MAIN STEPS IN INVESTING IN A VENTURE CAPITAL FUND

Raise funds through Investment Funds in Venture Capital (VC) is one of the options that innovative companies with high growth potential have to fund the expansion and accelerated growth of their businesses. There are several types of Investment Funds, as explained in the article”Investment in Young Companies: Maturity Stages and Financing Modalities”, published by FC Partners partner Lucas Della-Sávia. Despite Venture Capital To be the correct term to describe all risk investment classes, it is common to use VC as a form of investment in small and medium-sized companies, with high growth potential, in a phase of market traction and an increase in the customer base, the so-called startups.

The investment process of a VC it can be long, taking between 6 and 12 months from the first contact with the entrepreneurs until the investment is effective. The main steps can be broken down as follows:

1. Preparation of the Business Plan: In this initial phase, entrepreneurs prepare in a document the representation of the business model to be developed or under development. The Business Plan contains the main objectives, strategies, and actions that the company will carry out over time. This document will be the main form of presentation to VC of the business's return potential.

2. Development of Pitch: OR Pitch it is a material, generally prepared in a presentation template, that summarizes the main information about the business. O Pitch you must present the history of the company, the Background of the entrepreneurs and the team, the business value proposition and its competitive differentials, a brief analysis of the market and competitors, the main performance indicators (KPIs), the Investment Thesis, financial projections and any other relevant business-specific information.

3. Definition of Targets: The preparation of the list of Targets it is one of the most important steps in the search for investors. A great way to start drafting the List of TargetsIt is promoting a Brainstorm inter Advisors and entrepreneurs, where will be shortlisted the VCs that have more synergy with the Strategic Motivators of investment in the company. The choice of the ideal profile of VC, may be the definitive factor between the success or not of the business.

4. Presentation to TargetS: Os VCs covered analyze all the information submitted by the entrepreneurs, not limited to the financial and operational data of the business. At this stage, several meetings are generally held between the managers of VCs and entrepreneurs, with the main objective of strengthening relations and getting to know better the objectives of each of the parties.

5. Negotiation: During this stage, all negotiated terms will be formalized through a Term Sheet, or a Letter of Intent (Letter of Intent - LOI), which will contain both business issues involving business values and shareholding, as well as issues of Corporate Governance and company management.

6. Due diligence: This process consists of analyzing and obtaining all the information necessary to value the company, in addition to measuring all possible liabilities and risks involving the transaction. Generally, this stage comprises two steps, namely:

• Tax/Accounting Due Diligence: audit focused on determining the accounting numbers and searching for the company's tax and labor liabilities, as well as measuring the amounts and probability of occurrence of each liability found.

• Legal Due Diligence: auditing focused on examining legal grounds, such as social contracts, contracts with suppliers, labor agreements, loans, litigation, etc.

7. Formalization of the Transaction: Legal formalization of the purchase of a share in VC in the company by signing the Purchase and Sale Agreement (CCV), also called Sales and Purchase Agreement (SPA). The CCV/SPA must be faithful to the negotiation already stipulated in Term Sheet, in addition to also incorporating a series of important new clauses, such as: guarantees for the transaction, penalty clauses, constitution of the Board of Directors (in some cases), vetoes that Venture Capital will have in the main deliberations, etc.

After the investment in the company is made, it is the job of VC it will actually begin. In the period known as Acceleration, the management team of VC will work together with the company's team to create value for the business, either through the development of new products and businesses, structuring processes and teams, opening branches, developing partnerships, etc. Acceleration is the main stage of the investment process, before the sale of the Fund's participation. Due to the importance of this stage, FC Partners will explore in the next articles all the details of the Acceleration process, and the importance of choosing the appropriate profile of VC for the generation of value in the invested company.

ARTICLE WRITTEN BY LUCAS DELLA-SÁVIA — PARTNER OF FC PARTNERS

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