• Cory Cleveland

Seeking Investment? You Need to Do the Work

Make the investment banker’s job easier and understand what they require


My name is Cory, I am the President of Creative Return and the host of The Insider’s Guide To Finance. The following are my insights and learnings from the interviews and dealings I have with talented entrepreneurs, operators and financiers. I hope you find them valuable in your endeavours.


The business idea was far-fetched, the management team was passable at best and the technology worked but not without errors and glitches we hoped wouldn’t show when we pitched. But we still managed to raise millions and millions of dollars in the public market. How did we pull it off?


When raising growth capital by engaging an investment bank, the key to success is to make their job as easy as possible.


Gaining a better understanding of the investment banker’s role will make you better off financially. The secret is to know what they require and getting everything ready so they don’t have to start from scratch. The less friction you cause for the bankers, the easier the financing will go. Just don’t expect to get credit for doing it.


Here’s the inside scoop on what’s really going on in a live deal…


The Managing Director (typically +15-20 years of industry experience, often with a graduate degrees from a big name business school) dictates the overall strategy as well as identifies the potential investors and balances the best investment terms between you, aka the client and their book of investors.


The Vice President (typically 5-15 years experience, etc) is more of a client relationship/project manager. They will have at their disposal one or two Associates (typically +2-5 years experience, etc) who will do the bulk of the analysis and excel modelling. Between the VP and Associates that pitch deck you proudly refined and presented will double in size, lose all consideration for design and be forced through expensive legal scrutiny.


Together the banking team will evaluate your business and the industry, identifying the effect of competitive forces in analyzing the quality of your opportunity. If you’re generating revenue, they’ll analyze your cash flows and sustainability of the profit margins. They’ll scrap your model to rebuild their own and put together a financial forecast of your business going forward up to five years. Be ready to answer questions. But before this happens, be sure to schedule a meeting with the VP and Associates to articulate your business model.


During the due diligence process, the bankers will highlight potential risks and how the same will be mitigated, as well as analyze the capital structure of the company, set a preliminary valuation, and after assessing the market condition they will apply a discount rate to determine a valuation range.


All of the above will be created with the input of you and your management team. If you are not prepared, if you are slow to respond or if you aren’t clear in your communication, the bankers will lose their enthusiasm for your deal. With that, momentum will be lost and what was sold to you as a slam dunk financing will turn into a slog that they’d rather orfin than continue to piecemeal.


Given the amount of work for a banking team, it is only logical that a smooth due diligence process can increase your company’s valuation range pre-financing and also reduce the banker’s and lawyer’s time getting the deal ready for the road show (time is money).


So what is the real secret to successful financing?


Think of it as a user experience. Ask yourself and your team how you can deliver your financiers the most friction free, intuitive and transparent experience possible. From increased valuation to raising capital on far fetched deals, the potential payoff is huge.


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Copyright © 2021 Creative Return

Copyright © 2022 Creative Return

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