Depending on your financing journey, at this point you have either already developed a concrete proposal for your financing needs and scenarios ( → Overview Finance Need) or you have decided to work through these together with your investors. Particularly in the latter case, you will need to talk through the different parts of the financing structure (return scenarios, structured exit scenarios, governance rights) and compare your needs with your investors.
! This step will require sensitive and open communication as well as involving the right people for the discussion and calculation of different scenarios on both sides. It also means involving trusted lawyers and tax personnel on both sides as soon as the conversations get more detailed so as to make sure that you don’t waste time designing a financing structure that is not feasible for legal, regulatory or tax reasons.
A great starting point is to get both perspectives in the room – presenting your finance needs and wishes for the financing structure but also listening to and understanding the needs of your investors. Transparency and understanding of each other's situation and needs is key here. It will be helpful to reach a level of conversation with no hidden agendas or strategic posturing but you actually achieve an outcome-oriented, eye-to-eye conversation.
Dealing with several investors? When dealing with several investors, a question that comes up often is whether to set up a financing round with the same terms for all investors or negotiate individual terms with each investor to accommodate different needs. This can be particularly interesting for companies if they have investors on board that have lower return expectations and needs than others. However, having different terms also changes operatively how you can manage your investors and leads to more complexity. You will need to evaluate the legal and tax implications of having different terms and how they interact with each other with lawyers, will need to work out a good communication strategy around the transparency/non-transparency of having these different terms and will need to think about how these different terms will evolve in the case of future financing rounds. We have seen the same terms within a financing round more often but this doesn’t mean it might not be the right approach for your specific case to go with individual solutions.
Send chapter summary to yourself or a co-worker!