How to assess an investment offer

Reading a deal dossier requires method. Without it, any document full of numbers looks convincing. This guide organizes what to look at in each section before you decide.

1. Does the business exist, or is it just a plan?

Check current revenue, paying customers and time in operation. A company with proven traction has a track record; one at a very early stage depends entirely on projections, and projections are assumptions, not facts.

2. Where the money goes

• Expansion of capacity or of the team
• Entry into new markets or geographies
• Working capital for the existing operation
• Repayment of earlier debt

Companies raising to pay off debt or cover an earlier loss call for a much more critical look. The use of the funds must be described objectively in the documentation.

3. Who is running the business

The experience of the founding team is one of the hardest factors to quantify and one of the easiest to overestimate. Check time in the sector, previous track record, current equity holdings and how well the shareholders are aligned with investors.

4. How the exit works

• Is a liquidity window set out in the agreement?
• Does the exit depend on a specific event, such as a sale, a new round or a buyback?
• What is the minimum holding period?
• Is the percentage raised per investor diluted on exit?

5. Does the size of the contribution make sense?

If losing one contribution in full would compromise your financial plans, the amount is too high, however good the business looks. Set a cap per deal and a cap per segment beforehand.

Questions worth asking

• What was the revenue over the last twelve months?
• What is the current runway and how long does it last with this contribution?
• Who is already investing in the round, and how much?
• What is the relationship between the founding team and the other shareholders?
• What happens to the stake if the company is sold?

If any of those answers comes back vague, the answer is not to fill the gap with assumptions but to ask for more time. Capitalez exists to make that conversation possible before the contribution is made.