Switchboard

Index
 

Users Licence Site Map Administration Front Office Fast Help Admin Desk Payments Desk Service Desk Introduction Syndication Facilities Free Pre-Assessment Ezi Submissions Business Plans Advances Facility Types Basic Rates Securities Products & Services Submission Desk Documentation Dept Custodian  Services Lodgments Securities Warehousing Investor Services What's Hot  Access Restricted Offerings       Legislation ASIC Other laws Capital Market Services Application Form CIR Capital Market Entry Licence Subscriptions Sellers Buyers Agents Employment Casuals Agents & Consultants Service Contracts Notes & Articles Bulletins & Notes Accounts Members Accounts Statements New Accounts Documentation Business  Reply Post Yellow Pages White Pages

 
 
 
 

Send in your 
Submission

WINNING STRATEGIES

PRE-REQUISITES OF QUALIFYING CONDITIONS 
SOUGHT BY A VENTURE CAPITALIST

     Corporations desiring to expand their capital base will need 
to consider the following items in their Business Plan. (see example)

     The Venture Capitalist is generally at the start of the Capital creation process. A Venture Capitalist shifts through more trash in one year than most other people, searching for the few rough gems that may be cut and fashioned into diamonds which will shine like stars. Often a Venture Capitalist may need to turn a pile of rubble into something marketable. Unfortunately in the world of finance there are more applicants than money, hence some will never find all the capital they desire. The arena of Venture Capital is one of  HIGH RISKS and HIGH REWARD to both the Venture Capitalist, Investor and the Enterprise, however there are ways to 'Offset' or
reduce the risk. 

     The skills a Venture Capitalist require are vast, from Sales & Marketing, Legal ability, Banking & Commerce, Accounting, vast Industry knowledge in multiple industries, Capital Market and the Credit creation process, Investor and security requirements, all of these makes your Venture Capitalist truely a unique Business Partner. 

     Most Corporations have little real understanding of what should be in a Business Plan, its configuration, and its endorsments by third party professionals. 

     The next mistake Corporations make is believing a Venture Capitalist will give them money (cash) on the spot. To get a project to the CASHABLE stage it needs to go through a particular and peculiar process called Credit Enhancement, this means converting a raw project into a securitable item which syndication funding can then be brought into play. This is a little known process by most which is undertaken every day in every transaction and forms the most important part of the Capitalisation Process, once this is understood funding is quicker and easier. 

     Most Companies prepare their Business Plans on a Prospectus Format, which in essence, for private companies only constitues a 'Overview' of the company's project. A Venture Capitalist needs to have on its file more substance to support the Business Plan, just like a Prospectus is only representative of the mass of supporting documents behind it. 

     Last but not least Executive experience and commitment, does Management have a conformance attitude or do the Directors have a 'Rotten Egg' attitude, namely when events don't occure to plan, do they hide, become hostile, cut and run, or try to undermine the integrity of agreements set in place. No wonder why Investors are cautious and rely on the Venture Capitalist to maintain complience.

               Smart Businessmen lay down a plan, and THEN work it.

     The Business plan is a collection of 'little books', each one telling a story, it is your Operational Statement of how you are going to build the enterprise (like a house plan, its material, fittings and mode of construction put in words). 
     If you can't lay out a house plan, who would want to buy it 'off the plan'; this applies to building companies and selling equity off the plan, namely selling shares or SME securities.
     Many people get the order out of sequence, since a Venture Capitalist wants key information fast without the 'dribble'. Example, A concise Overview of, Financials, Company Charter and Structure, Plans, Permits, Growth potential, Market size, Risks, Contracts, Valuations agreements tying the entities together. A common fault with business plans is the overview is to long winded, short to the point paragrphs are better, diagrams also help. 

     Basic Business Plan Requirements are; 

Preamble:- What is on offer. ie shares, debt, quantity, value.

First:- 3-10 page Summary with key facts figures about the enterprise.

 Second:- Past financial and Future projected financials.

 Third:- Securities, stocks, shares, property, patents, copy rights available.

 Fourth:- Legal status of Enterprise, copy of its Charter and its share structure.

 Fifth:- Bindings, the legal agreements that tie each part together.

 Sixth:- Proof of Values and Appraisals by third parties. Professional Reports.

 Seventh:- Margins and spreads, cover ratios, growth expectations, local market share, dividends or interest, rising value of the deal.

 Eighth:- Take Out, how fast can an Investor or Venture Capitalist get out of the Enterprise, can the position be traded.

 Nineth:- Death Bed Recovery, how to recover and cut your losses. 

Tenth:- Cloud Nine, if all goes well how many times can the equity value be quadrupled.

Raising capital is all about salesmanship.

     1. Companies that succeed have the ability to sell their story, namely, point out the 'best features' of the Enterprise. Remember, no Investor will read through all your material, you must write a 3-10 page overview, this will get the story to the comprehension stage quickly, a Business Plan must show how Investors get their money back and dividends, how you will achieve your objectives.

     2. Financials are an absolute essential, these show 'where you have been' and 'where you are going'. You should not be over conservative, since a Venture Capitalist will automatically adjust your margins to take into consideration risk factors. Therefore be REALISTIC and factual, a good set of figures should tell the story with few words.

     3. Securities is what finance is really all about, the more the better, confidence to the Syndicate is paramount. Offer security of anything and everything you have, after all you are going to 'overdrive' your asset base and probaly be running on cashflow gearing. Be accurate and precise. Deals come before cash.

     4. Get your Corporate Legal Framework in order, subsidiaries, holding companies, make sure all aspects are put into agreements, such as Founders shares, Employees, Executive packages, share classes and rights attached, supply contracts.

     5. Many companies fail to tie up the loose ends. Make sure you have distribution agreements, access agreements, JV agreements, interlectual property agreements, rights, royalties, management agreements, founders agreements, equity agreement, manufactoring contracts, etc.

     6. Valuations and Value assessments are vital to calculate exposure ratios.

     7. Cover ratios are critical to show how the Enterprise can absorb fiscal fluctuations within its economic enviroment if there is a sudden change.

     8.The Discharge or Take-Out mechanism has to be clear and sure, since no Investor wants their capital tied up in your comapny forever. The shorter the redemption period of capital then the easier it is to raise it in the first place. Remember a lot can happen in 24 months.

     9. Everything on earth has to face death, even companies, but, before an Investor converts totally to straight equity, how can they 'cut their losses' while still holding debt, can they convert, do they have priority in a 'belly up'. Third party fund administration ensures there is less fund misappropriation. Don't think cash will buy everything.

     10. Corporate Heaven; one out of a 1000 can say everything went to plan, now for the acid test, how many times can the investment multiply, the greater this factor the easier it is to raise the capital, and the next round, and the next....

1. Don't think Investors need you. There are always safer investments.
2. He who has the gold makes the rules. It's not your money at risk.
3. Don't talk in billions of market potential, its shows you are a novice.
4. Your project is not so special, someone in another country is probaly doing the same.
5. Investors are generally smarter, after all they have the funds and you don't.
6. Don't rely on friends for advice. Good Finance, Legal, Accounting, Banking advice is not cheap but essential, you only get what you pay for. 
7. Does your suburban Accountant or Laywer have experience in the complex area of Capital Financing structuring. 

International Tel: +(613) 9654 7460 Fax: +(613) 9654 7462

Assessment Office 282 Collins St, Melbourne, Australia, 3000