Do you have a start-up and are looking for an effective way to finance it? Fund-raising can be a successful method. How can a lawyer help you?
Would you like assistance with your fundraising?
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What is fund-raising?
Fundraising is a technique that enables a company to obtain financing fromexternal investors. In return, they generally obtain a stake in the company’s capital. Managers can call on specialized internet platforms and private individuals or investment professionals. Financing comes in a variety of forms, from personal loans between individuals to equity investments.
How does fundraising work?
Fund-raising is a solution for generating capital by involving third parties in the company. This financing method is very effective for obtaining a cash advance to finance the launch of a new project. It is available in various forms: equity financing, venture loans, LBOs, etc. This type of financing accelerates a company’s development and opens up its capital to investors. Unlike a conventional loan, which requires you to borrow money from a bank in return for an interest rate, raising capital will introduce one or more new partners into your company. These investors will benefit from certain rights (information, consultation, dividends) in return for investing in your project, and will de facto have certain rights over your company.
What strategy should you adopt?
At the financial structuring stage, it is advisable to enlist the help of a lawyer to provide you with the best possible support. Indeed, this step is crucial. The help of a lawyer is therefore invaluable in helping you find the right type of financing for your needs. It must be adapted to your objectives, your project and your company’s situation. A lawyer’s expertise will help you understand your business model. He can also negotiate the terms of this financing favorably and help your business prosper over the long term.
This will give you the tools you need to assess the best strategy to adopt, and determine the amount and conditions of eligibility for financing. For these reasons, this operation needs a strict legal framework (confidentiality agreement, letter of intent, term sheet, articles of association, shareholders’ agreement). Well thought-out drafting of these various documents helps to avoid any risks for the various parties.
It’s a very attractive deal for ambitious companies aiming to grow their business. Nevertheless, this operation is complex and risky, both in terms of the amount collected and the management of the risk itself. You need to know how to surround yourself with the right people and conduct negotiations wisely. It’s also important to bear in mind that the founders and investors will be working hand in hand to ensure the company’s continuity, and the interests of each must be reconciled with the company’s main interests.