When an investor has been found who is interested in your start-up, it’s time to convince them! Most of the time you only have one chance with each investor to convince them of your business idea. This opportunity must therefore be used optimally. There are various ways in which you can convincingly present your idea. In many cases, the forms of presentation can also build on one another, since investors ideally want to learn more little by little.
One Pager: With the One Pager, you list the most important key data of your company for investors on just one PDF sheet. This is intended to give the investor a first impression of your company and then decide whether they want to learn more about it.
Pitch Deck: The pitch deck consists of a presentation of approximately 10 to 15 pages. The aim here is to get closer to the idea of the company and to give the investor more in-depth information
Business plan: Finally, the business plan follows, which is about the complete execution of the business idea. This is where the financial figures come into play, which you should check and recalculate down to the smallest detail. The investors attach particular importance to the financial plan and often decide for or against a company based on this plan.
NEGOTIATE TERMS WITH INVESTORS
The last step when it comes to attracting investors for your start-up is to negotiate conditions and investments. It is important to show a lot of tact here. It’s not the point here to simply accept the cheapest offer because you think you urgently need the investor. You should be particularly careful when selling company shares. It is often underestimated how much influence an investor can have with a certain percentage of the company. Here you should definitely have a professional check how many shares you can and should give up in the company. Contact GRECA Finance if you need assistance.
You should also be careful with the term of loans. If you choose a long loan term here, the monthly financial burden will be low, but higher interest will have to be paid in the end. If you expect higher sales and want to get out of the loan quickly, a shorter term with lower interest payments is worthwhile. It is therefore best to choose a lender where the terms can be individually adapted to your needs, despite investors.
A cap table can also be important for entrepreneurs when looking for investors, which can be used in negotiations.
CAP TABLES SET BOUNDARIES
For negotiations with investors, cap tables are very important documents that must be submitted in every financing round. They give you, as well as other shareholders, a precise overview of the distribution of shares and profits of the company.
The term cap table or cap table, also called capitalization table in full. It is the written list of all interests in the company as well as the valuation and assets of a company. Thus, the cap table shows who owns what in your company and who can claim ownership. This is particularly important if you are not the sole founder or if there are additional shareholders in your company. The distribution of ownership in a company is particularly interesting if your legal form is, for example, a partnership or a limited partnership. In such cases, distribution of profits and ownership claims are also to be regulated by other means.
Here are two cap table options:
- If you are active as a LLC (GMBH in DACH Regions), it is possible that profits and ownership claims can be calculated based on the amount of share capital contributed. Simply put, this means for you that the more capital you have contributed, the higher your claims can be.
- The situation is different again if you have chosen a limited partnership as the legal form for your startup. An existing liability risk can be absorbed here by changing the distribution of profits. As a rule, it is the case that shareholder agreements in a limited partnership already provide for such a distribution in a correspondingly reasonable proportion.
This may sound a bit complicated and cumbersome, but it is still manageable, especially after founding a start-up. It becomes more difficult when the first investors come on board before the cap table. In most cases, this is the case when a so-called “proof of concept” has been provided. Since there can be several investors in many start-ups, there are later very different claims to possible profits.
What is there to consider in the case of multiple investors?
Let’s assume that you and your potential founding partners are joined by an investor or two. Now it gets a bit more difficult with the overview of profit and ownership claims. It is also not uncommon for there to be investments that are carried out in so-called rounds. This means, for example, that after seed financing, the next round of negotiations with other investors follows, then another round of financing, then another round of negotiations and so on. After the second round, you may well get confused about the amount of ownership claims. This is exactly why it is important that you need a cap table as early as possible.