• Avinder Laroya

Legal Considerations on getting Pitch Ready!

This article is aimed at entrepreneurs and innovators who are in negotiations with angel investors or looking for guidance on how to best present themselves to be pitch ready.

The article will be focusing on the legal issues to consider when negotiating with an investor and some useful tips to follow

In this article, we will discuss the following;

· Introduction to business pitching

· What documents to include in a pitch deck?

· The legal issues to take into consideration

· Useful tips to consider when negotiating with investors

· Summary

Introduction to business pitching

Creating a good business pitch helps you identify and evaluate the strengths and weaknesses of your ideas, forcing you to face issues you may previously have ignored.

But what is a business pitch and how do you create something convincing and engaging? What are the legal considerations?

A business pitch summarises your business plan and model and is targeted towards a specific professional audience in order to obtain investment.

Think of it a bit like Dragon’s Den. The pitch itself may vary depending on the audience before you, and you may need to highlight different aspects of the business according to their particular concerns or interests.

But fundamentally, it is your best opportunity to persuade the audience to invest in you and your business.

Before all that, however, you need to build an exciting pitch deck. One that impresses potential investors and awakens them to the huge possibilities your business can bring.

At Serenity Law, we provide invaluable support by corresponding with potential investors, outlining your business to investors, guidance on your term sheet negotiations, and help selecting the right terms tailored to your business.

Drafting the letter of intent between the investor and entrepreneur and to formalise any agreement between the two through an investment agreement.

You can find more details of the services we provide here: https://www.serenitylaw.co.uk/fundraisingpackage.

What documents do I need to include in a pitch deck?

The basic elements include:

· A concise summary of what you want to do and why. This should be around two or three sentences long, a written elevator pitch.

· A discussion around the problem you intend to solve - this can range from a brief statement to a more comprehensive reference as to why you think it’s a problem that needs fixing.

· Explain your solution to the problem and why it is unique to the market. This should expand into your business plan, including a global analysis of the business landscape and where you fit into that.

· An explanation of your business model, including your sales and marketing strategies.

· Introduction to your management team, including their biographies.

· Financial projections showing revenues, expenses, and profits. This should be limited to one page.

· Your finance request and how you intend to use those funds if successful. You may be required to provide a 90-day plan for what you plan to do immediately after receiving funding, and include project plans and operational milestones.

During the negotiation and due diligence process, additional documentation will be required. Although venture capital organisations tend to provide the legal closing documents.

The legal issues to take into consideration

Due diligence documents help a venture capitalist to decide if things are as you say they are, whether that is with product functionality, intellectual property rights (IP), customers, or how you run the business.

Due diligence may include:

· Non-disclosure agreements (NDAs). Investors will rarely sign an NDA until they are certain they want to invest in your business.

That said, they will expect you to protect your IP if it has not been patented, together with any strategies and knowledge surrounding critical business relationships.

· Provide them with your full business strategy and market analysis, usually about 20 or 30 pages.

· Detail your business’s financial liability (loans or encumbrances) if applicable, and cap table.

· Provide details of any subscription agreements, stock purchase agreements, incorporation documents, and bylaws, agreements with vendors, contractors, employee agreements, and buy-sell agreements between the business’s founders.

Venture capital organisations tend to provide all the documents required to create their terms and encompass all their rights.

This may include the following documents:

· Term sheet

· Voting agreement

· Stock purchase agreement

· Right of first refusal

· Co-sale agreement

· Management rights letter

· Investor rights letter

· Indemnification terms

· Any required amendments to the bylaws

Tips to consider when negotiating with investors

· Come from a place of trust

Investors look to not only invest in your business idea but also the people behind the company, they want to know who they are investing their funds with.