If you’ve determined that your new venture is going to require outside investment, there are a number of things you can do to make your company more attractive to investors:
- Keep it simple! There are any number of ways that a young company can complicate its capital structure. Given two similar opportunities, investors will head for the one that is easiest to understand and requires the least modification before closing. For example, a simple capital structure of common shares issued to a small number of founders and strategic angel investors and an option plan for key employees, contractors and advisors is much more attractive than multiple classes of shares and/or convertible notes issued to numerous friends, family and non-strategic investors and individual options granted to non-core advisors with no option plan. Fewer shareholders with fewer rights will dramatically speed up your time to closing a new investment. As will an excel spreadsheet (a “cap table”) that lists all of the shares, options, and other securities (if any).
- Organize your corporate records. It may seem unimportant at the time of incorporation and the early days of your company, but you can save yourself time and money by keeping an organized record (electronic or otherwise) of all of your legal documents: articles of incorporation, by-laws, minutes of board and shareholder meetings, subscription agreements, share certificates, contracts, NDAs, employment/contractor agreements, etc. When an experienced investor begins due diligence, they will want to review all of these documents. If your house is in order, you can focus on negotiating the investment, instead of cleaning up corporate records. Anticipate due diligence and plan accordingly!