Fundraising Best Practices Insights

Silverpeak LLP is an authorised representative of Silverpeak Capital Ltd, which is authorised and regulated by the Financial Conduct Authority
Fundraising: Best Practices & Insights
Prepared for
26 October 2016

Agenda
page | CONFIDENTIAL | Silverpeak workshop for SMAU Milano3
1. Silverpeak overview p3
2. Status of the European technology financing market p6
3. Fundraising workshop p11
4. The role of the advisor p37

4
Silverpeak advises innovative, fast-growing technology companies on M&A and financing transactions
Investment bank focused on tech
M&A and financings advisory for
growth companies
Vast network of relationships
Global reach, based in London
Blue-chip investment banking service
Silverpeak overview
FACTSHEET
3 partners with 80+
years of experience
in tech investment
banking
150+ deals and
assignments
completed
15-strong team
Regulated by the
Financial Conduct
Authority
Member of
Globalscope and
sponsor of
Go4Venture
page | CONFIDENTIAL | Silverpeak workshop for SMAU Milano
€15m Series B
JULY 2013
has been acquired by
SEPTEMBER 2013
JULY 2015
JANUARY 2016
JULY 2015
1. INTERNET & DIGITAL MEDIA 2. ENTERPRISE SOFTWARE & SaaS
3. ENABLING TECH. & SERVICES 4. HEALTHTECH
RECENT TRANSACTION EXPERIENCE
FOR OUR 4 KEY SECTORS
$19m Series C
JANUARY 2014
$42m Growth Equity
and Recapitalisation
JANUARY 2012
JUNE 2015
NOVEMBER 2014
OCTOBER 2014
$8m Series C
FEBRUARY 2014
$8m Series B
MAY 2015
has acquired control
of
has been sold to
AUGUST 2015 JULY 2015
OCTOBER 2015
JUNE 2016

Selected completed mandates
More than 200 closed deals and assignments
RecentlyCompleted
Transactions
Cell-handling platform for medical
applications and research
SEPTEMBER 2013
has been acquired for €50m
by
Italy
Advisor to Silicon Biosystems
Global provider of wholesale IP
transit services
May 2009
Has been acquired for
€47m by
Italy
Advisor to TINet
Vendor of Radio Access Network
monitoring systems and software
August 2008
€9.25m Series-B financing
Italy
Advisor to CommProve
5
ItalianDeals
Drug delivery company specialised
in delivery through autologous red
blood cells
JULY 2013
€15m Series-B financing
led by
Italy
Focus Gestioni
Advisor to EryDel
Optical fiber protection solutions for
FTTx and industrial applications
JANUARY 2016
has been sold to
UK / US
Machine learning
for video processing
JUNE 2016
has been sold to
UK / US
Advisor to Octopus
Fabless semiconductors (manycore
processors)
JANUARY 2016
€5m:
France / France
Advisor to Kalray
€7.2m:
Jan-16
Feb-14
SaaS hotel management software
AUGUST 2016
has been sold to
UK / US
Advisor to Hetras
Multi-national
team with senior
Italian team
members
Pietro Strada
Managing Director
Matteo Pozzi
Director

Agenda

Venture and growth financing is healthy but softening
92 90
122 127
168
217
233
$1.6bn
$1.9bn
$2.4bn
$2.8bn
$4.8bn
$7.6bn
$5.7bn
-
$1b
$2b
$3b
$4b
$5b
$6b
$7b
$8b
$9b
$10b
$11b
$12b
-10
10
30
50
70
90
110
130
150
170
190
210
230
250
2010 2011 2012 2013 2014 2015 2016E
1: Between 2010 – 2016E
Source: Go4Venture.com
7page | CONFIDENTIAL | Silverpeak workshop for SMAU Milano
European tech financings (≥€7.5mn)1
# of deals Value of deals €496m Feb-15
late-stage round
€446m Jun-15
Series B round
€469m Jun-15
late-stage round
€1.4bn ACCOUNTED FOR IN
TOP 3 DEALS

In the last 18 months, Southern European companies have attracted attention
35%
20%
14%
4%
5%
4%
1% 17%
Other: 67 deals
Top 6 countries (+ Italy) shown, other counties: Ireland, Denmark, Netherlands, Finland, Belgium, Portugal,
Iceland, Russian Federation, Norway, Luxembourg, Poland, Lithuania, Austria, Estonia, Greece, Cyprus
8page | CONFIDENTIAL | Silverpeak workshop for SMAU Milano
# of European tech financings by country (≥€7.5mn)1
Total # of deals = 386
Italy: 3 deals, 1%
€10m Sep-15
Series C round
€16m Nov-15
Series A round
€8m May-16
Series B round
UK: 135 deals
Germany: 76 deals
France: 54 deals
Sweden: 17 deals
Switzerland: 19 deals
Spain: 15 deals
1: Between 01/01/2015 – 31/08/2016
€6.5m May-16
Series B round
Spain: Selected deals, 4%
€106m Apr-16
Series C round
€88m May-16
Series B round
€37m Jun-16
Series B round

Traditional investors are no longer the only option in Europe…
 Non-VC/Growth Equity investors are key to the venture financing eco-system
- c. 1/3 deals1 led by a Generalist Investor (i.e. non-VC / Growth equity)
- c. 2/3 deals1 featured a Generalist Investor
 Larger venture funds dominate the market (≥12 deals1 participated in)
 There is a healthy growth equity segment (≥5 deals1 participated in)
 Every corporate is getting involved (≥5 deals1 participated in)
 … as well as state funds and a range of others (≥5 deals1 participated in)
page | CONFIDENTIAL | Silverpeak workshop for SMAU Milano9 1: EU tech financings ≥€7.5m between January 2015 – August 2016

…although there are a growing number of active Italian tech focused funds
page | CONFIDENTIAL | Silverpeak workshop for SMAU Milano10 Source: Fondo Italiano di Investimento (revised by Innogest Sep-16)
 Bubble size denotes fund size
 Purple bubble + logo =
currently active
=€50m
KEY
FOCUSEDBROADINVESTMENTSECTORS
SEED SERIES A SERIES B LATE STAGE

 Rationale for raising money
 The process before the process
 Designing the process
 Identifying investors
 Valuation
 Marketing the opportunity
 Term Sheets
 Negotiation
 Due diligence
 Final documentation
Agenda
Preparation1.
Go-to-market2.
DD & Closing3.

When and why should a tech start-up raise money?
focus
The star indicates selected slides
to focus on during the workshop
1
2
3
4
Loss making…and…running out of cash
Requiring funds to accelerate growth and expansion
Respond to inbound enquiry -> validate the story
Selling a partial stake
Preparation Go-to-market DD & Closing1. 2. 3.
OR NONE OF THESE

The process before the process: starting to think about financing
 Set the financial objectives (reasonable) of the shareholders group and the company
— Validate them with third parties
 Have clear reasons why you are exploring a fundraising at that point in time and be able
to spell them out (it’s one of the first questions you will get)
 Determine the ideal timing and identify the factors that can have an influence on it
(including flexibility on target timing):
— Company performance
— Financial market conditions
— Internal preparation
— Company newsflow
 Identify the most likely investors and their rationale to support the company; the strategy
of the company comes first, but it can be influenced by potential investors’ expertise
— Conceptualise which type is the “perfect” investor for the company
 Get external input
— Speak with other CEOs that have done one or many fundraisings
— Meet and get to know the potential investors
— Strengthen your board or advisory board
— Build relationships with advisors (investment bankers, lawyers)
 Identify key internal preparation items
— Shareholder constraints (institutional or
personal)
— Competitors behaviour
— Financing requirements (if loss-making)
A successful fundraising is
often a carefully prepared
event
It’s never too early to start
to plan a fundraising

Information for fundraising should be both factual and forward-looking
 In a financing process, investors may not be as familiar with your business or the
sector as you are
— There is a greater onus on the company to provide information to investors
— Be prepared to educate investors and familiarise them with your business
— However, investors who deeply understand your sector may be the best fit
 By having long-standing relationships with investors, you can bring them up to speed
prior to a fundraising process (and get their mindshare)
 Investors will want to see an operating model with a forward looking business
plan built-in, typically covering the next 3-5 years
— Forecasts must be credible, they will often form a key component of an investor’s
valuation and potential return calculation analysis
— Historical KPIs give credibility to forecasts
— Investors “use” the Excel model to understand the business model of the company

Long-term positioning and buyer mapping
 Knowing your buyers and understanding their rationale for pursuing an acquisition, is
important to be able to effectively articulate your long-term plan to investors
 Consider mapping your buyers prior to a fundraising process: it will help you
articulate the story!
 Ultimately an
investor will realise
the value of their
investment by
selling your
company
 Evidence that you
have put some
thought into
planning for an exit
can help inspire
confidence

The process before the process: internal preparation
 Financial systems and accounting
— Audited financials (annual)
— Budgeting process
— Management accounts
— Accounting policies that can be scrutinised
— Identify discrepancies with IFRS and US GAAP, if any
— Ability to extract spot-information from the systems (e.g. accounts receivable, payable, tangible
assets)
 Corporate documents repository
— Corporate filings
— Board minutes
— Annual General Meetings
— Taxes
 Other tools
— Updated and complete cap table
— Waterfall analysis
— 3-5yr strategic/business plan
— Business model (integrated 3 financial statements)
— Scenario analysis
— Electronic data room
Getting your house in order!

May Jun Jul Aug Sep Oct
W/C (Monday) 16 23 30 06 13 20 27 04 11 18 25 01 08 15 22 29 05 12 19 26 03 10 17 24 31
Summer period
Data gathering and review of company information
Finalise financial projections
Valuation analysis
Preliminary data room
Finalise investor list - longlist and those for preliminary approach
Preliminary marketing approaches to selected investors
Contact all parties
Distribute teaser to selected investors
Sign NDAs with interested potential investors
Distribute company initial information pack
Issue process letter
Hold management meetings, respond to Q&A
Provide additional information pack
Deadline for indicative term sheet submission
Further Q&A and limited virtual data room access
Negotiate term sheet(s), select party(ies) to progress
Deadline for formal term sheet submission
Finalise comprehensive virtual data room
Grant access to complete virtual data room
Investor(s) conclude due diligence
Issue first draft investment agreement & shareholders agreement
Negotiation and further drafting
Ancillary documents (articles of association, disclosure schedule)
Signing
Key Milestones
Closing Phase
Go-to-Market Phase
Preparation Phase
Preparation of marketing materials (teaser, mgmt. presentation etc.)
Actual action plan and timetable of an fundraising process
→ 6 – 9 months
[EXAMPLE]

Process tools and documents checklist
 Cover email
 Teaser
 Standard NDA
 Company presentation
 Valuation analysis
 Exploratory virtual data room
 Status report (investors list)

Investor
Domain
Expertise
$ Firepower
Industry
Network
Overall Fit
Investor 1
Investor 2
Investor 3
Investor 4
Investor 5
Investor 6
Identifying potential investors: useful analyses
Investor research Investor “mapping”
Other considerationsPrioritisation and short-listing
 Chemistry with management team
 Investor lists are dynamic and should be
maintained
 Sources for investor names:
— Professional databases, annual reports, market
research, sector websites, conferences/events
 Map relationships with key decision makers
 Monitor the news involving investors
 Stated preferences
vs. deal history
— Size and stage
— Geography
— Sector/expertise
 Expected terms
 Commercial
opportunities

The role of valuation analyses in context
 Valuation of an asset has a relationship to the price paid, but is not the same
 Different valuation analyses can provide guidance within a range, which can be quite broad
 Valuation analyses allow an explicit conversation on valuation and may be an important
negotiation tool
 A potentially very emotional discussion can be rationalised
 The dilemma: set a price to investors or let the market speak
Value is what one thinks
his asset is worth
Price is what is paid for
the asset at the end
Valuation is an art,
not a science

Silverpeak understands how to deliver a strategic price for our clients
BASE
VALUATION
 Based on financial information of the business to date and forecasts
 Organic revenue generation and prospects
 EBITDA growth
STRATEGIC
PREMIUM
 Is it an attractive asset?
 Does it have competitive advantage?
 If both the above are satisfied, it carries a ‘scarcity’ premium
 Knowledge and expertise, combined with domain knowledge
 Service enhancement and future developments already in progress
VALUE
DESTROYING
FACTORS
IP, expertise &
development
Scarcity
premium
Scalability
Blue-chip
references
 Services are highly scalable
 Provides high potential growth
Lack of
forecast
visibility Agreements & obligations
with customer / supplier /
partner
Lack of
unique
approach
Lack of shareholder &
management alignment
 Vertical focus?
 Proof points and reference sites

Typical valuation techniques
COMPARABLES-BASED VALUATION DISCOUNTED CASH FLOW (DCF)
APPROACH
PROS
CONS
What similar companies are worth
(public market or acquisition valuations)
What the company’s future cash flows
are worth today
 Reflects what market is prepared to pay
 Simple and user-friendly
 Can value unprofitable companies
 Theoretically the most accurate
 Can be used even if no true comparables
 Can incorporate synergies and scenarios
 Can be hard to find true comparables
 Impacted by short-term market fluctuations
 Hard to forecast cash flows with confidence
 Very sensitive to WACC and TV assumptions
Both methods have advantages and disadvantages, so where possible
both should be used to arrive at a balanced view on what the company is worth

A valuation method for investments & minority deals: investor returns
Answers the
question: “What
price am I willing
to pay now to
achieve the return
that I want, given
the expected value
of the company at
exit?”
Input for the analysis:
 Target money-multiple return
 Target return on investment (time weighted) and indicative discount rates
— Early Stage VC (A rounds) → 50%-100%
— Later Stage VC (B, C rounds) → 30%-50%
— Private Equity → 20%-30%
— Venture Debt → 15%-20%
— Debt, Bonds → 5%-15%
 Assumptions on exit timing
 3-5 year business plan
 Valuation estimates at exit
— What multiples will apply at the time of exit?
Investor’s often revise the business plan
— Revenue reduction
— Increase in costs
— Potential delays
in $m FY 2016 FY 2017 FY 2018 (SP)
Gross Booking Value 456 1,148 2,067
Growth 1075% 152% 80%
Total Net Revenue 42 122 220
TNR-Margin 9% 11% 11%
EBITDA 8 37 70
EBITDA/Net Revenue-Margin 20% 30% 32%
in $m
Investment 35
EBITDA (2018) 70
EBITDA Multiple 15x
Enterprise Value (2018) 1,054
Low 4x 140 13% 229 71%
Medium 7x 245 23% 116 112%
High 10x 350 33% 70 144%
* Exit 31st Dec-18; Investment Jun-16
Implied
IRR*
Return for
investor
Share for
Investor
Pre-Money
Valuation
Money
Multiple
A
B
C
D
E F xE A= G /F D= H A= G A/ -
Company’s business plan

Contacting potential investors
 Mapping the organisation of potential investors
— Operational champion: this is the investment manager that will have day-to-day responsibility for the
investment and usually is also the one that is advocating the deal internally
— Execution champion: this is the partner that typically sits on the Investment Committee and will
have to persuade their partners to make the deal happen and negotiate the final documentation
— Investment Committee: this is the decision making body that takes the final decision
 Use all relationships from management, advisors, board members
 Carefully manage and track information flow and process
— If initial contact by phone, have a script of what to say
— If initial contact by email, have a good teaser to grab attention (either with the name or without the
name)
— Put in place NDA, when needed
— Share detailed presentation
— Organise a meeting with management
— Manage follow-up questions
— Provide guidance letter prior to submission of term sheet
 Keep all interested parties aligned on timing

The status report: key to manage the process
PriorityRanking
Turneddown(13)
Mainlocation
Company name
Canmentionname?
Contacted(45)
Teasersent(16)
SignedNDA(6)
CorpPresentationsent(4)
MeetingScheduled(5)
MeetingHeld(3)
BusModelsent(0)
Termsheet(0)
Duediligence(0)
Primary contact at counterparty
Silverpeakdirectcontact
Date of last
contact Summary of interactions Next steps
A N DE NAME 1 N P P P P PERSON 1, TITLE 22-Jul-16 NOTES: ubi mjor minor cessat Conf call on KPIs
A N UK NAME 2 P P PERSON 2, TITLE Y 21-Jul-16 NOTES: ubi mjor minor cessat
Meeting w CFO on 21-7
to discuss
A N UK NAME 3 P P PERSON 3, TITLE 19-Jul-16 NOTES: ubi mjor minor cessat Call, follow up
A N IT NAME 4 N P P P PERSON 4, TITLE Y 19-Jul-16 NOTES: ubi mjor minor cessat Follow up, if interested
A N FR NAME 5 P P P PERSON 5, TITLE Y 19-Jul-16 NOTES: ubi mjor minor cessat
Speak on the phone to
discuss presentation
A N US NAME 6 N P P PERSON 6, TITLE 17-Jul-16 NOTES: ubi mjor minor cessat Follow up
A N DE NAME 7 P P PERSON 7, TITLE Y 14-Jul-16 NOTES: ubi mjor minor cessat
Wait for response from
M&A department

Things to remember during the marketing phase
1. You are selling
2. The perception of value is created by every piece of information
communicated to the investors
3. Retain and communicate good news to investors during the engagement
— PR or targeted: new clients, new partnerships, new hires, etc.
— Exceeding forecasts
4. Only ask for a term sheet when the investors have all the information
to submit a good term sheet
— If you discuss valuation too early, there is the risk of getting the wrong answer
and then the counterparty will stick to it
1
2
3
4

The termsheet
 Be sure you know your investor.. and that they know you!
‒ A common view on strategy, risks and mitigations is key
 Keep it simple
‒ Cover all the key points
 For larger transactions, get a corporate finance adviser on
your side: you don’t have to fight on your own
‒ Investors do these all the time – they are better at it than you
are
 Remember: investors are in the business of asymmetrical
information advantage and issue termsheets for a living
 Use experienced lawyers
 Get them involved early - if only to check that the termsheet terms
can be implemented in the envisaged legal jurisdiction
 Fees will pay for themselves (if you think of all the traps you will
avoid and the better terms you will be able to negotiate)

ValuationThe Investment
The termsheet: key topics (1/3)
1 2
 Name of Investors (Syndicate Members)
― How many there are:
 The more numbers and the Board gets
crowded post Series-B
 If more than 2, one should be "Observer" on
the Board, with unstated vocation to step
down post Series-B
― How much do they invest (and from which
funds - check whether structure, size of fund)
 Investment
― Amount
― Type:
 Equity vs convertible debt
 Ordinary shares vs preferred (which gives
access to all sorts of rights - including
liquidation preference, Board position, etc)
― When? Avoid tranched investment (unless
unconditional). If not possible:
 Reduce the number of milestones as possible
 Make sure you only have to meet a few vs. all
(e.g. 3 objectives out of 5)
 Make sure the targets are realistically
achievable
 Don’t obsess about it
― What is really important is assembling a team
that will help you create value going forward
― And having good, simple terms, which will
serve you well in the future
 Valuation Ratchets
― Adjustment of valuation ex post, so the
investor mitigates their risk
 It is a way to pass the risk away from the VC
back to the entrepreneur
 Tools used: Convertible loan or Warrants
― Avoid ratchets unless it is used in a balanced
way to your benefit as well, i.e., get extra
shares if performance is truly exceptional
 Similar to tranched investments, make sure
targets are realistically achievable
 Who should be diluted by the ESOP?
― Entrepreneur says that all shareholders benefit; VC
says that the ESOP is required for the company to
deliver the promised performance
― Consider having a portion that dilutes existing and a
portion that dilutes everyone post investment
― At the end of the day, a valuation discussion

Liquidation Preference (“LP”)
3
 Dis-aligns VCs and entrepreneurs
― LP provides the VC with their money out first,
before common is paid
― LP right is linked to a "liquidity event". Usually
includes sale or winding up of the company but
excludes an IPO, where preferred shares
convert to common/ordinary
 Rationale?
― Conceptually: provides the VC with downside
protection in the event the company is sold /
wound up for below the post money valuation
― Initially: the entrepreneur puts little money, so
in theory could wind up the company and get
his hands of on his share of the financial
investor’s cash
― Now: “a cost to do business””
― Only value is bridging valuation differences -
but will backfire via dis-alignment
 If you have to have it
― Market is at 1x LP, i.e. VCs get their money
back in priority
― Real debate is the participating vs. non-
participating preference
 Participation Rights – aka the “double dip”
― Participating preferences allows the VC to
participate along side common, on a pro-rata
basis, after receiving their LP
 I.e. if a VC invested £5mn for 25% with a 1x LP and
participating shares and the business sold for
£25mn, then the investor would receive £10mn
(£5mn LP + £20mn x 25%)
― Non-Participating forces the VC to convert to
common in order to receive an amount greater
than their LP
 I.e. if a VC invested £5mn for 25% with a 1x LP and
non-participating shares and the business sold for
£25mn, then the investor would receive £6.25mn
(£25mn x 25%), as they would waive their LP
(£5mn) and convert to common in order to a
greater return
― Another common way to bridge the valuation gap
― Catch up rights
Note: We are seeing a small (but growing) minority of Series-A to be
done with ordinary shares. We also see is "preferred ordinary"
shares, i.e., shares which are called Ordinary but do offer some
(limited) preferences (no LP, no anti-dilution, but all the rest).

Exit provisions: drag & tag alongAnti-dilution protection4 5
 Key right: to be protected against a
down round. Typically by the exercise of
― Warrants (BSA); or
― Free shares (if tax rules allow) to make up
for the valuation difference
 Key points of negotiation
― Is the (share) price adjusted in full ("full
ratchet"), i.e., regardless of how many below
price shares are to be issued, or proportional
("weighted average")
― “Pay to Play” - Make the anti-dilution
protection linked to investors investing their
pro-rata in the future round, i.e. they have
to invest if they want to benefit from the
protection
― A key point of fairness, i.e. we should not
accept anti-dilution without “Pay to Play"
 Key trick is to link it to “Pay to Play”
― Anti-dilution provisions only available to
those who re-invest
― Others don’t benefit – and may in fact lose
other rights (preferred automatically
converted to common for instance)
 Timeline to Exit
― Usually defined in the termsheet
― Main constraint is the investor can force the
company to hire advisers to explore exit options
― Typically also parameters for what stock
exchange the company may list and how much
the IPO must provide in order to float the
company
 Drag along
― Grouped shareholders who want to sell can
force minority shareholders to sell
― Threshold is usually set so that the founders
alone cannot force it, and no VC can be forced
to sell his shares (veto right)
 Tag along
― If a shareholder sells a significant amount of
shares, then has to offer the same deal to other
willing selling shareholders on a pro rata basis
― Usually VCs will have a veto (and pre-emption)
right on the shares being sold
― Threshold should be sufficiently high so as to
allow tactical selling (to manage the founders
cash position)

Nuggets of wisdom in negotiation
 Deals are done for two main reasons: greed and fear. Both
should be at work during the process. Competitive tension
(real or perceived) is important
 In a single-party negotiation the competition is not to raise
money and continue to execute against the existing (or a
slightly less ambitious) plan backed by current investors
 Understand who is taking decisions on the investor’s side,
their processes and landscape
 Understand what is driving the deal
 It’s not done until it’s done
 Negotiation starts at the first contact
 There is “signalling” in everything you do: time or actions, quality, tone, credibility,
meeting expectations, etc.
 Role playing:
— Management will have to work with the investor after the deal
— Shareholders mostly stay behind the scenes until decision-making times
— The financial advisor is the orchestrator of roles (and sometime the “bad cop”)
— If possible, keep some back-channels of communication

Due diligence: start preparing on day one!
— Failure to disclose information can cause problems in the
late stage of the process
— Nevertheless, think carefully about the best way of
presenting information
 Expect investors to have a checklist for confirmatory DD
— An investor may employ advisors for specific DD areas:
financial, legal, commercial
 Keep track of all Q&A to avoid answering the same
question twice
 Selling to VCs is NOT like selling to customers
 Distinguish between exploratory DD / Q&A (pre term sheet) and confirmatory DD
(after term sheet)
 Gathering and collating information takes time: start as soon as possible
— We build an initial data room as part of our data gathering at the start of any process
 Numerous virtual data room providers, select one that offers the right functionality
(entry level: Box, SmartRoom; advanced: Intralinks, Merrill)
 Start to prepare the DD data room prior to receiving term sheets to ensure a smooth
process (minimise time between term sheet and DD)
 The data room must be a “complete portrait” of the company

Structuring a virtual data room
 Grant access to necessary people; keep track of who has access
— There may be more than 20 people accessing the data room
— There may be different level of access rights
 An effective data room and clear folder structure makes it easy
for the investors to navigate and locate the information they
require
— Provide a file index that maps the entire data room
— Name the files and folders eponymously
 Typically, the investors will provide their checklist or questions,
but the company should structure the data room as it deems fit
 Create a separate folder to track Q&A to ensure all answers given
are available to all staff involved in due diligence at the investor
 Provide a clear pamphlet of data room rules, so the investor is
aware of the structure, process and rules governing the data room
Example Data Room Structure
Request
Not
Applicable?
Company
Owner Company Response Document Reference
Investor
Stakeholder
Investor
Comment Status
1 Company Structure and Constitution
1.1 Has the Company any subsidiaries? If so, please specify.
1.2 Please specify which of the Company's subsidiaries (if any) are
trading and which are dormant. In relation to any dormant
companies, please state when (if at all) they last traded.
John Smith Only subsidiary X is dormant 01 Corporate Documents / Subsidiaries / Subsidiary X John Doe Sufficient Complete

Manage your data room intelligently
 The data room can be gated to elicit investor commitment and competitive tension
 If you do a good piece of analysis: 1.) it is re-usable, and 2.) it can often excite
other investors
 All data room providers offer the ability to monitor users as an “admin”, which can
provide valuable intelligence on the investor’s progress, such as:
— Who has received an invitation to the data room, but not accepted it?
— Who has accessed which file or folder? How long did they view a document?
— Who has used the data room in the last 24 hours?
 For fundraising, you don’t need a gold plated data room
 Proactive monitoring of the data room can help to identify any issues early on,
such as slow progress from a particular advisor or limited attention given to key
documents
Date / Time User's Name Action Item / Name Contained in Folder
13/02/2015 04:48 Andriy Download 04 - Sales, Marketing and Contracts Edata room - ABC Limited (Group)
13/02/2015 04:34 Andriy Download 02 - Financials Edata room - ABC Limited (Group)
11/02/2015 02:16 BM Previewed 2014_11_13 Limited Register of Members.PDF 1.3 - Registers
11/02/2015 02:09 BM Previewed Contact List (11 Feb 15).pdf 12 - Q&A, DD Lists, Process
Example Data Room Usage Report

An investor’s perspective on confirmatory due diligence
 Ultimately, in DD the investor should seek to confirm the information that was
previously provided and that led to the provisions in the Term Sheet
— Failure to confirm the accuracy of these assumptions could lead to a reduction in
valuation or similar
— Consistency of financial statements is of critical importance
 The investor will also want to identify any other risk exposures, for example:
— Potential claims of ownership of the IP
— Deferred liabilities e.g. tax
 The management will have to make representations and warranties in the final
contract. An investor will seek protection for a breach of the reps and warranties by
the company, but should normally not be able to claim damages if information was
known (i.e. if it was disclosed in DD) so….disclose everything

Final key investment documentation
Investment Agreement Articles of Association
Shareholders Agreement
 A contract that defines a transaction at
the specific point in time
― Notable exceptions are: tranches, options
and warrant terms
 It regulates the actual investment,
setting out the object, reps and
warranties and terms for the investors’
purchase of shares in the company
 The document that
defines the corporate
governance and each
class of shares
 Typical provisions
include: share capital,
share rights, allotment
and transfer of shares
and BoD rules
 The document that defines the rights and duties (if any) of shareholders that are not
attached to the class of shares they own
 Used as a safeguard to give protection or to bind shareholders
 Depending on how the agreement is written, it may be less enforceable than the articles
of association

Agenda

Components of an advisor’s added value
OUR APPROACH
 We become an
extension of the
company and the Board
 A “fresh pair eyes”
 We enhance the equity
story and the
company’s positioning
in its marketplace
 We prepare the
company for due
diligence, facilitating
the process with
buyers/investors
 We provide perspective
and get management
ready
 We help management
to think about their
own business in the
way buyers/investors
will early in the
process
Time leverage
 CEO and management focus on the business
 Communicate management’s “time preciousness”
Buyer/Investor selection and access
 Knowledge of the investor community and buyers
 Relationships
Quality in documentation and analyses
 Marketing materials preparation: cover email, teaser, presentation
 Financial modelling
 Help the company with the analyses that buyers/investors will ask for
Flawless process management
 Introductions and follow-ups
 Ability to identify the market feedback and address it
 Control of information flow
 Creating competitive tension
Expertise to negotiate value
 Valuation analysis
 Knowledge of transactions and current market trends
Execution
 Management of multiple parties
 Data room management
 Negotiation of closing documents
A
B
C
D
E
F

How to select an advisor
Ideally….don’t leave it to the last minute! There are distinct differences in approach:
QUALITY /
EXPERIENCE
PERCEIVED
ABILITY TO EXECUTE
PERSONAL
CHEMISTRY
COMMITMENT
 Do they respond quickly? Do they seem interested?
 Have they done their research on your business prior to meetings?
 Is the service customised for your needs?
 Do they make judicious comments?
 Do they make useful contributions (readings, introductions etc.)?
 Do they have experience of transactions in your specific area?
 Do they seem convinced a transaction is possible?
 Are they able to cater to your company’s specific needs? E.g. dual track
 Do you enjoy working with them? (and vice versa?)
 You will be stuck with them for 6+ months, probably longer!

’s differentiating factors
 Only technology – deep sector knowledge, incl. IP-rich businesses
 Creativity on how to position and present the company
 M&A and financings advisory – there at every step of the way
 Global cross-border deals track record
 Multinational partnership and team
 Power of experience - one of the longest established teams
 Hands-on senior dedicated service throughout the process
Many of our
mandates come
from referrals
& introductions
from clients or
parties we have
previously
worked with (or
“against”)

Thank you.
Matteo Pozzi
Director
Silverpeak LLP
M: +44 7825 840 785
T: +44 20 7529 5403
E: mp@silverpeakib.com
23 Hanover Square
London W1S 1JB
United Kingdom
www.silverpeakib.com

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