A. Why is fundraising from investors the top choice for enterprises?
For companies that are startups or have not been operating for many years, they have limited financial resources as well as do not own many valuable assets and have not built their reputation in the market. Therefore, raising funds from investors is both an effective financial instrument and an opportunity to cooperate and accompany each other in terms of business development.
For large companies with many years of experience, fundraising is also one of the company’s best selections to bring large financial resources to expand business activities into new potential markets and broaden its scope of activities into many new fields.
In addition, the companies also receive support in strategies, human resources, techniques, technology, and methods of corporate management from experienced investors in the market.
B. To make a successful fundraising, what should enterprises focus on?
1. Preparation stage before fundraising
Before initiating the process of fundraising from investors, companies need to review some issues related to legal, finance, business operations … At this stage, companies should need advice from lawyers with experience in mergers and acquisitions (M&A) as well as fundraising investment to review and resolve any issues that the company has not properly complied with, to carry out the appropriate corrective actions or restructuring for making enterprises become more “attractive” in the views of investors.
In addition, companies should also prepare a careful business plan, which reflects the company’s financial and business forecast in the following years to increase the persuasion for investors. However, enterprises should not come up with a business plan that is too positive, unrealistic and makes investors afraid of the feasibility of the plan.
Moreover, the determination of enterprise value is also extremely important to clearly see the potential and advantages of the business as well as a basis of reference for companies and then their making for an appropriate offering price.
2. Stage during fundraising
(a) Due diligence
Before negotiating terms and executing the contracts, investors often perform due diligence in aspects of finance, legal, operation, … of the target company to consider and make decisions on investment appropriately. Therefore, companies should build a transparent and clear system of records and documents right from their establishment to increase the likelihood of success when fundraising, avoiding loss of time and opportunities for both parties.
An enterprise with unclear, incomplete, or unreliable financial and legal records will hardly be accepted by investors, especially foreign investors.
At the preparation stage, if companies have been consulted by experienced lawyers and have fully prepared financial, legal, and corporate documents, then at this stage, the company will not be surprised or confused by the given requirements or problems from investors.
(b) Negotiation
In the process of negotiating to execute the contract, companies need to clearly understand, review and carefully consider the requirements and conditions that investors offer. In fact, many business owners, especially startups, due to the lack of experience or understanding of the law or urgent need for capital, have easily accepted all the terms that investors offer, which is detrimental for the fundraising company. In such cases, companies should consider hiring a lawyer when raising funds to avoid dealing with regretful consequences later.
During the negotiation process, the lawyers will advise the fundraising company on legal issues, the risks against offers of investors or propose reasonable solutions to balance the interests between the parties.
3. The stage after the end of the fundraising deal
After raising funds successfully from investors, companies must carry out legal procedures with the state authorities to record the capital contribution of investors. In the process of preparing dossiers and documents, enterprises need to study the implementation procedure as well as how to prepare and submit dossiers to avoid prolonging that process.
If possible, businesses can contact the support department of state agencies to check the process and documents to be prepared in fact.
At this stage, the participation of lawyers will partly help companies to carry out the procedures fully and quickly with state agencies.
Therefore, to raise funds successfully, beside convincing skills and positive business plans, companies must pay attention to legal, financial, business operations, … issues from the preparation stage, the negotiation stage to the final stage of a fundraising deal, especially legal issues to avoid any troubles and drawbacks arising later.
To overcome the above situation, companies need to consider advice from experienced lawyers in the entire fundraising process, from the preparation stage to the end of the deal to ensure legality, and increase the rate of success of the transaction. With many years of experience in M&A as well as the fundraising investment field, LMP team can support companies from introducing investors, consulting structuring, leading transactions, negotiating, preparing documents, and finalizing the deal.
Notice: The information provided here is for information purposes only. Depending on different times and customers, the above content may no longer be relevant. For any detailed advice, please contact LMP Lawyers.
