When the management prepares a financing round, hectic activity breaks out in the finance department. Investors want to see detailed figures and information: From the business plan to proof of assets to contractual obligations. And the deadlines are usually tight. The task now is to compile these figures, consolidate them and prepare them for presentation.
It does not matter whether it is a capital increase for a long-established company or venture capital investment for a start-up. In any case, investors want to see a detailed overview of all business-relevant facts:
The background to the enormous need for information is ultimately formed by four key questions that every investor asks himself before he invests in a company:
What is actually the problem of the finance department?
Only a small part of this information can be extracted by the finance department directly from the accounting data. Most of the data has to be requested from other departments: Human Resources, Marketing, Development, Product Management, etc. And this is where the biggest challenges for the finance department lie. The reason for this are three problems that almost every company knows:
The basic idea of reverse roadmapping can be summarised in one sentence:
"Define the goal and calculate from there back to the present".
For the finance department, which has to prepare a financing round, this means concretely:
In addition, it goes without saying that a central data room must be created and the form and scope of the required reports, presentations, fact sheets, etc. must be discussed with the management.
Start-up GmbH is planning a financing round. The management wants to announce the successful conclusion of this financing round in exactly six months.
It is known that investors still need one month to finalise the financing round after they have decided to invest, provided they have the necessary information. This includes, among other things, the signing of contracts, an appointment with the notary and the transfer of the amount of money.
In order for investors to be able to thoroughly check the available information (due diligence), it must be made available in a central data room that investors can access. And it must be complete, correctly classified, sorted and named in a comprehensible way. The due diligence process normally takes 4 weeks.
In order to motivate investors to enter into negotiations, they often first have to be convinced that a closer examination is worthwhile with so-called "teaser" presentations. Such "teasers" contain rough information on the financial model as well as data from the past, such as sales figures. They must be available at least 4 months before the planned closing.
Depending on the situation, it takes up to thirty feedback loops until the teaser presentations perfectly meet the requirements of the management. Often the data is not yet available in the required quality, which makes it necessary to consult the tax office or the legal department, for example. Sufficient time must be allowed for this as well!
Schematic representation of the reverse roadmap developed:
To ensure that the financing round goes as smoothly as possible, it is worthwhile to think carefully about the storage of the data and documents that need to be gathered and kept within reach during the process.
What requirements must the filing system fulfil in order to become an optimal "data room"?
In order to save time in setting up the data storage, online tools can be used which help to scan the documents, extract information automatically and bring order to the flood of data. One of these tools is ContractHero. Here you can find more information on contract management software.