Trying to Raise Capital? Seven Things Every Executive Summary Should Include

For Companies seeking to raise seed capital, or going out for investor financing, it is important to make sure your Executive Summary is well put together

Executive Summaries are documents companies use when they begin to try to raise money and are used whether a company is pursuing early stage start-up financing or later capital infusion.  A company provides an Executive Summary to potential investors as bait and if they are interested in hearing more, then they’ll receive a larger package of investment documents  – a private placement memorandum, an investor questionnaire and a subscription agreement are the norm.

Most often, a company will show potential investors a power point about the company and provide them with an Executive Summary.  These documents are condensed versions of the private placement memorandum and are legal in nature, but they also serve as a sales tool – you are trying to get the investor to drink your Kool-Aid and invest, while covering your legal bases from a disclosure and risk factors standpoint.

So what should they include?  Our 7 top items that every executive summary should include are:

  1. A brief summary of your business – include the history, overall market, your competitors and any intellectual property rights or key agreements you may have (don’t be afraid to name drop).  You want the reader to “get” what your company does.  What is the problem and what is your solution?
  2. Terms of the offering – from a high level.
  3. Use of proceeds – what exactly are you going to spend the investment money on and why?
  4. Risk factors (also known as Key Investment Considerations).  Do not bury these at the end of the document.  Potential investors need to be made aware that certain factors could hinder your business and that they could lose their entire investment.  Risk Factors can be the single most important piece of any Executive Summary as they provide the transparency necessary for an investor to make an informed decision.
  5. Management and Board of Directors – who is in charge?  Provide a short bio on everyone and include past employment and degrees.  It’s not enough to have a great idea; you need to have the team to execute it.
  6. Financials / Projections / Capitalization – high level and accurate projections that can withstand scrutiny.
  7. Corporate Information – how can the investor contact you for more information?

Note that even if you are able to draft the entire document yourself, it is highly advisable that you have an attorney at least review your summary and provide comments to ensure all proper disclosure language is included.  Companies and investors always have the best intentions, but it is best to be prepared if things go south.  Spending a little now could prevent you from spending even more later on.

Legalese to include:

  1. What SEC exemption are you raising money under?
  2. Investor notices (these are different than the risk factors, such as forward-looking statements).
  3. IRS Disclosure.

Executive Summaries should be clear, concise and compelling.  Your job is to capture the reader and get them excited about your company.  You need to show them why this is a great investment by showing them that you have a clear path to financial success and that you have the tools to succeed by way of the management’s history and the company’s position.  Answer the question – why does your company have the competitive advantage?  Try to explain your idea how you would explain it to a friend, but avoid broad, sweeping statements.  Write one specific and compelling sentence that introduces the company and summarizes it.  This will be used in intro emails that you or your colleagues send.  Keep in mind that your summary might not get read if this sentence is not well-crafted. Just like the Executive Summary as a whole, it should sell your company, not just describe it.

The article provided above is for general information purposes only and should not be relied on as specific legal advice. This article does not form an attorney-client relationship. If you have any questions about this article, or wish to discuss this article further, please feel free to contact the Apex Law Group at ContactApex@Apexlg.com

 

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