How does a startup raise capital from investors?

The purpose of this document is to provide an overview of how a startup can raise capital from investors.  There are four major sections.

I Understanding your customers

II Raising capital is an ongoing process with investors, until the final exit occurs

III Round X investor ask

IV Foundation of talent, knowledge, and processes


I Understanding your customers

Who are your target customers?  Customers may be users or may be those who give you money (e.g. Google users pay no money, while Google charges advertisers).  There may be direct and indirect customers (e.g. consumers or intermediaries).

What are the customers’ unmet needs, problems, or opportunities?

What is your solution?  How will you meet the customers needs?

II Raising capital is an ongoing process with investors, until the final exit occurs.

First you have to get ready to ask investors, which includes identifying target investors as well as the steps in the “Round X investor ask” described below.  Then you spend a focused few weeks contacting investors.  Interested investors will conduct due diligence.  Then there will be a legal and financial closing process to actually get the cash from the investors.  Of course you’ll continue communicating and working with the investors which includes ongoing two-way communications.  Meanwhile, you’re communicating with those who did not invest, as well as the broader investor community as part of getting ready for the next round of funding

Layout a simple high-level plan of the overall process, recognizing that many things happen in parallel and evolve over time.  This is not a case of complete step A before starting step B

Prepare to ask investors

The objective is to get ready to ask investors for capital, and be able to respond to their questions.

The key things to do are:

  • Understand your customers and have a differentiated solution which will be very profitable and allow initial investors to exit.
  • You must have a team. A single person with a great idea will have a hard time raising money.  There must be a least two members of the team: one focused on sales and one focused on building and delivering the solution.
  • Determine the characteristics of your ideal investors, and identify these investors.
  • Have your due diligence material and process ready to deal with investor questions.
  • Prepare the purpose and WOW1 statements, executive summary, and pitch deck.

Ask investors

The objective is to have engaging interactions with investors and building your long-term reputation.  Investors should become part of your network and may invest in future even if they don’t do so now.

  • This will be a focused, all consuming, few weeks of time.
  • Have your target list of investors.
  • Have your network do introductions to the investors.
  • Hopefully some of your target investors will do introductions to other investors.
  • Manage the investor engagement process, which including documenting key points from each investor phone call and meeting.

Due diligence

The objective is to enable an investor to conclude that they should invest.  In the case of a VC, this could be an investment letter going to the partner meeting for approval.

  • You also have to do a due diligence of the investors, if this was not done as part of peparing the target list of investors.

Close financing

  • This will be a set of negotiations, first over the term sheet and then over the final contracts.
  • The lawyers will have a closing agenda.

Work with investors

  • If you have investors that are providing more value than just cash, then you need to work with them to extract this value.
  • You have to update investors with the objective of ensuring no surprises to them. The updates can include: issues, talent changes, answering questions, press coverage, new sales and partnerships, milestones achieved in the past quarter, milestones for the next quarter, growth in customers and revenue, potential new challenges, any financial changes, include burn rate, working with the investor regarding their requests.
  • Communicate with investors who decided not to invest.

Prepare to ask investors for the next round of financing

At this point, you’re keeping supporting talent, knowledge, and processes up-to-date rather than creating from scratch.

III Round X Investor Ask

Each round of asking investors for capital is similar in process and structure but the messages, material, and perhaps presenters, will be different.

Reaching out to investors with messages, is like a pyramid with every increasing amounts of information, as the investor spends more time engaging.

The top of the pyramid is your statement of your company’s purpose and your WOW statement.   The objective is to generate immediate intense investor interest within a few seconds by communicating the essence of your company.  You can use this when you “bump” into an investor, leave a voice mail message, beginning of your presentations, etc.

  • Your company’s statement is a memorable sentence or two that is positive and outwardly focused on how you benefit customers and society (e.g. Nike’s “authentic athletic performance” rather than “sell lots of shoes made in China.”)
  • Your WOW statement has four sentences. What do you do better than anyone else?  What is your unique advantage and who benefits?  How are you different from the competition?  A wrap up sentence concluding with a call to action with the investor.

Then comes the 1 (at most 2) page executive summary.  The objective of the executive summary is generate sufficient interest to get a meeting with the investors. You only have at most 30 second of reading time to persuade an investor to take the next step with you. The executive summary will be sent to potential investors.

The purpose of the executive summary is to:

  • Provide a written quick reference guide to your business.
  • Generate investor interest by demonstrating the clarity of your thinking and written communications skills.
  • Enable the investor to talk to others about your business, using your executive summary.

The content of the executive summary should include:

  • Immediately grab the investors attention with 1-2 sentences that state your unique solution to a big problem. This could be you WOW statement.
  • Describe the problem or opportunity and how the customer will benefit.
  • Outline your solution, as the target customer perceives it.
  • Outline your solution from an internal company operating perspective.
  • Summarize the team (founders, critical staff) and what is their relevant experience. Include total number of employees.  Be clear on who is accountable for sales and who is accountable for building and operating the solution.
  • List your unique technology, intellectual property, and patents.
  • State your target market size.
  • Describe your pricing model e.g. yearly subscription per user.
  • Identify the competition and your unique competitive advantage?
  • List your current key customers and outline sales funnel.
  • State the investment ask. e. funding needed to reach the next milestone, and what will be done with the funds. Include short cap table. List current investors and total current investment.
  • Show the current monthly recurring revenue, and burn rate.
  • Show the website name and year/month of founding.

The format will be text and tables, not charts and illustrations.

The pitch deck

The objectives of the pitch deck are:

  • Be memorable – the investor must remember you the next day. Otherwise you won’t be called back.
  • Be professional – look and speak as if you already are the CEO of a successful company. This includes your body language, how you stand, and how you speak.
  • Create a trust, confidence, and emotional connection between the investor(s) and presenters.
  • Create the excitement and interest in the investors to learn more, what demonstrating your oral presentation skills and ability to have a Q&A dialogue.

You need to answer the key investor questions:

  • What will you do?
  • Who are you?
  • How will you make money?
  • How much cash do you need and what will you do with it?
  • How will you manage the risks?
  • How does the investor feel about you? Do they like you?  Do they think they might be able to trust you with their money?

Your approach is:

  • Engage the investors emotionally with the story about the startup.
  • Make a great first impression. The first 2-3 minutes can make or break you.
  • Describe what’s been a great relevant experience for each member of your core team (10-15 seconds each)
  • Use charts and illustrations.
  • Maximum of 10 slides, which support what you are staying. What is critical is what you (and how you say it) say during the presentation and during the Q&A.

 The following are the 10 slides.  The bulk of the investor impact will be due to what the presenters say, how they say it, and how the deals with Q&A.  The pitch deck supports the presentation and only contains a small part of what the presenters say.  This is why multiple dry runs of the presentation are required in front of a challenging audience to ensure that the presenters have a detailed understanding of their future business.

Slide #1 Cover slide

  • By the end of this slide, the investors have some idea of what the company does.
  • State your company purpose and WOW statement.
  • Show company name, location, presenters names and titles.

Slide #2 Company overview

  • By the end of this slide everyone knows what the company will do. The remaining slides show the details of how to do it.
  • State any brand names (customers, partners, investors, advisors) associated with the company.
  • State your value proposition: what types of customers will perceive what types of benefits to address which of the customer needs or opportunities.
  • What’s your target market, you unique solution (technology and intellectual property), your customer traction (launch date, current customers, revenue rate, pipeline) and your required funding.

Slide #3 Market opportunity

  • This draws upon your market analysis.
  • You are demonstrating that you understand the customers and the marketplace.
  • What is the size of the opportunity ($, # of customers)
  • Are there trends which support your statement of market size?

Slide#4 The team

  • The objective is to have the investors feel that the existing core team can achieve the next set of milestones.
  • Who are the key members of the team and what their relevant experience and accomplishments?
  • Those milestones may include attracting additional talent.
  • If there are any existing major talent gaps, identify those as well as the actions to close those gaps.

Slide #5 The solution

  • What will the customer perceive? Hardware?  Software?  Services? A combination?
  • Do the customers need to change their processes, talent or technology or does your solution complement?
  • Don’t use acronyms and lingo.
  • How will you deliver the solution to the customer?

Slide #6  Customer perceived value and benefits

  • What are the customer perceived value and benefit? There may be multiple customers and users. Think of Google.  Having the best search engine for users enables income from advertisers.
  • There needs to be a material change from the customers current situation. A 2% improvement will generate little excitement.
  • Value and benefits are more than financial.

Slide #7 Unique technology and intellectual property

  • You are demonstrating that it is not easy to copy your solution.
  • This can include unique team expertise and unique partnerships with others.
  • Illustrate how the technology will enable you to scale your business at low marginal costs.

Slide #8 Your competitive advantage

  • You need to demonstrate: why customers will change what they are doing today. There is a cost to change.  Often the status-quo is better than the costs and benefits of changing.
  • Why will customers buy from you rather than competitors. This is very different than pointing out all the problems that competitors will have.
  • Why do you have a sustainable and profitable advantage? Competitors will respond to you.  How will you deal with their response?  Competition and the market place are not static.
  • A check box matrix can show why customers will choose you over the competitors.

Slide #9  Go-to-market strategy

  • Who has already paid you?
  • Who is in your pilot program?
  • What your prospect pipeline? Letters-of-intent?
  • What’s unique or disruptive about your strategy?
  • What are your critical barriers and how will you overcome them?

Slide #10  How do you make money?

  • What is your pricing model? Cost-of-acquisition? Gross margins?
  • How long does it take to make a sale?
  • What are your costs?
  • What are your assumptions?
  • What do you do if there are major variances from your assumptions?

Slide #11 5 year financial projection

  • Investors are not assessing the precision of the number but rather the clear thinking and understanding underlying the numbers.
  • What are the key metrics that drive sales?
  • What are revenue, expenses, profit, and headcount?
  • What is your free cash flow?
  • Use a table to show the 5 year projection (not a graph)

Slide #11 Key Milestones and financing requirements

  • What have been the accomplishments to date, with the historical financing. This directly ties to the metrics in your financial projection.
  • What will be future financing rounds and what will be the related accomplishments?

Slide #12 summary

  • Restate the purpose and WOW.
  • Restate the value proposition.
  • What are the key points you’d like investors to tell other investors?

IV Foundation of talent, knowledge and processes

The description of your understanding of your customers, your round x ask, and your ongoing process with investors are all built on a foundation of talent, knowledge, and processes.  This foundation is built in parallel, rather than a sequential series of steps, when B starts after A completes.  The foundation is constantly evolving as you learn more and as your business grows. The key foundational elements are described below.

What is the target customer niche? Who are your target customers?  Customers may be users or may be those who give you money (e.g. Google users pay no money, while Google charges advertisers).  There may be direct and indirect customers (e.g. consumers or intermediaries).  What are the metrics and the sources of those metrics? What is the analysis you did?

What is your value proposition?  What are the benefits of your solution?  Who realizes these benefits? Quantify or be specific on the benefits: financial, time savings, convenience, resource uses and types of resources, customer service (if your customer has customers, etc.)

What is the market size? What’s your market analysis? What are the factors that define market size?  What are the facts and sources of the facts?  What are the trends driving the market and how are those trends reflected in your assumptions?

Who comprises your team?  How are their skills relevant for the next stage of company growth?  Your needs will change thus your team will change.  Your team is comprised of: founders, staff, advisors, accountant, lawyer, etc.  Helpful to have as advisors: founder who has done a successful exit, VC who has invested in successful startups, someone who understands the customer and industry, some who is an expert in the technology, etc. Specifically describe the unique expertise and ensure that team resumes reflect the expertise, team references will confirm the expertise, and that the team members social media presence (e.g. LinkedIn, Twitter) reinforce this expertise.  Does your website focus on the startup relevant and unique expertise of each team member.

What is your competitive advantage?

  • You need to demonstrate: why customers will change what they are doing today. There is a cost to change.  Often the status-quo is better than the costs and benefits of changing.  List out the actions a customer must take in order to buy from you and to obtain your service?  Is your service easier and simpler than what they are doing today?
  • Why will customers buy from you rather than competitors? This is very different than pointing out all the problems that competitors will have. What have your customers told you as their reasons for buying from you?
  • Why do you have a sustainable and profitable advantage? Competitors will respond to you.  How will you deal with their response?  Competition and the market place are not static.
  • A check box matrix can show why customers will choose you over the competitors. Populate the check box based on customer feedback.

What is your unique technology or intellectual property?

  • What is your unique team expertise (reflected in your team writeup) and unique partnerships with others.
  • The technology should enable you to scale your business at low marginal costs.
  • What are your patents and trade secrets?

What is your plan and process for ongoing talent recruitment and development? What will be the types and quantities of talent you will need in future?  What will be the sources of this talent?  What work environment, culture and compensation will the talent expect in order to join and stay?

What is your five-year roadmap?  What are the key milestones?  What are the expected funding rounds?  What were the historical business accomplishments from each previous round of financing?

What is your go-to-market strategy?  Who are your current signed customers and LOIs (letters of intent).  Do customers seek you out or do you need to seek out customers? Do you sell via: social media, email, telemarketing, or face-to-face meetings?  What will be your customer acquisition costs?  How will you scale to reduce future customer acquisition costs?  What will be your distribution channels?  Will you require distribution partners? What is your CRM (Customer Relationship Management) software and process?

What is the five year financial forecast, including a free cash flow forecast?  What are the one to two key metrics driving growth?  What is you 18 month budget?  What have been the historical financial results?

What is you cap table?  How does it enable future investing and future equity for employees? (A capitalization table (or cap table) is a table providing an analysis of a company’s percentages of ownership, equity dilution, and value of equity in each round of investment by founders, investors, and other owners)

What will you include in your due diligence data room?

  • The most important thing is to manage the process.
  • Do not just send data room access to investors.
  • Always ask the investor for a 15 minute call to understand what the investor is looking for, what analysis would be most helpful, and what the best format would be. If the investor say to send over the data and they’ll call in future, decline the request, because there is insufficient investor interest to for them to invest 15 minutes of time.
  • What you are doing is trading information in return for investor-engagement and learning more about the investor.
  • The data room is critical for your team to have an organized location for all information, from which you can extract information to send to the investor, as well as keep all members of your team up-todate.
  • It will usually be junior people at the investor analyzing the data.
  • Do not just give customer contact information to investors. Always offer to contact the customer and get her ready for a 20 minute call with the investor.
  • Common items in the data room will include:
  • Bios, resumes
  • Market analysis
  • SWOT analysis
  • Cap table
  • Exit strategy
  • Cash flow projections
  • Other items outlined under “Foundation of talent, knowledge, and processes”

Who will be carrying out your ongoing financial and operational reporting? What software solution are you using?  Do you need audited financial statements?

What is your term sheet?

  • Common terms include: Who is issuing stock or note. Type of collateral. Valuation. Amount being offered. Shares and use of proceeds. What happens on liquidation or IPO. Voting rights. Board seats. Conversion options. Anti-dilution provisions. Investor rights to information. Founders obligations. Who pays for legal expenses. Nondisclosure requirements. Rights to future investments. Who signs.
  • Capital options: Debt. Convertible notes. SAFE (Simple Agreement for Future Equity). Equity. Consent to sell, first right-of-approval, tag-along.

What is an ideal investor?

  • Do they have the same values and interest in growing your business as you do? How soon do they want to exit?  What is their reputation?
  • Are they easy to work with? What do other founders say about them?
  • Do they have a relevant network: of other investors? Of potential customers or partners? Of talent that can help or join your team?
  • Do they have relevant industry expertise?
  • Do they have relevant business model expertise?
  • Do they have relevant functional expertise?
  • Do they have the financial capability to keep investing in future rounds?

What is your investor and company governance structure?  What decisions require shareholder approval?  What is in your shareholders agreement?  What decisions require board approval?  How are directors appointed?  How are disputes resolved?  What documented policies do you have for regulatory and legal requirements?  What documented policies and procedures do you have?

What will be your communications approach: with current and potential investors?  With current and potential customers?  How will you use social media?  Who is monitoring social media to see what others are saying about your and to see what your team is saying about you? Is your website up and running?

 What do you do if you are a SME (Small Medium Enterprise)?Z

This article is applicable to SME’s raising capital from investors.


A lot of work must be done before the first investor ask.  Planning, organizing, and team communications are critical.

 Your next steps

To enable discussion with your team and advisors, download the following one-page slide:

How does a startup raise capital from investors?


1 Bill Reichert, “Getting to WOW.  How to create a value proposition that will dazzle investors”, Garage Technology Ventures,

2 SME Industry Canada definitions (2018 May 9): Small business: < $5 million in revenue, < 100 employees; Medium business: between $5 million and $20 million in revenue, 100 to 499 employees.

Further reading

There are many types of potential investors.  Tom Koor, “How can a private company sell securities in Ontario?”, Koor and Associates,

How can a private company sell securities in Ontario?


  • There are two ways for a private company to sell securities in Ontario: with or without a prospectus.
  • A prospectus is always required unless the company meets specific exemption conditions.
  • With these exemptions, the company has multiple potential sources of capital.
  • With a prospectus, the company can raise capital from any investor, either through a stock exchange or the over-the-counter market. This is the IPO (Initial Public Offering).

This article (supported by a one-page slide) is intended to enable discussion and action planning among owners/shareholders, boards of directors, CEOs, and advisory boards. The approach and action plan will be unique to the specific situation of each corporation.  There is no one-size-fits-all answer.

This article does not provide legal advice. If you decide to further explore selling securities, you must speak with a securities lawyer who understands the law, the regulations, and the process for selling securities.

There are two ways for a private company to sell securities in Ontario: with or without a prospectus.

A private company can raise capital via many sources, including:  the founders’ funds, bank financing, leasing, government loans, grants and tax credits, selling accounts receivable, selling securities.

All corporate securities sales in Ontario are regulated by the OSC (“Ontario Securities Commission”).

A private company going public via an IPO must have a prospectus and be compliant with securities laws and OSC regulations.  Typically, an investment bank is used to sell the securities to a broad range of individual and corporate investors.  There are no legal restrictions regarding who can buy, the amount that can be bought, and future sale of the securities.  The securities are liquid.

A prospectus is always required unless the company meets specific exemption conditions.

 The following provides a high-level overview of the 7 general exemption situations if a company is selling securities directly to investors.  You must consult a securities lawyer for advice, as the laws and regulations are far more detailed than this overview.

  • Private issuer: your corporation has fewer than 50 people holding securities. A company starting out with a handful of founding shareholders actually takes advantage of this exemption, often without being aware of it.
  • Employee, officer, or board director of the corporation, or consultant to the corporation.
  • Accredited investor: These are investors with assets and income which meet the OSC’s definition of a “accredited investor”. The OSC views these as sophisticated investors who do not require the detail contained in a prospectus in order to make an investment decision.
  • Minimum amount of $150,000: As long as the investor (who cannot be an individual) purchases at least $150,000 of securities.
  • Family, friends and business associates.
  • Offering memorandum: an offering memorandum is a simplified prospectus, which must follow OSC regulations and be filed with the OSC.
  • Crowdfunding: your corporation can sell simple securities (e.g. common shares and non-convertible debt) through a registered online funding portal.

If you are taking advantage of one of these exemptions, you must file a report with the OSC, unless you are utilizing the Private Issuer or Employee, Officer, Board Director, Consultant exemptions.

 By utilizing these exemptions, the corporation has multiple potential securities buyers.

Potential securities buyers may include:

  • Friends and family;
  • Angel investors;1
  • Individual investors;
  • Incubators2 or accelerators;3
  • Private equity;
  • Strategic investors;4 and
  • Institutions.

In addition to the above, the corporation may utilize an exempt market dealer, who is an intermediary between the corporation and accredited investors.

Any buyer of securities issued without a prospectus, must fall within the conditions of one or more exemptions.

The securities are not liquid, due to the many restrictions on an investor being able to sell the securities to another investor.

With a prospectus, the company can raise capital from any investor, either through a stock exchange or the over-the-counter market.  This is the IPO .

A registered IIROC5 dealer (e.g. investment bank) is needed to sell securities to the general public and corporations.  The dealer may sell stock directly to investors.  The stock may be listed for trading on one or more stock exchanges (each of which will have its own regulations) or be traded in the over-the-counter marketplace.

What do you do if you are a SME (Small Medium Enterprise)?6

Many small private companies raise small amounts of money.  In 2016, approximately 1,400 Canadian companies raised less than $1 million each, in Ontario, without a prospectus.  The median size of debt sold was $2.8 million and the median size of equity sold was $600,000. 7,8


  • The decision to sell securities must be done in the context of the strategy and strategic plan.
  • Your company needs a variety of legal and financial skills in order to analyze options for raising funds and make the decision as to whether or not selling securities is appropriate.

Your next steps

To enable discussion with your shareholders, board of directors, CEO, and advisory board download the following one-page slide:

How can a private company sell securities?

Your shareholders, board of directors, CEO, advisory board, and C-Suite need to assemble facts and talk through what is driving the need for capital, the various options, and the implications associated with selling securities (especially selling equity).

  • Assemble the facts regarding your current situation: your corporation’s strategy, strategic plan, and financial forecast. The financial forecast will detail the future capital requirements.
  • Founders and major shareholders must also consider their personal and family financial plans.
  • What is driving the need to raise capital at this point? (e.g. Funding growth?) What are the options for raising capital?
  • Why is the best option to sell securities? g. other financing options not available.  There are various costs associated with selling securities, depending upon the approach you take.
  • What stage is your corporation at? g. Seeking angel investors/seed capital or A,B,C series funding?  An established corporation that has been in business for many years? Founders seeking to sell their interest or sell the company?

Does your corporate leadership9 have the necessary legal and financial knowledge to layout a plan for raising capital, including selling of securities?

Does your advisory board or advisory network have the experience and skills to help your corporate leadership think through the decision and action plan?  (e.g. someone who has raised capital, someone who has successfully sold securities, someone who has sold their company, securities lawyer, potential securities buyers, etc.)

If you are a SME wishing to sell your company and have less than $3 million/year EBITDA, consider how to grow the company to the range of $3 million per year, at which point your sale will be easier and your multiple will be higher.

Your final decision and action plan may result in an update to your strategy and strategic plan.


1 Angel investor: an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity.

2 Incubator: an incubator helps take a start-up to the point where there is a MVP (Minimum Viable Product).

The characteristics of an incubator are: Co-located office space with other start-ups; Links to investors; Access to lawyers; Provides coaching and mentoring, via successful start-up executives and consultants.

3 Accelerator: an Accelerator is a company or organization that puts a start-up company (which already has a Minimum Viable Product) through a very structured 3-4 month process.  This process has the goal of quickly growing the size and value of the start-up to enable future funding. The accelerator puts company’s through a vetting process so that higher likelihood of success companies are made available to investors.  This reduces investors’ due diligence time and costs. The Accelerator may take a small financial interest in the company in return for its assistance. Mentorship is provided by experienced start-up executives and investors.

4 Strategic investor: an investor (typically a company) that invests primarily for strategic rather than financial (return) purposes. e.g. in order to gain future access to a key new technology or product. (By contrast, financial investors make investment decisions primarily based on the prospect of a strong financial return.)

5 IIROC: Investment Industry Regulatory Organization of Canada

6 SME: Industry Canada definitions: Small business: < $5 million in revenue, < 100 employees; Medium business: between $5 million and $20 million in revenue, 100 to 499 employees.

7 2017 Ontario Exempt Market Report, Ontario Securities Commission Notice 45-715

8 This understates the number of SMEs raising capital.  For example, if a company has fewer than 50 investors (excluding current and former employees), there is no requirement to file a report to the OSC regarding securities sales.

9 Corporate leadership: board of directors, CEO, advisory board, C-Suite.

Further reading

How do you invest in a private company?

You are considering investing in a private company or you’re already a private company investor.

The investor must think about their own personal situation and future before thinking about the business. e.g. When might they need to exit?  What happens if the investor suddenly dies or is incapacitated?  How much time and effort for how many years does the investor want to devote to their investment? Etc.

There are 7 sets of questions to consider, starting with questions regarding the future (and the potential for value growth), which are the foundation for the questions regarding short term actions.  It’s better to think through these questions BEFORE you invest your money.

#1 What will be the needs of the future customers?

  • Who are the target customers?
  • What problem or need do they have?
  • How will the company sell to them?
  • What will be the customer experience?
  • How will the customer perceive the competitively differentiated value proposition?
  • How will the company’s internal operations be competitively differentiated?
  • What are the potential sales and profits?

#2 How will you get value for your investment?

  • Eventual equity sale?
  • Management salaries?
  • Dividends?

Products or services provided by the company?

#3 Will you leave your equity in the company indefinitely, or do you plan to exit? Even if you have no intent to exit, there is one exit situation to think through – your death or incapacitation.

Let’s assume there is an eventual equity sale.

#4 Who will buy the company in the future (5-10 years time)?

  • Strategic buyer?
  • Financial buyer?
  • Owner/operator?
  • Employees?
  • IPO?

#5 Why will they buy the company?

  • Leading and defensible market position?
  • Non-concentrated distribution?
  • Proven management team with successors?
  • Sustainable margins?
  • Growth potential for the future buyer?

#6 What might they pay for the equity?

  • Multiple of free cash flow or EBITDA?
  • Terms and conditions?

#7 How will decisions be made by the shareholders?

  • What decisions will be reserved for the shareholders rather than management?
  • What veto power will individual shareholders have?
  • What % of equity and % of shareholders will be required for a decision?
  • What decisions, if any, will be made by the board of directors

To enable discussion with your colleagues, download the following slide:

How do you invest in a private company?