funding requirements. Valuation www.growthmanagement.co.nz Escalator - Capital Raising (V1) Page 24 of 73 3 Valuation Methods SEP Trailing Based Forward Based Value Value • Highly complex to overly simple valuation methods. • Ultimately a business is worth “only as much as someone is willing to pay for it.” . www.growthmanagement.co.nz Valuation methods Common methods in the early stage capital raising space: 1. Market Value/Multiple 2. Discounted Cash Flow (DCF) 3. Venture Capital Method www.growthmanagement.co.nz Market Value/Multiple • Most widely used business valuation method. • Benchmark business with comparable companies sold that operate in the same industry. • Gives an indication of what the market is willing to pay. Requirements… – Normalised EBITDA (Profit) – Comparable company multiplier Example… A firm with EBITDA over the last three years of 4.2m, 4.4m, 4.3m has recently found that a comparable company has been sold at an EBITDA multiple of 3. What is the valuation? Answer… Normalised EBITDA =4.3m Comparable company multiple =3 Enterprise Value 4.3m x 3 = $12,900,000 www.growthmanagement.co.nz Escalator - Capital Raising (V1) Page 25 of 73 4 EBIT Multipliers 3 -7 Manufacturing – Stable High Growth Potential How well does it scale www.growthmanagement.co.nz Market Value/Multiple - Limitations • Ability to normalise profit – Early stage companies with large expected growth rates - not simple • Comparability of companies – Potential differences in business model or structure • Multiple – Often investors will use a multiple based on gut and personal experience (usually in the 3-5 range in New Zealand) www.growthmanagement.co.nz Discounted Cash Flow Method • Best method when – Cash flows more important than profit (early stage expansion/growth) – Investor is concerned with return over specific time period (key when investors plan to exit) – High growth rate • Simply discounting future cash flows for risk and opportunity cost. • Requirements… – Forecasted cash flows • Normally 3 - 5 years – Understanding of risk/return requirements of investors. www.growthmanagement.co.nz Escalator - Capital Raising (V1) Page 26 of 73 5 Discounted Cash Flow Method - Limitations • Ability to accurately forecast cash flows • Risk/discount rate assumptions • Needs common sense to evaluate result – Not a scientific process www.growthmanagement.co.nz DCF - Mechanics EBIT 229,958 396,572 827,839 Valuation on 15% DCF Addback Depreciation (13,020) (13,020) (13,020) 242,978 409,592 840,859 = sum(yr1,yr2,yr3) = $1,073,875 DISCOUNTED CASHFLOWS (ASSUME START YR IS 2007) NPV Discount rate 10% 220,889 338,506 631,750 1,191,145 15% 211,286 309,710 552,879 1,073,875 20% 202,482 284,439 486,608 30% 186,906 242,362 382,731 50% 161,986 182,041 249,144 60% 151,861 159,997 205,288 517,146 = NPV(rate,value) = Value / (1+discount)^years =NPV (10%, 242978) = 409,592 / (1+ 0.6)^2 = Value / (1+discount)^years = 840,859 / (1+ 0.6)^3 refer to spreadsheet in handouts www.growthmanagement.co.nz NPV • Net present value • Net present value (NPV) is a comparison of a dollar today to a projected value for the same dollar at some point in the future. Alterations to its value such as returns on investment and currency inflation are taken into consideration. If a certain project has a negative net present value, then it is likely to be rejected. However, a project with a positive net present value is likely to be accepted. Certainly, as mortals we do not know what the future will hold, even for such a thing as an investment. A positive NPV simply means that the company or organization, after accounting for the factors in an investment, deems it to be a positive cash flow rather than a negative one. In one example, a computer hardware business is looking to buy an existing store, and when calculating the estimated cash flows in the future, it considers those to be worth $800,000 as a current lump sum. If the store's owner is willing to sell for less than $800,000, the acquiring business would consider it a positive NPV investment. If the cost is more than the expected $800,000 cash flow, then it would be viewed by the business as a negative in net present value. www.growthmanagement.co.nz Escalator - Capital Raising (V1) Page 27 of 73 6 Venture Capital Method Company Stage ROI 5-year Increase in Capital SEED 60%+ 10x + STARTUP 50% 8x EARLY STAGE 40% 5x 2nd STAGE 30% 4x NEAR EXIT 25% 3x www.growthmanagement.co.nz Venture Capital Method Example Investment $1M Exit Year $5th year after investment Revenues (in 5th year) $20 million Net Profit (in 5th year) $10% of $2 million P/E (comparatives) $15x Company value (in 5th year) $30M Required ROI (from table) 60% = 10x Required ROI (in dollars) $10 million % Ownership in Coy 33% Pre-money Valuation $2M www.growthmanagement.co.nz Exit Strategy Exit • Investors in the early Planned or Not IPO stage market do not Cash Flow Sale tend to be long-term. Trade Sales • A clear exit strategy Asset Sale needs to be laid out: Orderly Shutdown – Selling their shares back to the business – Sale of the company – Listing on the stock exchange Zero Bankruptcy www.growthmanagement.co.nz Escalator - Capital Raising (V1) Page 28 of 73 7 Reality Check • Valuations are merely a starting point for negotiations. • Your perceived value of the business may not be the value a potential investor sees. • Expect multiple rounds • Focus on shareholder value not percentage shareholding • Expect terms… www.growthmanagement.co.nz Valuations Final Word Not an absolute science, so negotiate…but be realistic! • Discounted cash flow (DCF) • EBIT multiple/EBIT Data • Forecast multiple • Price earnings ratio • Net tangible assets • Other “If pressed we would use DCF re forecast for early stage companies, PE or EBITDA multiples or published market rates for companies with revenues. To be fair, most valuations are based on how much do you need and how much will you give up to get it.” (Escalator Broker on typically used valuation methods.) www.growthmanagement.co.nz Bridging the Gap “the terms” Deal Killer- “Inability to negotiate” www.growthmanagement.co.nz Escalator - Capital Raising (V1) Page 29 of 73 8 Deal types Equity Non-Equity Ordinary equity (shares) Debt Preferential equity Licensing Convertible notes Strategic Partners Joint Ventures www.growthmanagement.co.nz Equity Deals • Issuing shares for capital is a simple investment • Options exist: • Carrots and sticks can be created • Structured buy-in • Structured sell out • Shareholders (SHAG) Agreement www.growthmanagement.co.nz Tools to Consider - Pricing/Valuation The investor will nearly always have a different view on valuation either: – Agree a fixed price, or Pricing tools: – Future price based on multiples – The ‘earn out’ – Negotiate a solution – Stepped returns to investors Anything is possible with a Shareholders Agreement www.growthmanagement.co.nz Escalator - Capital Raising (V1) Page 30 of 73 9 The Earn Out Solution • Used when profit low, and/or can’t agree on valuation and/or potential growth, or just as incentive • Predict future net profit • Value (usually a multiplier of EBIT) • Set agreed milestones • Value again in 2 - 3 years • If goals achieved, receive a top up - shares and/or cash This can help if there is a wide gap between your valuation and the incoming investor www.growthmanagement.co.nz Terms – Carrots& Sticks • Equity – Non Equity • Bridging Valuation Gaps – Ratchets, Earn outs • Control Exits – Tag Along, Drag Along – Reluctant Shareholders - Forced Sales • Clean Balance Sheet (removed debt) – Unplanned Exits – Russian roulette • Bridge Risk – Convertible notes • More carrots • Maintain control – Bonuses – Profit share – Financial Authority – Put /Call • Poison Pills • Funding Milestones • Protecting Minority Interests • Milestone Funding www.growthmanagement.co.nz Shareholders Agreement (SHAG) Simple Shareholding • SHAG – Is a mechanism for distributing returns to – Opex / capex decisions investors – Right of veto on major decisions – Is a simple instrument for exercising – Anything operational / strategic control – Subscription for New Shares 51% gives a simple majority – Appointment of Directors Directors decide dividend distribution – Settlement policy – Further Issues of Shares and Rights of 75% for ‘major transactions’ Sale – Ongoing Arrangements – General Provisions – dividends, major transactions, etc – Schedules See Example SHAG in workbook www.growthmanagement.co.nz Escalator - Capital Raising (V1) Page 31 of 73 10 Equity Deals Equity Ordinary equity These are shares that are entitled to all income and capital after (shares) the rights of other classes of capital and creditors have been satisfied Preferential equity A security that has preference over ordinary equity with respect to dividends or payments when liquidating the company. They may also have rights to block certain transactions Convertible notes A security that can be converted to ordinary equity under certain conditions. These notes often have special rights that the ordinary equity does not. www.growthmanagement.co.nz Non-equity Deals Non-Equity Debt The borrowings of a company that ordinarily is repaid prior to equity being paid. It is normally interest bearing and has a defined repayment terms. Debt has priority upon winding up. Licensing A legal agreement entitling the owner to undertake a specific activity (e.g. sales license, manufacturing license). For a useful guide, refer to Robert Auerbach’s ‘Granting a Licence to Manufacture Products’, available at: http://www.marketnewzealand.com/MNZ/services/14433.aspx?Exporter=true Strategic A partnership where two parties agree to work together for mutual benefit. It can Partnership involve several licenses and an agreement to develop a product / market together. Joint Ventures Similar to a strategic partnership, although a JV has a separate legal standing as an entity (enabling it to be sued). For a useful guide, refer to Robert Auerbach’s ‘Joint Venture Agreement’, available at: http://www.marketnewzealand.com/MNZ/services/14433.aspx?Exporter=true www.growthmanagement.co.nz Controlled exits… Do you want to control who can buy out the investor? Do you want the investor to control who can buy you out? http://vcexperts.com/vce/library/encyclopedia/glossary.asp Pre emptive A shareholder's right to acquire an amount of shares in a future offering at current prices per share paid by new investors, whereby his/her percentage • Right ownership remains the same as before the offering Put/ Call The right to sell / buy at given price (or Range) within a given time period Ratchet: Ratchets reduce the price at which investor can convert their debt into preferred stock, which effectively increases their percentage of equity. Often referred to as an “antidilution adjustment.” Drag Along: A majority shareholders' right, obligating shareholders whose shares are bound into the shareholders' agreement to sell their shares into an offer the majority wishes to execute. Tag Along: A minority shareholder protection affording the right to include their shares in any sale of control and at the offered price. www.growthmanagement.co.nz Escalator - Capital Raising (V1) Page 32 of 73 11 Preference Terms – VC Investors • Different share type – ‘preferred shares’ now common • Preference plus advantages of ordinaries • Preferences include: • Liquidation preference (1-3 times) • Preferential dividends • Anti-dilution (full ratchet or weighted average) • Protective mechanisms (e.g. board, consent requirements) • Exit provisions (Source: ‘Recent Developments in VC and PE terms and Structures’ – Presentation by Andrew Lewis, Simpson Grierson .) www.growthmanagement.co.nz Example: Mixed funding Tranche 1 Tranche 2 Tranche 3 Total Preference Shares (VC) $2m $2m Convertible Note (VC) $3m $2m $5m Debt (bank) $3m $3m Total $5m $2m $3m $10m www.growthmanagement.co.nz Non-Equity Deals - Types & Tools • Debt • Licensing agreements - Sales & distribution - Manufacturing • Technology development agreement • Joint venture • Strategic partnership www.growthmanagement.co.nz Escalator - Capital Raising (V1) Page 33 of 73 12 Private Debt • Security documentation ⎯ Mortgage of business and personal property U IO ⎯ Discharge/priority of existing debt ⎯ Personal guarantees • Key issues: ⎯ Funding ‘tagged’ to specific purposes ⎯ Restriction on asset disposal ⎯ Dividends/distributions or repurchase shares ⎯ Compliance with financial ratios www.growthmanagement.co.nz Licensing – Issues and Consideration Sales / distribution / marketing license: Manufacturing license: • Royalties / license fees • Ownership of IP, designs etc • Ownership of IP • Capital equipment required • Term • Royalties / license fees / other fees • Minimum / maximum volumes • Training • Market research • Market development commitment • Post sales support Some times these licenses can be with the same counter parties - but, can they do it all? www.growthmanagement.co.nz Technology Development Agreement • IP Ownership (pre agreement) • Funding commitment • Resource commitment • Term • IP ownership (post development) • Management structure www.growthmanagement.co.nz Escalator - Capital Raising (V1) Page 34 of 73 13 Joint Venture A joint venture can take many different legal forms: • Formal ‘joint venture’ • Unincorporated joint venture • Partnership The joint venture’s scope can be as broad as: • Sales / distribution • In-market representation • Manufacturing • Technology development • In-market support • Administration www.growthmanagement.co.nz Wrap Up Deal Killer “failure to explore options” www.growthmanagement.co.nz Collaboration in the Industry • Developing Industry – Angel Groups – Industry players • Training Investors • Sharing Knowledge www.growthmanagement.co.nz Escalator - Capital Raising (V1) Page 35 of 73 14 Drop Sheets • AngelSoft – Automating deal management – Syndication www.growthmanagement.co.nz More Training • Power Pitching – What do you do again? www.succinctstories.com • Specialist – Contracts – Strategic Deals www.growthmanagement.co.nz What Are Your Takeaways? • Raising Capital is a finance tool • Is your business an investible proposition? – succinct story – business model – Advisory group • Register for a free Needs Assessment www.escalator.co.nz www.growthmanagement.co.nz Escalator - Capital Raising (V1) Page 36 of 73 15 Contact Details: www.Escalator.co.nz Apply for Help: www.escalator.co.nz Mark Robotham Mark@escalator.co.nz www.escalator.co.nz www.GrowthManagement.co.nz 021 61 8850 Brendan Mahar – Help Desk Brendan@escalator.co.nz 0800 822 748 Ben Grant – Help Desk Ben@escalator.co.nz 0800 822 748 www.growthmanagement.co.nz Acknowledgements • Bell Mason Diagnostic www.bellmasongroup.com • Tom McKaskill – www.tommckaskill.com • Jim Collins – Good to great www.jimcollins.com • Mark Robotham email@example.com www.growthmanagement.co.nz www.succinctstories.com • John Cunningham firstname.lastname@example.org www.growthmanagement.co.nz Escalator - Capital Raising (V1) Page 37 of 73 16 DCF - Mechanics EBIT 229,958 396,572 827,839 Valuation on 15% DCF Addback Depreciation (13,020) (13,020) (13,020) 242,978 409,592 840,859 = sum(yr1,yr2,yr3) = $1,073,875 DISCOUNTED CASHFLOWS (ASSUME START YR IS 2007) NPV Discount rate 10% 220,889 338,506 631,750 1,191,145 15% 211,286 309,710 552,879 1,073,875 20% 202,482 284,439 486,608 30% 186,906 242,362 382,731 50% 161,986 182,041 249,144 60% 151,861 159,997 205,288 517,146 = NPV(rate,value) = Value / (1+discount)^years =NPV (10%, 242978) = 409,592 / (1+ 0.6)^2 = Value / (1+discount)^years = 840,859 / (1+ 0.6)^3 refer to spreadsheet in handouts www.growthmanagement.co.nz Escalator - Capital Raising (V1) Page 38 of 73 Company Limited P & L Forecast for the year ending 31 March 2008 2008 2009 2010 SALES - - - Total Sales 3,238,241 4,147,318 5,311,601 3,238,241 4,147,318 5,311,601 Discounts given (226,677) (290,312) (371,812) Total Sales 3,011,564 3,857,006 4,939,789 COST OF SALES Opening stock 116,329 116,329 116,329 Cost of production 1,652,852 2,116,860 2,711,130 Closing stock (116,329) (116,329) (116,329) Total Cost of Sales 1,652,852 2,116,860 2,711,130 Gross Margin 1,358,712 1,740,145 2,228,659 % 45.12% 45.12% 45.12% OTHER VARIABLE COSTS Sales Administration 120,463 154,280 197,592 Logistics 60,231 77,140 98,796 Total Variable Costs 180,694 231,420 296,387 Gross Profit 1,178,018 1,508,725 1,932,272 % 39.12% 39.12% 39.12% Gross Profit C/Fwd 1,178,018 1,508,725 1,932,272 EXPENSES ADMINISTRATION EXPENSES General Administrative Expense 67,004 67,004 67,004 Couriers & Postage 3,020 3,020 3,020 Computer Expenses 1,000 1,000 1,000 Office Expenditure 5,940 5,940 5,940 Telecommunications 20,400 20,400 20,400 HR Costs 439,530 552,373 587,486 Vehicles 15,007 15,007 15,007 Occupancy Costs 57,659 57,659 57,659 Travel 15,000 15,000 15,000 Total Administration Expenses 624,560 737,403 772,516 PRODUCT DEVELOPMENT Product Development 20,000 22,500 20,000 Quality Control 99,000 107,750 101,500 119,000 130,250 121,500 MARKETING EXPENSES Design 12,000 52,000 50,000 Promotion 55,000 55,000 45,833 General Marketing 137,500 137,500 114,583 Total Marketing Expenses 204,500 244,500 210,417 TOTAL EXPENSES 948,060 1,112,153 1,104,432 EBIT 229,958 396,572 827,839 Addback Depreciation (13,020) (13,020) (13,020) 242,978 409,592 840,859 DISCOUNTED CASHFLOWS (ASSUME START YR IS 2007) Discount rate 10% 220,889 338,506 631,750 15% 211,286 309,710 552,879 20% 202,482 284,439 486,608 30% 186,906 242,362 382,731 50% 161,986 182,041 249,144 60% 151,861 159,997 205,288 (has not taken into terminal value) Example is purely to demonstrate the effect the discount rate has on valuation Escalator - Capital Raising (V1) Page 39 of 73 Company Limited (ANSWERS) P & L Forecast for the year ending 31 March 2008 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 SALES - - - - - - - - - - - - Total Sales 240,313 245,319 250,430 255,647 260,973 266,410 271,960 277,626 283,410 289,315 295,342 301,495 240,313 245,319 250,430 255,647 260,973 266,410 271,960 277,626 283,410 289,315 295,342 301,495 Discounts given (16,822) (17,172) (17,530) (17,895) (18,268) (18,649) (19,037) (19,434) (19,839) (20,252) (20,674) (21,105) Total Sales 223,491 228,147 232,900 237,752 242,705 247,762 252,923 258,192 263,571 269,063 274,668 280,390 COST OF SALES Opening stock 116,329 116,329 116,329 116,329 116,329 116,329 116,329 116,329 116,329 116,329 116,329 116,329 Cost of production 122,660 125,215 127,824 130,487 133,205 135,980 138,813 141,705 144,657 147,671 150,747 153,888 Closing stock (116,329) (116,329) (116,329) (116,329) (116,329) (116,329) (116,329) (116,329) (116,329) (116,329) (116,329) (116,329) Total Cost of Sales 122,660 125,215 127,824 130,487 133,205 135,980 138,813 141,705 144,657 147,671 150,747 153,888 Gross Margin 100,831 102,932 105,076 107,265 109,500 111,781 114,110 116,487 118,914 121,392 123,921 126,502 % 45.12% 45.12% 45.12% 45.12% 45.12% 45.12% 45.12% 45.12% 45.12% 45.12% 45.12% 45.12% OTHER VARIABLE COSTS Sales Administration 8,940 9,126 9,316 9,510 9,708 9,910 10,117 10,328 10,543 10,763 10,987 11,216 Logistics 4,470 4,563 4,658 4,755 4,854 4,955 5,058 5,164 5,271 5,381 5,493 5,608 Total Variable Costs 13,409 13,689 13,974 14,265 14,562 14,866 15,175 15,492 15,814 16,144 16,480 16,823 Gross Profit 87,422 89,243 91,102 93,000 94,938 96,916 98,935 100,996 103,100 105,248 107,440 109,679 % 39.12% 39.12% 39.12% 39.12% 39.12% 39.12% 39.12% 39.12% 39.12% 39.12% 39.12% 39.12% Gross Profit C/Fwd 87,422 89,243 91,102 93,000 94,938 96,916 98,935 100,996 103,100 105,248 107,440 109,679 EXPENSES ADMINISTRATION EXPENSES General Administrative Expense 5,584 5,584 5,584 5,584 5,584 5,584 5,584 5,584 5,584 5,584 5,584 5,584 Couriers & Postage 252 252 252 252 252 252 252 252 252 252 252 252 Computer Expenses 83 83 83 83 83 83 83 83 83 83 83 83 Office Expenditure 495 495 495 495 495 495 495 495 495 495 495 495 Telecommunications 1,700 1,700 1,700 1,700 1,700 1,700 1,700 1,700 1,700 1,700 1,700 1,700 HR Costs 31,404 31,404 31,404 31,404 31,404 31,404 31,404 43,941 43,941 43,941 43,941 43,941 Vehicles 1,251 1,251 1,251 1,251 1,251 1,251 1,251 1,251 1,251 1,251 1,251 1,251 Occupancy Costs 4,805 4,805 4,805 4,805 4,805 4,805 4,805 4,805 4,805 4,805 4,805 4,805 Travel 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 Total Administration Expenses 46,823 46,823 46,823 46,823 46,823 46,823 46,823 59,360 59,360 59,360 59,360 59,360 PRODUCT DEVELOPMENT Product Development 1,667 1,667 1,667 1,667 1,667 1,667 1,667 1,667 1,667 1,667 1,667 1,667 Quality Control 8,250 8,250 8,250 8,250 8,250 8,250 8,250 8,250 8,250 8,250 8,250 8,250 9,917 9,917 9,917 9,917 9,917 9,917 9,917 9,917 9,917 9,917 9,917 9,917 MARKETING EXPENSES Design 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 Promotion 4,583 4,583 4,583 4,583 4,583 4,583 4,583 4,583 4,583 4,583 4,583 4,583 General Marketing 11,458 11,458 11,458 11,458 11,458 11,458 11,458 11,458 11,458 11,458 11,458 11,458 Total Marketing Expenses 17,042 17,042 17,042 17,042 17,042 17,042 17,042 17,042 17,042 17,042 17,042 17,042 TOTAL EXPENSES 73,781 73,781 73,781 73,781 73,781 73,781 73,781 86,319 86,319 86,319 86,319 86,319 EBIT 13,641 15,462 17,321 19,219 21,157 23,135 25,154 14,677 16,781 18,929 21,122 23,360 Addback Depreciation (1,085) (1,085) (1,085) (1,085) (1,085) (1,085) (1,085) (1,085) (1,085) (1,085) (1,085) (1,085) CASHFLOWS 14,726 16,547 18,407 20,305 22,242 24,220 26,239 15,763 17,867 20,015 22,207 24,446 DISCOUNT RATE 6% 15% 20% 30% 40% 50% Escalator - Capital Raising (V1) Page 40 of 73 Handouts & Additional Reading Escalator - Capital Raising (V1) Page 41 of 73 SAMPLE FLYER SAMPLE FLYER COMPANY OVERVIEW INTRODUCTION [The review should cover the following aspects:] The Shareholders of [ ] (the “Company") have decided to seek additional investment in the Company. IP Limited has been appointed by the Shareholders to act as their adviser History and to manage the process. No approaches in relation to the process should be made to the Company. Management and Employees This Information Flyer provides a description of the key investment highlights, an overview Operations of the Company, a description of the investment process and an indicative timetable. Summary Financial Information INVESTMENT HIGHLIGHTS A summary of the Company’s recent financial performance and position is set out below. [Outline key selling features which could include: [You may include commentary to explain historic performance and growth expectations]. Strategic Asset/Player – Track Record - Growth Prospects – Key Contracts and Customer Relationships - Processing Facilities – Low Cost, High Quality Production Competitive Strategy - Financing Options – Skilled Management – Strong Barriers to Entry - Other Escalator - Capital Raising (V1) Page 42 of 73 SAMPLE FLYER THE INVESTMENT PROCESS AND INDICATIVE TIMETABLE Investment Process Potential investors will be provided with, at the option of IP Limited and the Shareholders of the Company, an Information Memorandum that will describe the business of the Company. Prior to the release of the Information Memorandum potential purchasers will be requested to sign a Confidentiality Agreement. Selected potential investors will be given access to further confidential information to enable them to conduct their own due diligence investigations. The Shareholders of the Company and IP Limited reserve the right at their sole discretion to include potential investors in or to exclude potential investors from, the shortlist. A shareholders agreement will be issued to shortlisted potential investors during the due diligence process. The Shareholders of the Company and IP Limited reserve the right at their sole discretion to change or discontinue the investment process at any time without notice. Indicative Timetable Information Memorandums Issued Proposals received Due Diligence Settlement Escalator - Capital Raising (V1) Page 43 of 73 CONFIDENTIALITY AGREEMENT THIS AGREEMENT is made this (date) (name of Company 1.) BETWEEN Company 1. and AND Company 2. (name of company 2.) BACKGROUND A. Company 2. will be provided with information owned by Company 1. and Company 1. will be provided with information owned by Company 2. which is commercially sensitive and highly confidential. B. The purpose of the provision of the information to the respective parties is to enable Company 1. and Company 2. to consider entering into a business relationship / strategic alliance / joint venture. C. Company 1. and Company 2. have agreed to be bound by duties of CONFIDENTIALITY AGREEMENT confidentiality and secrecy. IT IS AGREED as follows: 1. Definitions “Company 1. Confidential Information” shall mean all information and data which is disclosed to Company 2., and which relates to the business activities of Company 1. and which is not in the public domain. “Company 2. Confidential Information” shall mean all information and data which is disclosed to Company 1. and which relates to the business activities of Company 2. and which is not in the public domain. 2. Non-Disclosure In consideration of Company 1. furnishing Company 2. with the Company 1. Confidential Information, Company 2. agrees not to disclose or otherwise publish the Company 1. Confidential Information without the prior written consent of Company 1. In consideration of Company 2. furnishing Company 1. with the Company 2. Confidential Information, Company 1. agrees not to disclose or otherwise publish the Company 2. Confidential Information without the prior written consent of Company 2.. Escalator - Capital Raising (V1) Page 44 of 73 Page 2 of 3 3. Use Company 2. agrees not to use the Company 1. Confidential Information for any purpose other than that for which the information was provided. Company 1. agrees not to use the Company 2. Confidential Information for any purpose other than that for which the information was provided. 4. Material Company 2. shall take all reasonable care to ensure that all materials in the possession of Company 2. which contain or incorporate Company 1. Confidential Information be securely kept; and shall return, destroy or otherwise deal with as directed all material containing or incorporating Company 1. Confidential Information on the direction of Company 1.. Company 1. shall take all reasonable care to ensure that all materials in the possession of Company 1. which contain or incorporate Company 2. Confidential Information be securely kept; and shall return, destroy or otherwise deal with as directed all material containing or incorporating Company 2. Confidential Information on the direction of Company 2.. 5. Other Agreements Company 2.’s obligations in respect of the Company 1. Confidential Information shall be in addition to any other obligation under any other agreement which involves the Company 1. Confidential Information, unless expressly excluded by reference. Company 1.’s obligations in respect of the Company 2. Confidential Information shall be in addition to any other obligation under any other agreement which involves the Company 2. Confidential Information, unless expressly excluded by reference. 6. Term of Agreement This agreement shall continue until an agreement in respect of a business relationship / strategic alliance / joint venture between Company 1. and Company 2. is entered into, or Company 1. and Company 2. agree that Company 1.’s and Company 2.’s obligations under this agreement shall cease. SIGNED for and on behalf of ) Company 1. ) SIGNED for and on behalf of ) Company 2. ) confagree1 Escalator - Capital Raising (V1) Page 45 of 73 SAMPLE INFORMATION MEMORANDUM SAMPLE INFORMATION MEMORANDUM CONTENTS EXECUTIVE SUMMARY THE OPPORTUNITY BUSINESS DEVELOPMENT [Company Name] COMPETITIVE ADVANTAGE THE TECHNOLOGY COMPETITOR ANALYSIS Information Memorandum CORPORATE STRUCTURE [Date] FINANCIALS THE OFFERING COMPANY DIRECTORY [Company Logo] APPENDICES STRICTLY CONFIDENTIAL COPY NO: [ ] Copy No. ( ) Copy No. ( ) Escalator - Capital Raising (V1) Page 46 of 73 SAMPLE INFORMATION MEMORANDUM SAMPLE INFORMATION MEMORANDUM IMPORTANT NOTICE & DISCLAIMER EXECUTIVE SUMMARY The Opportunity In consideration of X Co. Ltd providing this Information Memorandum to the The Company recipient, the recipient acknowledges that the contents of this Memorandum Products and Marketing Strategy are confidential to X Co. Ltd and the recipient agrees not to disclose, Funding and Finance distribute or permit to be communicated verbally, directly or indirectly, or The Offering otherwise, or to otherwise publish the contents of this Memorandum except with the prior written consent of X Co. Ltd. THE OPPORTUNITY Product and Market Opportunity For the purposes of this acknowledgement “recipient” includes, without Business Model to exploit Opportunity limitation, any principal, director, officer, shareholder, employee or agent of the recipient. BUSINESS DEVELOPMENT Products and Market Strategy This Memorandum has been compiled solely for information purposes to M&A Strategy assist interested parties in making their own evaluation of the X Co. Ltd and Licensing Strategy does not purport to contain all the information that a prospective purchaser Future Projects may require. In all cases, interested parties should conduct their own Milestones investigation and analysis of the Company and the data contained in this Memorandum. COMPETITIVE ADVANTAGE Strengths X Co. Ltd does not make any representation or warranty as to the accuracy or Alliances and Strategic Relationships completeness of the information contained in this Memorandum. Operations and Distribution Furthermore, X Co. Ltd shall not have any liability to the recipient or any person resulting from the use of this Memorandum. THE TECHNOLOGY Description X Co. Ltd considers that the financial information contained in the Protection Memorandum has been prepared to the best of its knowledge and ability but Future Technologies recipients must rely on their own investigation of all financial information and no representations or warranties are or will be made by X Co. Ltd as to the COMPETITOR ANALYSIS accuracy or completeness of such information. Competing products Competition in the sector The Confidential Information is disclosed on the basis that the Recipient is Emerging products 1. a close business associate of the Owner Competition in other sectors 2. a person whose principal business is the investment of money or who in the course of and for the purposes of the recipient’s CORPORATE STRUCTURE business habitually invests money Directors 3. a person who cannot be regarded as having been selected as a Senior Management member of the public. Company Structure Accordingly neither the provision of the Confidential information nor anything Company Constitution contained in the Confidential Information constitutes an offer of securities an offer of securities to the public that would otherwise be required to comply FINANCIALS with the Securities Act . Summary of Financial Position Summary of Financial Performance For the purposes of this disclaimer, X Co. Ltd includes, without limitation the Summary of Financial Projections officers, employees, directors, advisers and agents of X Co. Ltd. Gross Margin Analysis Capital Planning Copy No. ( ) Copy No. ( ) Escalator - Capital Raising (V1) Page 47 of 73 SAMPLE INFORMATION MEMORANDUM THE OFFERING Form of Capital Capital Raising Process Timetable Value of Company Risk Factors Exit Strategy COMPANY CONTACT DETAILS APPENDICES Copy No. ( ) Escalator - Capital Raising (V1) Page 48 of 73 SAMPLE TERM SHEET SAMPLE TERM SHEET Terms for Investment into X co Ltd Costs Agreement between Y Ltd and the shareholders of X co Ltd Costs associated with the investment and changes to shareholders agreement and constitution will be paid by the investor. Dated 1 May 2003 Background Exit X co has developed technology. It requires money to complete a business plan, Y is a venture capital investor and expects to exit profitably in about 4 years. The parties progress its intellectual property rights, complete proof of concept and to build a facility agree to include exit strategies in the business plan. to produce the product and extract the active components. Note Investment terms All amounts are exclusive of GST. Where GST is a factor this needs to be added to the The investment term required reflects the development stated above. amounts shown. Under current law these investment are financial transactions and do 1. $A by 31st May 2003 to complete a business plan. The plan will be completed by 30th not attract GST. June 2003 2. $B by 31st July 2003 to progress the protection of the intellectual property and proof of concept. The monies in 1 and 2 will be by way of unsecured loan to the company and will convert to ordinary shares with the subscription under 3 below. 3. $C to build the facility outlined in the business plan. This is expected to be in three As agreed by all X co Ltd shareholders and Y Ltd tranches for land, building and equipment the first tranche in February 2004. The second in June 2004 and the third in Sept 2004. 4. The investment in 3 will be for ordinary shares and the loans in 1 and 2 will convert to ordinary shares at the same value. Y will own 30% of the company post investment. X co Ltd Shareholding The current shareholding and post investment shareholding will be Shareholder Current Post investment Y Ltd The conditions for this subscription are: x Satisfactory due diligence by Y by 30th May 2004 x Production of a business plan acceptable to the parties by 30th June 2003 x Appointment of a Y appointed Director to the Board of X co x Changes to the Share Holders Agreement and Company Constitution before the subscription in item 3 above. x Any disputes are resolved within 7 days of written notice, or referred to arbitration x The agreement will be interpreted under NZ law Escalator - Capital Raising (V1) Page 49 of 73 SAMPLE DUE DILIGENCE FILE HEADINGS Technology Product Operations and Implementation Business Plan Marketing Sales CEO Team Corporate and Board Cash Financeability Controls Escalator - Capital Raising (V1) Page 50 of 73 6+$5(+2/'(56· $*5((0(17 ´.H\ 3HUVRQµ PHDQV DQ\ SHUVRQ ZKR KROGV WKH SRVLWLRQ RI &(2 RU &)2 IRU WKH &RPSDQ\ $*5((0(17 GDWHG ´6HFXULWLHVµ PHDQV DQ\ VKDUH LQ WKH &RPSDQ\ DQG DQ\ VHFXULW\ WKDW PD\ EH FRQYHUWHG LQWR VKDUHV LQ WKH &RPSDQ\ RU WKDW JLYHV WKH KROGHU RI WKH VHFXULW\ WKH ULJKW WR KDYH VKDUHV LQ 3$57,(6 WKH &RPSDQ\ LVVXHG WR LW LQFOXGLQJ RSWLRQV DQG ZDUUDQWV ; /,0,7(' ´;µ ´6KDUHKROGHUµ PHDQV D VKDUHKROGHU RI WKH &RPSDQ\ < /,0,7(' ´<µ ´6KDUHVµ PHDQV RUGLQDU\ VKDUHV LQ WKH &RPSDQ\ DQG DQ\ RWKHU VKDUHV LQ WKH &RPSDQ\ = /,0,7(' ´=µ FDUU\LQJ 9RWLQJ 5LJKWV DQG > @ /,0,7(' ´&RPSDQ\µ ´9RWLQJ 5LJKWVµ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´LQFOXGLQJµ DQG VLPLODU ZRUGV GR QRW LPSO\ DQ\ OLPLWDWLRQ 'HILQLWLRQV ,Q WKLV $JUHHPHQW XQOHVV WKH FRQWH[W RWKHUZLVH UHTXLUHV LY D VWDWXWH LQFOXGHV UHIHUHQFHV WR WKDW VWDWXWH DV DPHQGHG RU UHSODFHG IURP WLPH ´$FWµ PHDQV WKH &RPSDQLHV $FW WR WLPH DQG ´$JUHHPHQWµ PHDQV WKLV 6KDUHKROGHUV· $JUHHPHQW Y ´ µ RU ´GROODUVµ DUH WR 1HZ =HDODQG FXUUHQF\ ´%RDUGµ PHDQV WKH ERDUG RI GLUHFWRUV RI WKH &RPSDQ\ E WKH KHDGLQJV LQ WKLV $JUHHPHQW DUH IRU FRQYHQLHQFH RQO\ DQG KDYH QR OHJDO HIIHFW ´%XVLQHVVµ PHDQV WKH GHYHORSPHQW FRPPHUFLDOLVDWLRQ DQG VDOH RI > @ DQG RWKHU F WKH VLQJXODU LQFOXGHV WKH SOXUDO DQG YLFH YHUVD DFWLYLWLHV VSHFLILHG LQ WKH %XVLQHVV 3ODQ G WKH VFKHGXOHV IRUP SDUW RI WKLV $JUHHPHQW ´%XVLQHVV 'D\µ PHDQV 0RQGD\ WR )ULGD\ H[FOXGLQJ D SXEOLF KROLGD\ ZLWKLQ WKH PHDQLQJ RI VHFWLRQ RI WKH +ROLGD\V $FW WKDW RFFXUV LQ >:HOOLQJWRQ@ 7HUP ´%XVLQHVV 3ODQµ PHDQV WKH EXGJHW DQG EXVLQHVV SODQ IRU WKH &RPSDQ\ DSSURYHG E\ WKH 7HUP 7KLV $JUHHPHQW FRPPHQFHV RQ WKH GDWH WKDW LW LV VLJQHG E\ DOO SDUWLHV DQG ZLOO %RDUG LQ DFFRUGDQFH ZLWK FODXVH 7KH LQLWLDO %XVLQHVV 3ODQ LV DWWDFKHG DV 6FKHGXOH FRQWLQXH LQ IRUFH XQWLO WHUPLQDWHG XQGHU FODXVH ´'HHG RI $FFHVVLRQµ PHDQV D GHHG RI DFFHVVLRQ WR EH HQWHUHG LQWR E\ HDFK SHUVRQ 7HUPLQDWLRQ 7KLV $JUHHPHQW ZLOO WHUPLQDWH ZKHQ EHFRPLQJ D VKDUHKROGHU RI WKH &RPSDQ\ LQ DFFRUGDQFH ZLWK LQ WKH IRUP DWWDFKHG DV D WKH 3DUWLHV DJUHH LQ ZULWLQJ WKDW LW VKDOO EH WHUPLQDWHG LQ ZKLFK FDVH LW VKDOO 6FKHGXOH WHUPLQDWH RQ WKH DJUHHG GDWH ´,QYHVWRU 'LUHFWRUVµ PHDQV WKH GLUHFWRUV RI WKH &RPSDQ\ DSSRLQWHG XQGHU FODXVH E DQG 25 F 6LPPRQGV6WHZDUW 3DJH 6LPPRQGV6WHZDUW 3DJH Escalator - 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EMBARGOED UNTIL 11AM, THURS 21 APRIL 05 Endeavour Capital's Neville Jordan, said he had known Beca founder Sir Ron Carter as well as Gavin Cormack for 20 years. "I admire the outstanding work started by Sir Endeavour Capital invests NZ$3 million in Ron in building the Beca Group into a world class engineering consultancy business with extensive success in many countries," he said. "The innovative New Zealand Beca start-up Derceto following sales in USA of world technology that Beca has spun off into Derceto signals a bold new step for the group. leading energy efficiency technology We look forward to committing our resources, both financial and commercial, to help grow Derceto into the dominant international player within its niche industry." Derceto to leverage Endeavour Capital's North American Derceto director Bryce Whitcher said the company had been faced with a raft of expertise and target US$250 million market financing options including interest from overseas venture capital firms. "We wanted external funding to take the business to the next level and, given our New Zealand AUCKLAND, 21 April, 2005 - Endeavour Capital, one of New Zealand's leading heritage, we are proud that a locally based investor such as Endeavour Capital has venture capital firms, today announced a NZ$3 million investment in software come on board as our partner," he said. "In addition, three of the principal executives innovator Derceto, a spin-out from Beca, the largest New Zealand owned professional in Endeavour Capital are professional engineers which means they understand both services group. Initially stimulated by New Zealand's deregulated electricity market, the Derceto technology and the target market, making Endeavour Capital an ideal Derceto now develops energy efficiency software for large water distribution mentor and partner." companies in the United States and Australia, optimising water pumping schedules and creating significant savings in power. Endeavour Capital partner Dennis Row said he saw huge opportunities in developing the company into a global innovation leader in its field. "Derceto is a truly unique The US$104 billion water utility market in the United States accounts for 75 billion product developed in New Zealand for a very specific yet commercially significant kilowatt hours per annum or 3% of the total electricity consumption in that country. world market, the water distribution industry. In the United States alone, where In 2004 Derceto began targeting the 210 largest utilities, each serving more than Derceto already has traction, the market opportunities are immense. This makes 200,000 customers, where sales opportunities alone total more than US$250 million. Derceto a compelling investment for Endeavour Capital," said Dr Row. In the last eight months Derceto's American client base has grown to more than fifteen utilities across the United States. Derceto's success in the US market to date includes the implementation of its software by California based East Bay Municipal Utility District, a recognised innovator The NZ$3 million investment from the Endeavour i-Cap fund, managed by among North American utilities. East Bay MUD, who service 1.2 million customers Endeavour Capital under the Government licenced Venture Investment Fund scheme in and around Oakland, estimate that their annual energy savings will reach (NZ VIF), will be made in two tranches over 12 months culminating in a shareholding US$500,000, based on the first eight months of Derceto operation. of approximately 40% in Derceto. For further information please contact: Nicholas O'Flaherty, Bullet PR Beca Executive Chairman, Gavin Cormack, said the Endeavour Capital investment Tel: 021 303-181, email: email@example.com will enable Derceto to reach its full potential as a stand-alone commercial entity. "Derceto has successfully transformed innovative technology from within the Beca Group into a unique product with a huge international market, especially among the Notes to editors: more than 200 major water utility companies in North America" he said. About Derceto Mr Cormack said that Endeavour Capital's proven success and extensive business Auckland-based Derceto is a software company focussed on delivering award network in the United States made the firm a natural fit for Derceto. "In Neville winning energy efficiency software for water and wastewater utilities. The company Jordan and Dr Dennis Row, Endeavour Capital has two outstanding New Zealand grew out of Beca's development of software designed to take advantage of New entrepreneurs with proven commercial success in the North American market." Zealand's deregulated electricity market by optimizing territorial local authorities' water pumping schedules, allowing significant power cost savings. Derceto emerged Neville Jordan, the founder and Chairman of Endeavour Capital, became the first out of the Beca Group as an optimisation software company in 2003. US subsidiary, New Zealander to successfully list a local company, MAS Technology, on NASDAQ. Derceto Inc. headquartered in San Francisco, provides sales and support services to Endeavour Capital partner Dr Dennis Row, who becomes a Derceto director, has also clients in the USA and Canada. For more information on Derceto visit: achieved significant business success in the United States. He spent more than two www.derceto.com decades in California where he was founding partner and CEO of Rebis Inc, and Senior Vice President of Cyra Technologies. Escalator - Capital Raising (V1) Page 59 of 73 About Beca Group Established in 1918, Beca Group is the largest New Zealand-owned professional services company, employing over 1500 staff in 13 countries and with projects in over 63 countries. Beca works in five key sectors: industry, building, infrastructure, environmental and resource management, and delivers engineering, planning, project management, applied technologies and valuation services. Headquartered in Auckland, Beca operates from three market hubs: New Zealand, Australia and Singapore. The employee-owned practice designs and supervises projects with a total value of over $N2.4 billion annually. Recent projects include terminal expansion at the Wellington and Auckland international airports, Britomart Transport Centre in Auckland, Westpac Stadium in Wellington, Sky Tower and Casino in Auckland, Manukau Wastewater Treatment Plant in Mangere, Auckland City Hospital and the 338m Macau Tower in China. For more information on Beca Group visit: www.beca.com About Endeavour Capital Endeavour Capital was founded by successful businessman Neville Jordan as a result of his desire to put something back into the New Zealand economy and to help ensure that small companies based on science and technology had access to vital venture capital funding. As a licensed manager under the New Zealand government's Venture Investment Fund scheme, Endeavour has raised more than $40 million of investment funding. This is presently being invested in exciting New Zealand-based companies working on world-class developments in biotechnology, ICT, the creative industries, and advanced manufacturing. More information on Endeavour Capital and its investments is at: www.ecap.co.nz Escalator - Capital Raising (V1) Page 60 of 73 Escalator Client Fact Sheet What strategies did the broker use to overcome the challenges? Time up front clarifying the investment and business story to ensure consistency Name of Broking firm: when either the broker or the company was in discussions with investors. The broker also took significant time understanding the needs of the investor and Deloitte coaching Derceto Executives and Board about the needs of investors. Name of Client (if Broker OK to use): What benefits did the client receive from the completion of this deal? Derceto Ltd x Capital - giving the company the ability to grow in the U.S. market. x Assistance with strategic development and management of the business. What did the client need? Any comments from the client’s perspective? The client approached Escalator requiring capital. After initial meetings with the broker it was evident the client required a clear business plan and an overall Escalator/Deloitte provided useful services. strategy needed developing. There was a great product however the client was 1. Experience and contacts in capital raising. not in the position to raise money, as the ‘story’ was not captured in a clear 2. Resource to search for potential partners and “woo” them. business plan. The broker worked with the client to develop the ‘story’, i.e. what’s 3. Low cost – except for Business Plan which was paid for – coaching and the market, what was driving the need for the product in the future - which was assistance to prepare for talking to investors. changes in U.S. power market (deregulation and consolidation of water plants). NB: Success only basis for balance of fees is helpful to a start-up company. How did the broker assist? The broker advised the client around strategy and their investment story and took the investment opportunity to twelve investors, four of whom were interested to learn more (three venture capitalists and one strategic partnership). Two came back with serious offers. Eventually the broker helped close the deal with one of the VCs. How long did it take to complete the deal? The assessment, strategy and business plan work took 6-7 months, followed by the deal work which took a further six months. What challenges needed to be overcome to complete the deal? The investment story had to be developed plus credible sales numbers needed developing and proving, i.e. who is going to buy and when (sales numbers attributed to exact sales target with potential date of purchase). A key activity at this time was the first successful product sale to a US client. Escalator Client Fact Sheet Escalator Client Fact Sheet Escalator - Capital Raising (V1) Page 61 of 73 Escalator Client Fact Sheet What benefits did the client receive from the completion of this deal? Primarily the money, which usefully leveraged approximately $80,000 NZ Trade & Enterprise grants funding for market development (Enterprise Development Name of Broking firm: Grant – Market Development Component) and intellectual property protection I Grow NZ Ltd – David Caselli (Enterprise Development Grants). The capital injection and grants will speed up international market access. Name of Client (if Broker OK to use): Smarter than Jack Ltd (subsidiary of Avocado Press Ltd) A second benefit to the client was the skills and capabilities the investors have brought to the company, four of whom have taken seats on the board. What did the client need? The client required capital (less than $500,000). However during the Current It became important to the client to have an independent group to be accountable Position Analysis (CPA) and Business Needs Assessment (BNA) process it was to, in addition to managing herself. The board has assisted the client to achieve apparent that the client also required skills and capability which in turn dictated more than she might have done being accountable only to herself. the type of investor that the broker would approach. Any other comments on this transaction from a broker’s perspective? How did the broker assist? The client was great to work with as she thought about advice provided and The client had an existing business plan. The brokers asked that this be rewritten acted quickly on that advice – usually within a matter of days. It proved she was to re-define the business strategy, implicitly accelerating the global offering. The committed. Additionally she rolled up her sleeves to assist in getting the deal threat was if the business does not grow into foreign markets quickly enough it away. could face competition. Any comments from the client’s perspective? How long did it take to complete the deal? I would highly recommend Escalator to other would-be clients, and found it really About 7 months from application to deal completion. This comprised 6 weeks useful. I had a business plan but no idea what investors might want or how to assessment of the opportunity by the broker in the form of an Escalator Current value the business. Escalator helped me to move from being accountable only to Position Analysis and Business Needs Assessment, followed by 6 months deal myself to having a board and being accountable to them. (Jenny Campbell, preparation and closing. Smarter than Jack Ltd) The client put the process on a hold for a time during this period, while focusing on running her business (as the only staff member). Exploration of overseas markets gave the client the impetus to initiate expansion sooner rather than later. What challenges needed to be overcome to complete the deal? The major challenge was getting a number of individuals investing on the same terms and conditions. This took two months. Two of the investors were seeking radically different terms and eventually all came together. It took time getting the client in front of all the potential investors. What strategies did the broker use to overcome the challenges? Talking a lot! This was necessary due to the number of individual investors involved and the need to get commitment from them to buy into the same vision and the same deal structure. Escalator - Capital Raising (V1) Page 62 of 73 Valuation Worksheet 0 Modest Factors & Issues: + High Weighted Ranking Impacting the Valuation of Pre-revenue, Start-up Companies ++ Very high 0-30% Strength of the Management Team 0-10% Product or Service Impact Founder's experience Impact How well is the product/service defined? + Many years business experience -- Poorly defined ++ Experience in this space - Some definition +++ Experience as a CEO 0 Definition needs focus ++ Experience as a COO, CFO, CTO + Clear, focused and succinct + Experience as a Product Manager -- Sales person or Technologist only Is the product/service compelling? --- Straight out of School - This product/service is a vitamin 0 This product is a pain killer Willingness to step aside + This product is a pain killer with no side effects -- Unwilling - Somewhat unwilling Can the product/service be easily copied? 0 Neutral --- Easily copied + Somewhat willing - Duplicated or replaced with difficulty ++ Willing 0 Product is unique and protected by trade secrets +++ Solid patent protection Is the founder coachable? 0 Yes 0-10% Channels to market --- No -- Haven't been considered - Many possibilities identified How complete is the management team? 0 Narrowed to one or two channels -- Very incomplete + Initial channels verified - Somewhat incomplete +++ Channels established 0 Good start + Rather complete team 0-10% Stage of Business ++ A complete and experienced management team -- Idea only - In product development 0-25% Size of the Opportunity 0 Product ready for customer evaluation Impact Size of the specific market for the company's product or service ++ Positive, verifiable customer acceptance -- <$50,000,000 +++ Sales 0 $100,000,000 ++ >$500,000,000 0-5% Size of investment + $250,000 - $750,000 Potential for revenues in 5 years 0 $750,000 - $1,500,000 - <$50,000,000 -- >$1,500,000 + $100,000,000 ++ >$100,000,000 0-5% Need for subsequent funding + none Strength of competitors in the marketplace 0 <1,000,000 --- Very strong -- >1,000,000 - Strong 0 Modest 0-5% Quality of presentation + Weak --- Poor ++ Very weak 0 OK + Excellent How large are the barriers to entry? -- Very low Adapted from Power of Angel Investing Workshop - Low Ewing Marion Kauffman Foundation Escalator - Capital Raising (V1) Page 63 of 73 HANDOUT 2 An investor invests $503,968, for a post money share of 30% in the company of XYZ Limited. The P & L below forecasts the operating profit for the next three years. Comparable firms in the same industry give rise to an EBITDA multiple of 3. XYZ LIMITED 2007 2008 2009 Total Y1 Total Y2 Total Y3 Sales Total Sales ($) 1,575,728 3,405,440 5,036,740 Cost of Sales Product 789,673 1,720,441 2,561,838 Distribution 116,235 257,600 378,700 Gross Profit 669,820 1,427,399 2,096,202 GP Percentage 43% 42% 42% Overheads 478,389 507,800 534,300 Operating Profit 191,431 919,599 1,561,902 Multiple on EBITDA 3 3 3 Implied Enterprise Value 574,294 2,758,796 4,685,705 Investor Share 30% 172,288 827,639 1,405,712 IRR calculation Exit in 2007 Exit in 2008 Exit in 2009 Dates Values Dates Values Dates Values Entry 1/04/2006 -$503,968 1/04/2006 -$503,968 1/04/2006 -$503,968 Exit 31/03/2007 172,288 31/03/2008 827,639 31/03/2009 1,405,712 IRR -66% 28% 41% Escalator - Capital Raising (V1) Page 64 of 73 Escalator - Capital Raising (V1) Page 65 of 73 Escalator - Capital Raising (V1) Page 66 of 73 Escalator - Capital Raising (V1) Page 67 of 73 Escalator - Capital Raising (V1) Page 68 of 73 Escalator - Capital Raising (V1) Page 69 of 73 SAMPLE DEAL firstname.lastname@example.org Business Summary: We buy, sell and produce goods and services that are bought, sold or produced. We sell all the goods and services that are bought or produced. We buy all the goods and services that are sold or produced, and we produce all the goods and services that can be bought or sold. We buy when prices are low, sell when prices are high and skim fees off the top of every transaction. This question allows up to 450 characters. I have used a total of 449. Company Profile: URL: www.SampleDeal.com Customer Problem: Consumers want or need to purchase goods and services Industry: Electronic Instruments & that are produced. This requires a marketplace for vendors to provide these. This Controls question has a limit of 210 characters. I have used a total of 203. Employees: 12 Founded: 01/2006 Product/Services: When someone wants to buy something, we provide them with the product and the vendor. When someone wants to sell something, we Contact: provide them with the consumer and the product. When a product is to exchange Horace B. Gillywater hands, we provide the consumer and the vendor. We buy when the prices are email@example.com w 111-222-3333 low, sell when our prices are high, and charge fees on each and every c 222-333-4444 transaction that is made. This question allows up to 450 characters. I have used f 333-444-5555 a total of 450. Financial Information: Target Market: There are 6.1 billion consumers in the world. We create a Funding Stage: Product In potential marketplace for each and everyone one of them. Today we are Development reaching one hundred million people in the US, over one hundred fifty million Capital Raised: $250,000 people in Western Europe, and another 50 million people in Australia and New Monthly Burn Rate: $45,000 Zealand. We are confident that with your money we will be able to reach one Pre-Money Valuation: $5,000,000 billion people. This question allows up to 450 characters. I have used a total of Capital Seeking: $1,000,000 450. Management: Customers: Current customers are two hundred fifty million men, women, and Horace B. Gillywater, CEO children in the United States, Canada, and the European Union. This question Jimmy J. Walterwash, CFO has a limit of 210 characters. I have used a total of only 206. Advisors: Sales/Marketing Strategy: We advertise using extensive markieting campaigns Lawyer: Dewey and Howe on television, radio, billboards, magazines, the Internet, and by word of mouth. Investors: Our advertising campaign includes a catchy tune and an easy to remember Friends slogan, accompanied by a well recognized logo. We are looking to expand our Family market into Asia, Africa, South America, Antarctica, and Greenland by the end of this year. This question allows up to 450 characters. I have used a total of 445. Referred By: Business Model: We charge a fee of ten percent on every transaction made, at each level of production, distribution, wholesale, and retail sale. This question has a limit of 210 characters. I have used a total of only 208. Competitors: Current competitors include but are not limited to shopping malls; retail, wholesale, and second hand stores; manufacturers, buyers, sellers, resellers, and advertisers; law firms, doctors offices, banks, and consulting firms; black markets, importers, exporters, and mom and pop shops; restaurants, hotels, salons and resorts; high tech, low tech, and no tech companies. This question allows up to 450 characters. I have used a total of only 449. Competitive Advantage: The current way of partnering consumers with vendors for the purposes of buying, selling, and producing goods and service is the age old marketplace. We provide the only alternative to that marketplace with our completely innovative model. We have intellectual property of patents, copyrights, and trademarks. We have recently cornered 80% of the potential market. This question allows up to 450 characters. I have used a total of only 445. SAMPLE DEAL Financials* 2005 2006 2007 2008 2009 2010 2011 111 Elm Street Metropolis, AL 77777 Revenues $0 $0 $0 $0 $15,000 $65,000 $100,000 USA Expenditures $200 $400 $800 $1,000 $2,500 $4,000 $9,000 Net ($200) ($400) ($800) ($1,000) $12,500 $61,000 $91,000 Powered by Angelsoft. Submitted to Angelsoft Angels on 06/21/2006 * In Thousands (000) Escalator - Capital Raising (V1) Page 70 of 73 Want to catch the ear of Investors? Unleash the potential of your company with … Power Pitching Workshop Getting your “story” or pitch right, is not only the secret to gaining access to investors but it will also open the gateway to attracting talented staff and profitable customers. It’s amazing that the majority of companies fail in the basic task of explaining what they do. It takes practice and time to master this talent in an effective way. Most companies will fail to secure investment and limit their growth potential if they do not master the talent of pitching. The Escalator Service helps aspiring companies raise capital. If you are looking at raising finance within the next 2 years then you should attend. This workshop is an interactive working session where you will learn what investors are looking for in an investor pitch. Most importantly we will help you craft your company “pitch”. This is a high impact intensive session with rave reviews. Workshop Agenda: (4 hours) • Create your succinct-story • Pitch structure and content • Pitch Delivery • Working on your own pitch • Plenty of practice pitching Mark Robotham – General Manager Escalator Service – facilitates leveraged capital investment and strategic alliances for business growth. Mark has been described as a passionate and pragmatic orchestrator of Entrepreneurs. Having “gone global” with some of NZ’s pioneering technology export companies, working in places such as Silicon Valley and Marton, Mark now helps the rising stars of the navigate the issues of high growth. His background is in Electronic Engineering, Marketing, Business Growth and governance.. He is also founder of a consultancy practice that works with high growth potential companies www.growthmanagement.co.nz To register email firstname.lastname@example.org Attendance is fully funded by NZTE Numbers are limited to 10 companies per workshop to maximise participants learning and output. If you fail to attend once registered – remember you have stopped another Entrepreneur experiencing the power of an Escalator workshop. Escalator Workshops are supported by the Unlimited Magazine Escalator - Capital Raising (V1) Page 71 of 73 Escalator - Capital Raising (V1) Page 72 of 73 Workshop Feedback: Workshop Title: Essential Guide to Capital Raising Date: ___________ Name: __________________________ Email Address: ____________________________ Company: ___________________________ Phone: ________________ Disagree Agree Because of this workshop, I will change something in 1 2 3 4 5 the way I run my business The content of this workshop matched my 1 2 3 4 5 expectations The presenters were knowledgeable about their 1 2 3 4 5 topics I would recommend this workshop to others 1 2 3 4 5 The information was presented in such a manner 1 2 3 4 5 which enabled me to grasp key concepts and ideas I found the workshop – presentation stimulating 1 2 3 4 5 I would like you to contact me so I can learn more about Escalator Services – Training or Raising yes no Capital Can we keep your details on our database? yes no (You be informed about other workshops) This workshop could be improved by…. My number one takeaway or action point is … General Comments on today's workshop: We would love to use any endorsements from today’s workshop. Can we publish your comments for promotional purposes? YES NO Please hand in this feedback form at the end of today's workshop Escalator - Capital Raising (V1) Page 73 of 73