Workshop C: Your Path to a structured exit

This workshop requires your brain for financial projections, future scenarios and details – we want to look at the path to liquidity for your investors. This builds on the deep dive on liquidity and is made easier if you have already looked into the workshop on return as of course the topics return and liquidity are interrelated.

The question we want to answer here is: How far away are the investors from receiving liquidity and what is the path to liquidity for them? To answer this, you will need to draw from your financial projections in the first part of the finance map as well as think about which scenarios would feel most appropriate for your company’s situation – while also taking into consideration that your investors most likely need to get their money back within a certain time frame. While in the financial projections you have developed a plan for how and when liquidity is expected, the workshop now turns around the question of how and when this liquidity will flow back to investors. Depending on the stage of your business, this will rely more on actual figures or assumptions.

In the first part of the workshop, take a look at the manner of payment (e.g. regular payments or bullet payments) you are envisioning and that is realistic and fitting to you – of course a combination of approaches is absolutely possible. 

If you prefer regular payment instalments, you will need to take a look at what type of regular payment is realistic and fitting to you, fixed or variable, and if you want a variable payment, which performance metric you want to use and what level feels appropriate. 

The next step is to look at the timing of paying back your investment.

• Do you need a grace period (period in which no payments are made)? What is your argument behind it? How long should it be?
• When can you start paying back the investment (either through free cash flow or by refinancing with lower-cost capital)?
• What intervals are you looking at for investment (e.g. regular payments are often made once per year, but for more spaced payments you could also look at every two or three years or only in years that certain criteria are met)?
• When do you expect the investment to be fully paid back? This might not be possible to be answered at the moment, particularly if you are working with more open return caps. It is still a relevant question to consider and think about, even if the answer is we don’t know but we hope to be able to pay back everything until …
• Are there any other relevant points to consider for planning your timing?

Lastly, based on the above, draft a liquidation waterfall that takes into account the initial investment sum, the envisioned return cap and the structured exit/ redemption scenario that you are envisioning.