INVESTMENT BRIEF PRO FORMAExecutive Summary Investment Summary Business Plan A firm’s ability to become ‘investment ready’ is critical if they are to be successful in attracting any type of equity investment. Whilst every business angel or venture capital fund is different, a number factors constitute investment readiness. As the British Venture Capital Association notes (1998:9-10) small to medium enterprises (SMEs) need to ask themselves a number of questions before going down the venture capital road. They are: Does your company have high growth prospects and are you and your team ambitious to grow your company rapidly? Does your company have a product or service with a competitive edge or unique selling point? Do you and / or your management team have relevant industry sector experience? Do you have a clear team leader and a team with complementary areas of expertise, such as management, marketing and finance? Are you willing to sell some of your company’s shares to a venture capital investor or business angel? If you are serious about going down the venture capital path and you feel that you are investment ready, then you must be able to confidently answer ‘yes’ to each of the questions above. If not, you should take the time to find out more about the venture capital game and attend investment ready seminars and workshops before making the next step. Private sector organisations run seminar and workshop programs on venture capital and investment documentation. It is important to note also that the market may not warm to any project just because it has an excellent business plan. Due to the high risk involved and the effect of financial market expectations on investment, even a firm with the best business plan can fail in their initial attempts to attract equity investment. Alternatively, it is essential to investigate other finance options suitable for your particular operation. If you are realistically confident in proceeding then the following pro forma document will be of use to you in preparing your business plan and investment brief. The brief is broken down into 3 sections: 1. The Executive Summary (which may be given to any interested parties) 2. The Investment Summary (which is generally submitted to the analyst) 3. The Business Plan (which should only be provided to VC Funds during serious negotiations) It is advisable to conduct research and seek professional advice to assist in the preparation of these documents, and to ensure that laws, eg Corporations Law are not contravened. It is worth noting however, that the entrepreneur’s ability to actively contribute to the development of these documents is a good indication to the investor of the management team’s ability to successfully operate the business, and inturn, generate a high return on the Venture Capitalist’s investment. Please contact the Capital Raising Unit 3227 9241 if you have any queries. Good Luck! Capital Raising Unit Page 1 of 7 The executive summary should not be more than four pages (the preference is for 2 pages) and should clearly summarise the business plan and the investment opportunity using concise language. Sydney. Investment Summary The investment summary will generally be submitted to the analyst and should clearly establish the deal proposed to potential investors. Additionally. Executive Summary This document can be made available to any interested parties and should concisely refer to the following: A short paragraph on each: Purpose of the Business Plan – to raise money ($x) to fund commercialisation of…. the opportunity that presents in the marketplace. the quality of the summary will be the deciding factor for the investor in determining whether to pursue the opportunity or throw the proposal in the rubbish! “The first paragraph is essential. R & D and the expected return on investment. experience in commercialising a product and raising investment. R&D. production. how investor will exit with funds. The Background – history of product development to date. it is important that confidential or strategic information and other intellectual property are omitted from the document to protect trade secrets from “falling into the wrong hands”.1. the first sentence is critical”1 Finally. what it does. employing research/management team. an independent venture capital fund manager. where you are up to in commercialising the product eg. Management Team – experience in relevant industry sectors. whilst a strong and convincing sales pitch is essential even at this point in time. trading. cencept stage. running a successful business. intellectual property protection and other sustainable barriers to entry. 2. namely: The financial and operational status of the company (to the extent which would be reported to the Australian Taxation Office) The amount of funds being sought The length (life) of the investment Entry strategy for the equity investor (ie. Chris Golis is also Executive Chairman of Nanyang Management. Allen and Unwin. about to export etc. accounting. how that need is/will be fulfilled. The Market and The Opportunity – the product/service. Investment Opportunity – equity share offered in return for money and how the money will be spent ie marketing. Capital Raising Unit Page 2 of 7 . given the quantity of proposals a Venture Capitalist receives and the time restrictions placed on them. Funding to Date – what investment has the company so far attracted or your own “hurt money”. what need it meets. how will the venture capitalist come on board) Structure of the deal Transactions to be completed (eg common shares issued) 1 Chris Golis (1998:84) Enterprise and Venture Capital.. Strategic Competitive Advantage of Product/Service – how product/service better than existing competitors. skills in marketing. it is nevertheless important to clearly state the investment opportunity from the outset. Exit strategies Whilst it is almost guaranteed that the deal initially proposed will be renegotiated by both parties. Capital Raising Unit Page 3 of 7 . Business Plan The third and final section of the brief is the business plan. The fundamental elements of a business plan are outlined below: • Executive Summary Incorporates the key elements of the business plan namely: • • The product or service The market. requirements and exit strategies involved. Opportunities for second generation products 4. the opportunity. As this document will contain highly sensitive information regarding factors such as intellectual property and marketing strategies. its product and the deal structure. Research completed / prototype / 1st version ready / 2nd version ready etc) 2. Unique Selling Points 3. Define the market (domestic and key overseas markets) 2. General Description and stage of product life cycle (ie. Competitor analysis 3. which should be thorough in detail. Who are the customers Page 4 of 7 Capital Raising Unit . and the strategy Business Operations Management Risk identification and analysis Financial Projections Amount and use of finance required Exit Strategy Options and Timing Mission Statement Legal Status of the company Table of Contents Market Segment Product or Service 1. Legal protection Market Analysis 1. the business plan should not be made available until the parties involved have entered into serious negotiations.3. covering all aspects of the company. 6. Legal protection (including overview of any patents held or applications) 3. 7.4. out-sourced operations (and how trade secrets are protected) 2. production capacity and suppliers Research and Development 1. resources required. The production process. 3. Niche market opportunities / Market segmentations 1. 2. 4. Status of developments and strategic alliances 2. • Market Strategy Market positioning Pricing Promotion and advertising Overseas markets Distribution Strategic alliances Product life cycle analysis Business Operations Manufacturing 1. Production costs. experience and track record Establish complementary areas of skill Current and potential skills gaps and how this will be resolved Appointment of Non Executive Director (NED) Remuneration Organisational Chart • Risk Identification and Analysis SWOT Analysis Identify risks and how they will be managed Identify key success factors Capital Raising Unit Page 5 of 7 . What are the projections for the company and the market 5. Development plans • Management Profiles of CEO and management team. 5. skills. including due diligence Financial Statements (5 years including past 2 years where possible) 1. Profit and Loss Statement 3. Monthly cash flows 2. from what sources and their intended use Anticipated future rounds of capital-raising Capital structure and ownership (before and after funding. gearing. stock. and include expected rate of return • Implementation schedule Exit Strategy Possible exit options Best time for exit Realistic Exit Value • Appendices Market research studies (Professional market analysis studies are essential) Product brochures Resumes of CEO and Management Team Other detailed information of value Capital Raising Unit Page 6 of 7 . interest cover. annual sales/employee. Several ratios: net margin. creditors and debt ratios.• Financial Segment Independently audited statements should be available during later stages of the process. contribution and break even point • Application of Funds Amount of funds required (in this initial round). return on equity. Balance Sheet 4. htm Private Capital Council PCC Website: pcapital@ocean. Corporation Builders.html e.Sources and other useful information sources: Golis (1998) Enterprise and Venture Capital: A Business Builder’s and Investor’s Handbook.dti.com.com.au/sample.gc.qld.au Capital Raising Unit Page 7 of 7 . Allen and Unwin.asx.htm.bvca.htm Venture Capital: investing in Britain’s Future BVCA Website: www.qld.ic.com. Winning Australian Venture Capital AVCAL Website: www.com.gov.avcal.gov.au/guideprint.com/[email protected]/sc_mangb/stepstogrowth/engdoc/homepage.php Personal Communication: James Paulsen.em.au Email: heather.uk/BVCA/Publications/Welcome.au Email: [email protected] Business Plan Enterprise Market Website: [email protected] Steps to Growth Capital – Canadian Government websites for growth companies Website http://strategis.uk/SMEP/finbus/t1.htm Aurora Funds: The Investment Process Aurora Funds Inc Website: www. Sydney Activities and Resources Department of Trade and Industry (UK) Website: www. Brisbane For further information please contact: Venture Capital Unit Department of State Development Ian Gilbert: (07) 3224 8624 Peter Bonney: (07) 3238 3120 Heather Hardy: (07) 3224 8514 Facsimile: (07) 3227 8464 Email: ian. Executive Director.