This is a series of headings for an Information Memorandum to be put before an investor, venture capitalist or equity stakeholder seeking funds.
Before this step, the founder has to give thought to be the dollar amount sought and the amount of equity surrendered.
This equity raised will depend on the valuation of the business.
Too often the equity for sale is offered as a minority interest where the valuation is excessive and seldom will an investor go any further. The reality of life for those seeking investor funds is that ‘control’ has to be surrendered and as a minimum a partnership has to be agreed on where decisions that need all to agree on are spelt out clearly.
This Shareholder agreement must cover, amongst other things, future salaries of the founder otherwise the future profit will never be converted into dividends to the investor.
Dependant on the interest of the investor will be the stage of development of the company – is the entity a: