Getting Ready to Raise Capital w/ Shearman & Sterling LLP

In an ongoing effort to provide relevant mentorship, training, and acceleration modules for our startup community Quesnay partnered with Shearman & Sterling LLP to host two candid training sessions on raising capital. 

Part 1 covered accessing private sources of capital from VC and Angel investors, while Part 2 covered public sources of capital and preparing for an IPO.  Thank you to Gillian Emmett Moldowan, Kristina Trauger, and Cassandra Cuellar for presenting to our community!  Below, we’ve put together some key takeaways along with replays of both sessions:

Part 1 - Private Capital

Key Takeaways:

  • When looking to raise capital from participating in an accelerator program, do your due diligence.  Some accelerator programs are better than others so make sure you are getting true value from the amount of equity they are taking.

  • Be mindful of getting introductions to potential investors from unregistered third-party broker-dealers.

  • When approaching a negotiation be sure to:

    • Do your research on the contract you are negotiating

    • Use trusted advisors 

    • Know what you want, in advance 

  • Read the term sheet and see that the terms are in your favor.  Check to see if the valuation is based on post-money vs pre-money valuation.

  • When receiving documents from an investor, the first version is not final.  Send back a revised version that is in your favor.

  • Set your company up as a Delaware C-corporation as soon as possible.  This will make your fundraising process more seamless.  If investors include a lot of milestones for you to hit this is a potential red flag for you to consider.

Part 2 - Public Capital

Key Takeaways:

  • When looking to go on the “roadshow,” your investment bank will start introducing you to institutional investors who could purchase your stock when the stock starts trading.

  • When going public, your financial statements need to be audited to the SEC’s standards.  This is traditionally done by a Big 4 accounting firm.

  • Having an organized cap table is critical to going public.  Ditch excel sooner than later, and consider using tools such as Carta. 

  • On top of keeping your documents in order, having a top management team is key to your success.  Having a strong CFO and COO is especially critical.

  • The IPO process is very expensive, each party takes a piece of the pie (underwriting, legal, audit, etc.) but the process is key for a company's growth and access to cheaper liquidity.