AEGIS CAN HELP

A successful capital raise requires a lot of things to come together – a great business opportunity, capable managers, a complete description of the opportunity (narratively, financially, and legally) and the successful execution of a strategy to distribute the opportunity to potential investors.   

Often, we are asked to be heavily involved in each of the following items where an investment package needs to be assembled and distribution strategy developed.  At times, our clients have many of these items prepared and we are merely updating or slightly reworking.  Other times, we are helping to prepare original content.   Either way, our team can help bring your private investment offering package together.

$0
Estimated amount of venture funding completed with AEGIS support.

Convertible Note Offering

Estimate

$2,500 - 5,000one-time
  • Term Sheet
  • Statement of Risks
  • Diligence Support
  • Investor Advocacy
  • Convertible Note
  • Note Purchase Agreement
  • Operating Agreement

SAFE Offering

Estimate

$2,500 - 5,000one-time
  • Term Sheet
  • Statement of Risks
  • Diligence Support
  • Investor Advocacy
  • SAFE Agreement
  • Shareholder Agreement

Private Placement Memorandum

Estimate

$5,000 - 10,000one-time
  • Term Sheet
  • Statement of Risks
  • Diligence Support
  • Investor Advocacy
  • Private Placement Memorandum
  • Subscription Agreement
  • Operating Agreement

Business Plan & Financial Modeling

Estimate

$3,000 - 6,000one-time
  • Business Plan
  • Investor Pitch Decks
  • Startup Funding Strategy
  • Financial Projections
  • Investor Advocacy

What’s Included?

What is a convertible note?

A convertible note is an investment vehicle often used by seed investors investing in startups who wish to delay establishing a valuation for that startup until a later round of funding or milestone. Convertible notes are structured as loans with the intention of converting to equity. The outstanding balance of the loan is automatically converted to equity at a specific milestone, often at the valuation of a later funding round. In order to compensate the angel investor for the additional risk of investing in the earlier round, convertible notes will sometimes have additional clauses, such as caps, and or discounts.

Why should early-stage companies use them?

Convertible notes (or “notes”) offer a simple, cheap, and fast method for startup funding as compared to traditional priced equity rounds. It also defers the more complex discussion of startup valuation to the next round of financing as convertible notes do not set the exact terms of the investment.

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What is a SAFE?

A safe is a Simple Agreement for Future Equity.  An investor makes a cash investment in a company, but gets company stock at a later date, in connection with a specific event.  A safe is not a debt instrument, but is intended to be an alternative to convertible notes that is beneficial for both companies and investors.

Why should early-stage companies use them?

Debt instruments have requirements – including regulations , interest accrual, maturity dates, the threat of insolvency and in some cases, security interests and subordination agreements.  These requirements can have unintended negative consequences.  A safe is intended to be simple for both companies and investors, with the usual path to agreement requiring the negotiation of only one item – the “valuation cap.”  

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What is a Private Placement Memorandum?

A private placement memorandum may also be called an offering memorandum (OM), confidential offering memorandum (COM) or confidential information memorandum (CIM). A PPM is similar to a business plan, although it focuses much more on legal issues.  The primary purpose of a PPM is to disclose to prospective investors the terms of a potential investment and primary risk factors involved in making the investment. A PPM also usually contains a considerable amount of information about the business opportunity, structure and management.  It is less sales-oriented than a traditional business plan, partly because business lawyers typically create them.

From the standpoint of a company raising money (called an “issuer” in SEC terminology), a PPM is a safety belt offering protection to a company selling unregistered, private securities. The securities may be stock or other equity interests (e.g., limited liability company membership interests) or they may be some type of debt instrument.  

Why should early-stage companies have one?

In a private offering under Rule 506(b) where you raise money from accredited investors, you don’t have an obligation to deliver any specific information to the prospective investors, provided you don’t violate the antifraud rules. Rule 506(b) allows companies to raise money from unaccredited investors, although you’d then be required to provide certain information, which is similar in scope and form as the information required in registered offerings with the SEC.

The SEC website defines an accredited investor as an individual who (a) has earned more than $200,000 ($300,000 with their spouse) in each of the prior two years with a reasonable expectation of earning at least that in the current year; or (b) has a net worth over $1 million, either alone or together with a spouse (excluding the value of the person’s primary residence and any loans secured by the residence (up to the value of the residence)). There are other meanings of accredited investors that apply in the case of entities (corporations and LLCs, as opposed to individuals).

The takeaway here is that if you use the 506(b) safe harbor (which is a great exemption to use, by the way – easy and SAFE) and only offer securities to accredited investors, you do not technically have to provide the disclosures contained in a PPM (for clarity, the disclosures and information in a PPM are much less than in a registered offering).

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Whether you have an academically perfect 30-page business plan or some notes on a napkin, we focus on the right amount of information about the right parts of your business model in the right format for an investor audience. Using our years of experience, we address weaknesses in your business plan with appropriate attention to critical sections such as management, revenue operations, financial planning, and market analysis.  

Our process for writing business plans has served clients well to improve quality of investor submissions, minimize production time for documents, and maximize the value of our diverse professional team.  If you have a good business plan for us to start with, the cost and time commitment to make it investor ready will be minimal, but if you don’t even know where to start, we’ll put in the time and effort to write the whole plan.

A prerequisite for the business plan is a Financial Operations Model which expresses your business plan in numerical form–these two critical components of any investor pursuit must be aligned to set expectations for your investor.  

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You may have a detailed and highly accurate business model built by a skilled team of accounting and operations specialists, in which case we offer a validation process to prepare you and your team for the investor process.  Sometimes that objective eye can find an opportunity or miscalculation before your investor presentation.

In most cases, Financial Operations Models are built using plug-in numbers and best guesses, built entirely separate from the business plan so SG&A budgets, marketing expenditures, and revenue forecasts produce fictitious financial figures.  Not only is this a red flag to investors, but you as the business owner cannot make decisions about your business based on the facade of a financial model.  In these cases, or if starting with a blank spreadsheet, we can build you a fully functional financial operations model from scratch so you you can not only court investors, but present realistic revenue goals that you can actually achieve using the funding they provide.

Upon completion of our Financial Operations Model process, you will be able to answer the tough investor questions about how your business will be profitable.

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Schedule a Consultation

Consultations with AEGIS are always free. Give us a call at (314)-454-9100 x101 or email us to schedule your appointment.