Connecting the Dots for Your Business Being “Fund Ready”

March 2, 2021 By Vince Poscente

Dots on a page may seem random until you, or someone who knows what the image needs to be, connect the dots in a way that makes perfect sense. Global Leaders Organization (GLO) was from a number of seemingly random dots. With membership in organizations like Young Entrepreneurs Organization (now EO), Young Presidents Organization (YPO), serving Vistage, TEC, and CEO business leadership organizations we realize that access to capital was a missing link. This is what makes GLO unique. We seek to give our members a platform with access to capital. In the article below, we uncover the concepts of helping your company become “Fund Ready” when you seek to solicit funds from other entities.

What does it mean to be “Fund Ready”?

To be “Fund Ready” means that you are prepared to receive funds. If a prospective investor or lender were to say “yes” — do you have everything you need to receive their money. Being “fund ready” includes proper authorization, paperwork, and bank information.

What are the documents I need?

These are the documents we consider minimally required to fund ready:

• Organizational Authorization: An authorization by your company to the sale of equity or the assumption of debt. Authorization can be as simple as an acknowledgment letter signed by the principals or as formal as the documentation of a Board resolution.
• Private Placement Memorandum (PPM): The PPM is simply the offering memorandum. It lays out the terms of the deal. It can be developed by an investment banker or a securities attorney, but it does not have to be. The company can write the PPM. A comprehensive PPM will include a business plan. A good PPM will also include a section that explains all of the risks of the investment. A PPM protects you. A PPM protects the investors.
• Executive and Officer Disclosure Questionnaire: The Executive and Officer questionnaire discloses information about your business’s critical principles. Principals include both the Executives and Officers of your company. It also covers key shareholders with a significant percentage of ownership in your business. The completed questionnaires are made available for review by a prospective investor or lender.
• Subscription Agreement (SA): The subscription agreement is the document signed by the investor. It can be a simple signing document that references other documents. A term sheet where the lender or investor acknowledges the deal’s terms can be the subscription agreement.
• Other Shareholder Agreements: At closing, there are often additional documents you will want your investor to sign. Examples include Shareholder Agreements, an Operating Agreement, or a Know Your Customer (“KYC”) questionnaire.
• Investor Qualification Document: Depending on the type of exemption from public filing, you will have a different investor qualification form. On the Invest.withGLO platform, the most common exemption is a 506(c). In a 506(c), you need third party verification of the qualification of the investor. This verification form is reasonably standardized.  Invest.withGLO.com has a templated form which can be used.

Each offering is unique. Your offering may require additional material. These six items represent the minimum expectation from GLO of what you will have to be “Fund Ready.”

What is next in the Fund Ready process?

After your company is Fund Ready — the next step is Raise Ready. To learn more about being Raise Ready, click here.

To our members, we are here to help you feel comfortable with the various “dots” that need to be connected as you seek to raise capital. To those who are not GLO members, consider us a clarifier in the world of connecting those metaphorical dots on your business page. We have built a platform for entrepreneurs wanting to grow their business with a community of business leaders and peers, ways to do business with each other, cutting edge content, and, of course, that raising capital “dot” that brings it all together for you.

Article by Joseph Barazonzi and Vince Poscente

Photo by Anna Nekrashevich from Pexels