Converge Challenge has been a fantastic programme this year with some truly inspiring businesses coming through the programme. We have been very lucky to be involved and impressed by the market research, commercial awareness and technological innovation demonstrated by the Converge Challenge participant companies. It has been a real pleasure working with the cohort on business plans and legal issues. As part of MBM Commercial’s sponsorship of the programme, our Alexander Lamley has been attending legal clinics to help the Converge companies identify and address early stage issues.
As a start-up business there are some essential things to think about when looking for investment. To make the best possible impression with a potential investor, getting your company’s house in order is key. The following top tips for getting investor ready will help make your company more attractive to investors:
- Share Structure – It is fundamental that you have absolute clarity as to who owns what in your company and the proportionate shareholdings of each of your shareholders. Including any share options or other sweat equity to those who have provided support and advice in the early days.
- Record Keeping – Do you have Company Books and are they up to date? Company books are often forgotten about, but actually they are one of the first things an investor’s solicitor will ask to see when an investment deal is on the cards. Has your file on the Companies House Register been correctly maintained? Make sure you keep it updated and make your filings in good time.
- Employees and Consultants – You need to be clear about who works for you and on what basis. Employment and/or consultancy contracts are very important – for early stage companies, often a key factor behind an investor’s desire to invest is linked to the strength and expertise of the company’s team.
- Intellectual Property (IP) – IP is another area where investors will focus diligence efforts. You need to be very clear as to what IP you own. For example, if a person is working for you as a consultant rather than as an employee, any IP they create will be owned by them personally, unless there is a contract in place which says that this will be owned by the company. Some companies, particularly at an early stage, might think that they do not have much IP, but you will likely own more than you think, e.g. copyright which is automatically generated on creation and some unregistered rights. Investors might also attach a lot of value to know how, i.e. the stuff you have in your head about how your technology works. Know how is hugely valuable in certain businesses and it is a concern if it is not documented anywhere.
- Confidentiality – If you don’t have registered IP protection, then it becomes all the more important to take care when giving out company information.
Are you using non-disclosure agreements to protect your confidential information? If not, you should be.
These are just a few things an investor, or their solicitor, will check as part of the process, together with any financial diligence to be done by the investor’s accountants. Investors will be impressed by companies who already have their houses in order and who take these matters seriously. The more “investor ready” work you do now, the less you need to do later – and ultimately, the smoother the investment process will be.
If you are a start-up company looking for help finding investment or getting investor-ready and would like further information, please contact a member of our team.
MBM Commercial has the largest corporate team in Scotland which is dedicated to working with high growth companies and their investors. Your key contacts at the firm are:
DD 0131 226 8203 & 0203 096 0113
Tel 0131 226 8238