The Tech & High Growth team at Cooper Parry are the UK’s leading startup and scaleup partner in the accounting and tax space, working with fast-growing venture backed businesses and the people that own them, to get ahead of the challenges and opportunities that lie in wait.

The team work with over 500 early stage and over 250 scale ups, building relationships with the Founders, CFOs, and Boards of high growth businesses. Unlike any other team in the tech sector, they support clients across all financial needs from Pre-Seed to Exit and beyond.

The Tech & High Growth team is an internal ecosystem built specifically for high growth businesses, and it doesn’t exist at other firms. That’s just one of the reasons why Cooper Parry are known as the rebels of accountancy. They don’t do suits and don’t do boring, instead cutting straight to the answers with the freedom to work closely with clients to deliver the pragmatic and timely support they need.

With an entrepreneurial spirit at its core, CP is here to ‘Disrupt, Lead and Make Life Count’ – backed up by being the 22nd Best Company to Work for in the UK and No.1 Accounting firm to work for in the UK. All whilst being largest accountancy firm to be B Corp Certified.

Operating from a network of 11 offices across the UK, the team serves clients across multiple industries including technology, financial services and digital assets, retail and consumer, health and social care, creative and media, professional services, property, construction, manufacturing and industrials.

Bixteth Partners specialises in sourcing growth capital for early-stage companies and providing advice to founders on capital requirements and growth planning with the aim of getting clients “investment ready” whatever their stage - Post-Seed, Early Growth, Series-A or beyond.

Led by Guy Briselden, who has over 30 years of capital markets experience, the team of partners has deep experience in public and private markets, from Private Equity through Investment Banking, Financial PR and Board roles, and an extensive investor network of institutional firms, HNW individuals and family offices. They undertake a staged and targeted approach to investor outreach to help companies raise the right amount at the right time, with investors that represent the best fit for their growth plans. They also assist with plans for an ultimate exit or strategic investment, whether that turns out to be private equity or secondary VC investment, trade sale or IPO (Aquis, AIM or Main Market).

Bixteth's sweet spot is funding requirements between £1m and £10m, but have supported on smaller and larger deals. They are sector agnostic, with the exceptions of deeptech and life sciences where they are less active. They have most recently advised companies in the premium spirits, digital printing and retail tech / Metaverse industries. Bixteth do not often assist companies which are pre-revenue or in very early revenue as it is not a sweet spot for their investor network; however, they are happy to offer advice and potentially some introductions.

Introduction

In this section we cover how to create an impactful crowdfunding campaign that covers the key points required to enable investors to consider the investment opportunity.

Campaigns are financial promotions

A crowdfunding campaign is a financial promotion and therefore must be formally signed off by a regulated entity, which will either be the crowdfunding platform itself or their appointed representative. This approval process will confirm that the campaign is clear, fair and not misleading.

You will need to provide supporting evidence for all facts and statements made in the campaign. It’s best to collate these documents as you draft the campaign so that nothing is missed.

Key contents of a campaign

Below we cover a checklist of items that should be included within the core sections of a typical crowdfunding campaign.

Summary

This sits at the top of every crowdfunding campaign and includes:

The pre-money equity value can be calculated as follows:

Pre-Money Equity Value (£) = Post Money Equity Value (£) – New Equity (£)

Where:

Post Money Equity Value (£) = New Equity (£) / Equity Stake (%)

Idea

Routes / channels to market

Team

Financials

Funding / Investment Opportunity

A few drafting tips

Inspire

Consider your audience carefully and what might motivate them to invest. Each investor has a different appetite and you are attempting to appeal to a large and varied pool. Crowdfunding investors are often motivated not only by financial returns and tax incentives, but also by the company’s mission, social impact and added perks.

Be transparent

While investor Q&A is a core part of the crowdfunding process, a well drafted campaign should minimise the number of questions. Many of the questions raised during live campaigns relate to clarification – try to be as specific as possible and avoid industry jargon.

Change perspective

Take a step back from the detail and consider investment risks instead of operational risks, i.e. what are the things that will impact the performance of the business and thus the returns that investors will expect.

How to produce a video

A video is an important part of a campaign – traditional fundraising involves a lot of a face to face meetings with potential investors, whereas crowdfunding involves appealing to a disperse, largely online audience and you cannot meet everyone. A video replaces the face to face meeting, giving investors the opportunity to hear directly from you and members of your team and to see your products or services in action.

There are a number of different companies that film and produce crowdfunding videos for you. The crowdfunding platform you are using will likely have producers that they can recommend, and may even have an arrangement in place to do this more economically than approaching a producer independently. Most crowdfunding platforms will expect you to cover the cost of producing the video. Some companies use the opportunity to produce a version that can also be used for generic marketing purposes, to make the exercise as cost effective as possible.

Below we set out our recommended video template:

Format

Content

A few style tips

Try to speak clearly and slowly. As time will be tight, make sure your script is short and impactful. This may require a few rounds or refinements before it is ready to film.

Try not to appear too formal. Professionalism is important; however, potential investors will use this as an opportunity to assess your character. This can be achieved by speaking to a friend or colleague instead of directly to camera, while filming.

Supporting documents

It can be helpful to provide certain supporting documents to help potential investors consider your investment proposal. Some of these items may be subject to restricted access owing to sensitivity.

Introduction

Financial due diligence for early venture rounds is typically conducted by the investors themselves, but may also involve the appointment of an external consultant or firm to review the company’s finances depending on complexity of the business and size of the raise.

You should ask potential investors what their process entails and their specific approach to financial due diligence in order that you can prepare in advance.

What is financial due diligence?

Financial due diligence (also referred to as FDD) is the diligence stream that focuses on the company’s trading, balance sheet and forecasts. It's an important area of diligence for new investors as it covers how their money will be spent, the extent to which it is at risk and the return it is expected to generate.

What does a typical FDD process entail?

FDD usually begins after the first meeting when the investor asks for a business plan / financial model and a copy of the company’s latest accounts.

A more detailed review will usually take place once the term sheet has been agreed. Where there are multiple investors, the lead investor will take the lead on undertaking due diligence.

The investor may:

The scope of financial due diligence

Exactly what is included within an FDD scope will vary between investors; however, there are certain core items that crop up regularly.

Forecast cash flow

Investors will seek to ensure that their funding is sufficient and that you have enough cash headroom to deliver the business plan while keeping the business going.

Many companies at the venture stage are loss-making – in this case, the cash burn rate is of particular interest. Investors will assess the rate of depletion and ensure there is sufficient time and headroom before the business breaks even or raises the next round of funding.

We recommend including a forecast cash flow within your business plan / financial forecast model.

Balance sheet

Investors will assess the strength of the company’s balance sheet. Specifically, they will want to ensure that the value of assets is fair and not misrepresented, as well as understand how successfully the business converts work, orders and turnover into cash. In doing this, they will review your cash balance, aged debtors and work in progress ("WIP").

An "aged debtor" analysis illustrates how young or old the debtor balances are - if they are old, then that may be an indication that the business is slow to collect cash after invoices have been issued.
An "aged WIP" analysis does the same thing, but for work in progress, i.e. work that has not yet been invoiced. A high proportion of old WIP balances can indicate issues in getting invoices out to customers.

Investors may also review the value of tangible and intangible assets to ensure these are booked appropriately. For example, the value of stock and when the last stock take was undertaken.

On the liabilities side of the balance sheet, investors will be interested in creditor balance, i.e. how promptly the business pays suppliers.

They will also want to understand the details and terms of any debt items on the balance sheet, including overdrafts, term loans and shareholder loans.

Financial forecast or business plan

The financial forecast sets out what you expect to achieve with the new funding and provides a forward vision of what the business might look like at the point of exit, thus helping investors to estimated their potential returns.

We recommend preparing a short written document to accompany the Excel file, that sets out the key driving assumptions.

The following items are typically of interest to investors:

A note on revenue recognition

Many small businesses book turnover when cash is received or an order is placed. The more usual accounting practice is for turnover to be booked as and when services are delivered, for example:

A software business charges customers their annual subscription fee in advance

It is important to recognise turnover in line with the delivery of products and services in order to provide a reliable estimate of turnover growth, run rate turnover and profitability. Investors use these metrics for valuation analyses. If customers are charged in advance in a growing business, and turnover is booked at the time of cash receipt, this will overstate the company’s turnover and may result in difficult discussions when this emerges during due diligence.

Investors may also apply sensitivities to the assumptions within the business plan in order to understand how profit, cash and their anticipated return are impacted if things don’t go according to plan. It therefore makes sense to have a model that is built in Excel, integrated and can be flexed relatively easily.

To assess the feasibility of forecasted turnover, investors may ask to see a pipeline analysis, setting out discussions and progress with current and potential customers.

Historic trading

How the business has performed historically is one indicator for how realistic the forecasts are. Recent historic trading should ideally be included within the financial forecast model so that the forecasts can be sense-checked easily.

Investors may also ask for the company’s performance relative to budget in prior years, if sufficiently established to have set budgets historically. This is a mechanism for them to test the company’s ability to budget and perform in line with expectations.

Finance function

Investors may enquire about the finance systems used and their robustness, as well as who in the company runs the numbers. They may suggest additional resource or investment as a result of this assessment.

Cash controls

Investors will want to ensure that there are adequate cash controls in place so that the new investment is secure. These include permissions around who can set up, approve and make payments from the company’s accounts. Make sure these are set up appropriately with your bank ahead of the fundraise.

Checklist of items to prepare for financial due diligence
Introduction

Financial due diligence (also referred to as FDD) is the diligence stream that focuses on your trading, accounts and forecasts. It's an important area of diligence for new investors as it covers how their money will be spent, the extent to which it is at risk and the return it is expected to generate.

What does a typical FDD process entail?

FDD begins after the first meeting when the investor asks for a business plan / financial model and the company’s latest accounts.

A more detailed review will usually take place once the term sheet has been agreed.

Investors will typically:

The scope of financial due diligence

Exactly what is included within an FDD scope will vary between investors and will depend on the business; however, there are certain core items that crop up regularly.

Forecast cash flow

Investors will seek to ensure that their funding is sufficient and that you have enough cash headroom to deliver the business plan. They will therefore want to understand, assess and stress test the forecast cash flow.

The financial forecast model should include a forecast cash flow.

Balance sheet

Investors will assess the strength of the company’s balance sheet. Specifically, they will want to ensure that the value of assets is fair and not misrepresented, as well as understand how successfully the business converts work, orders and turnover into cash. In doing this, they will review your cash balance, aged debtors and work in progress ("WIP").

An "aged debtor" analysis illustrates how young or old the debtor balances are - if they are old, then that may be an indication that the business is slow to collect cash after invoices have been issued.
An "aged WIP" analysis does the same thing, but for work in progress, i.e. work that has not yet been invoiced. A high proportion of old WIP balances can indicate issues in getting invoices out to customers.

Investors may also review the value of tangible and intangible assets to ensure these are booked appropriately. They will be interested in the capitalisation, revaluation and depreciation policies applied to assets. Specifically in relation to stock, they will want to understand the basis of valuation for stock, the method of provisioning and stock turnover.

On the liabilities side of the balance sheet, investors will be interested in the trade creditor balance, i.e. how promptly the business pays suppliers. They will want to understand any deferred revenue, i.e. turnover for which cash has been received but where the services has not yet been delivered.

They will also want to understand the details and terms of any debt items on the balance sheet, including overdrafts, term loans and shareholder loans, as well as any hire purchase agreements or finance lease commitments. Of particular interest are covenants attached to banking facilities, whether the business is in compliance with these covenants and how they are monitored.

Financial forecast or business plan

The financial forecast sets out what you expect to achieve with the new funding and provides a forward vision of what the business might look like at the point of exit, thus helping investors to estimated their potential returns.

We recommend preparing a short, written document to accompany the Excel file, that sets out the key driving assumptions.

The following items are typically of interest to investors:

Investors may also apply sensitivities to the assumptions within the business plan in order to understand how profit, cash and their anticipated return are impacted if things don’t go according to plan. It therefore makes sense to have a model that is built in Excel, integrated and can be flexed relatively easily.

To assess the feasibility of forecasted turnover, investors may ask to see a pipeline analysis, setting out discussions and progress with current and potential customers.

Historic trading

How the business has performed historically is one indicator for how realistic the forecasts are. Recent historic trading should ideally be included within the financial forecast model so that the forecasts can be sense-checked easily.

Investors may also ask for the company’s performance relative to budget in prior years, if sufficiently established to have set budgets historically. This is a mechanism for them to test the company’s ability to budget and perform in line with expectations.

Historic trading may also reveal seasonality or challenging trading periods, which the investor will want to understand and greater detail.

Finance function

Investors will want to understand what systems or software you use to manage your finance function, to ensure that it is robust enough to support your growth and whether it requires investment.

They will also be interested in the individuals within your finance team and their capabilities to understand whether further resource would help the business to deliver the plan.

Cash controls

Investors will want to ensure that there are adequate cash controls in place so that the new investment is secure. These include permissions around who can set up, approve and make payments from the company’s accounts. Make sure these are set up appropriately with your bank ahead of the fundraise.

Checklist of items to prepare for financial due diligence
Introduction

Tax due diligence may form part of financial due diligence (FDD), or may be a standalone scope, and is usually undertaken by institutional investors in either a venture capital round or, more commonly, in a growth capital round.

The intention of tax due diligence is to understand the different taxes that apply to the business, or may apply in future, the application of different tax jurisdictions and to assess any current or future potential tax liabilities that may arise.

It is usually undertaken by a third party accountancy firm through an initial questionnaire and follow up questions to clarify.

What is in a typical scope?

The scope will include compliance with all relevant categories of tax, such as:

As well as the potential tax implications of the transaction and related activities, including:

How to prepare for tax due diligence

Here’s a checklist of items to compile in preparation for tax due diligence:

Introduction

Commercial due diligence for venture rounds is typically conducted as a joint effort between the investors themselves and individuals from their network. Some funds have specific advisory boards or networks dedicated to this purpose – comprised of individuals with specific, sector expertise that they can call upon.

Occasionally, funds may also wish to formally appoint a consultant, possibly an individual or a firm, to conduct a more formal exercise. This may be applicable in the case of larger rounds, more complex businesses or a novel market.

What is commercial due diligence?

Commercial due diligence (also referred to as CDD) is the diligence stream that focuses on the commercial elements surrounding a company, in particular – the market in which it operates, it’s positioning within that market, for example, in relation to competitors, the strength of the product or service and the customers it currently serves.

The objective for investors is to verify the legitimacy, strength and potential of the product or service and thus bring confidence in the future growth prospects and value generation of the business.

What is the process?

Investors will begin assessing the commerciality of the product or service from the initial meeting. Unlike financial and legal due diligence, the scope of commercial due diligence is more variable and tailored to each individual business. It is not usually organised into a specific scope and may comprise a number of different activities and workstreams.

In practice, it may comprise:

Common scope areas

Market outlook

Areas of interest:

A large addressable market that is growing is an important feature for venture investors.

Positioning within the market and competition

Areas of interest:

There is arguably some fatigue among investors of the top-right-quadrant graph, which plots competitors on two axes and features the company in the top right. It is difficult to be explicit about the nuance of how the business is differentiated through a graph such as this. This could be used to set the scene, while a table that lists the more detailed features of competitor’s offerings, alongside your own, may be more helpful in answering the question of why and how you are different.

How compelling the company’s product or service is

This is assessed through a trial or demo of the product, and usually discussions with certain customers.

Areas of interest:

Quality of the business model

There is some overlap here with financial due diligence, but the objective is to understand the legitimacy of the business model, either in generating a profit or equity value. From a commercial perspective, areas of interest are as follows:

Checklist of items to prepare for commercial due diligence
What is commercial due diligence?

Commercial due diligence (also referred to as CDD) is the diligence stream that focuses on the commercial elements surrounding a company, in particular – the market in which it operates, it’s positioning within that market, for example, in relation to competitors, the strength of the product or service and the customers it serves.

The objective for investors is to verify the legitimacy, strength and potential of the product or service, as well as the market opportunity, to assess the future growth prospects and value generation capabilities of the business.

What does the process involve?

Investors begin assessing the commerciality of the product or service from the initial meeting. Unlike financial and legal due diligence, the scope of commercial due diligence is more variable and tailored to each individual business and fund. It is not usually organised into a specific scope and may comprise a number of different activities and workstreams.

In practice, it may comprise:

Common scope areas

Market outlook

Areas of interest:

Growth capital investors are looking for a sufficiently large addressable market that is ideally growing.

Positioning within the market and competition

Areas of interest:

There is arguably some fatigue among investors of the top-right-quadrant graph, which plots competitors on two axes and features the company in the top right. It is difficult to be explicit about the nuances of how the business is differentiated through a graph such as this. This could be used to set the scene, while a table that lists the more detailed features of competitor’s offerings, alongside your own, may be more helpful in answering the question of why and how you are different.

How compelling the company’s product or service is

This is assessed through a trial or demo of the product, and usually discussions with certain customers.

Areas of interest:

Quality of the business model

There is some overlap here with financial due diligence, but the objective is to understand the legitimacy of the business model, either in generating a profit or equity value. From a commercial perspective, areas of interest are as follows:

Checklist of items to prepare for commercial due diligence
Introduction

Legal due diligence for venture rounds is typically conducted by the investor’s legal advisors, i.e. the firm that is also preparing the investment documentation.

Depending on the complexity and extent of the scope, you may choose to answer the questions yourself, or you may ask your legal advisors to do this on your behalf.

What is legal due diligence?

Legal due diligence (also referred to as LDD) is the diligence stream that focuses on your contracts and agreements. Investors are keen to ensure that your business is operating with the appropriate agreements, protections and processes in place.

What is the process?

The investor’s appointed law firm will typically issue a questionnaire with a series of information requests and questions. You and your appointed law firm (if applicable) will then provide the answers and supporting information and there may be some discussion back and forth to clarify certain items.
This exercise will usually result in the investor’s lawyers preparing a short legal due diligence report, summarising the responses, their views on them, any key risks or matters that should be dealt with prior to completion of the transaction.

You may be asked to provide a warranty over the accuracy of the contents of the legal due diligence report.

The scope of legal due diligence

Exactly what is included within an LDD scope will vary between investors; however, there are a number of core areas that most investors will review.

Corporate

This involves confirming the current ownership of the company’s equity and corporate structure. The investor’s law firm will run a search of Companies House for each corporate entity (limited company or otherwise) and review the latest annual returns to confirm the accuracy of the share cap table.

It is worth ensuring the company’s annual return is up to date and any subsequent changes in the equity capital have been documented in the company’s statutory book as appropriate.

Employment

This entails confirmation of the employment status of key members of the team (and in some instances, all members of the team).

Investors or their appointed law firm will ask for copies of service agreements (also referred to as service contracts or employment contracts) so that they can review the terms and check their suitability. Areas of interest include:

If you do not have a service agreement, you will need to put one in place as part of the transaction. Before having this drafted, you may want to ask your investor if they have a template that they prefer to use.

Investors will also ask for details of any other incentive schemes in place, such as bonus arrangements or option schemes.

Finally, they will ask if there are any outstanding or unresolved disputes with employees or former employees.

Contracts

If part of the scope, this involves a review of any key contracts, for example, customer contracts, supplier contracts and / or leases.

This helps investors to understand:

Customer, supplier and financing contracts can sometimes include “change of ownership” clauses, which require that the relevant party is notified of any change of ownership or control of the business. In some cases, this clause may also require that the other party consents to any change of ownership prior to completion. Even a minority equity investment can sometimes be considered a change of ownership and therefore it is a good idea to do a quick search of any key contracts for these clauses and notify the relevant parties before completion of the deal.

Intellectual Property

Investors will want to ensure that all IP is owned by the business and not by individuals or employees. They will also review what, if any, arrangements you have in place to protect your IP, such as patents.

Health and Safety

Among other sectors, health and safety is of particular importance to businesses operating within construction, engineering, food production, manufacturing and leisure. An investor may ask to review your health and safety policy to ensure that you take these responsibilities seriously.

Insurance

Investors may wish to review the company’s insurance policies to ensure that there is appropriate cover in place.

Anti-bribery

Investors may wish to discuss your approach to preventing and reporting bribery and may review your anti-bribery policy, if you have one.

Checklist of items to prepare for legal due diligence
What is legal due diligence?

Legal due diligence (also referred to as LDD) is the diligence stream that focuses on the company’s contracts and agreements. Investors are keen to ensure that the business is operating with the appropriate agreements, protections and processes in place.

What does the process involve?

The investor’s appointed law firm will issue a questionnaire with a series of information requests and questions. You will be required to provide the answers and supporting information, for which you may ask your appointed lawyer for help. There will then be some discussion back and forth to clarify certain items.

The investor’s lawyers will prepare a short legal due diligence report which summarises the responses, their views on them and any matters that should be dealt with prior to completion of the transaction.
You may be asked to provide a warranty over the accuracy of the contents of the legal due diligence report.

The scope of legal due diligence

Exactly what is included within an LDD scope will vary between investors; however, there are certain common areas of interest for the majority of investors.

Corporate

This involves confirming the current ownership of the company’s equity and corporate structure. The investor’s law firm will run a search of Companies House for each corporate entity (limited company or otherwise) and review the latest annual returns to confirm the accuracy of the share cap table.

It is worth ensuring the company’s annual return is up to date and any recent changes in the equity capital have been documented in the company’s statutory book as appropriate.

Employment

This entails confirmation of the employment status of key members of the team (and in some cases, all members of the team).

Investors or their appointed law firm will ask for copies of service agreements (service contracts or employment contracts) to review and assess the suitability of key terms, including:

If you or key members of the team do not have service agreements, you will need to put them in place as part of the transaction. Investors often have a standard template, or this can be drafted by your legal counsel.

Investors will also ask for details of any other incentive schemes in place, such as bonus arrangements or option schemes.

Finally, they will enquire as to whether there are any outstanding or unresolved disputes with employees or former employees.

Contracts

This involves a review of any key contracts, for example, customer contracts, supplier contracts and / or leases.

This helps investors to understand:

Customer, supplier and financing contracts sometimes include “change of ownership” clauses, which require that the relevant party is notified of any change of ownership or control of the business. In some cases, this clause may also require that the other party consents to any change of ownership prior to completion of the transaction. Even a minority equity investment is sometimes considered to be a change of ownership or control and therefore it is a good idea to search for these clauses within all key contracts and notify the relevant parties before completion of the deal. Time taken for third parties to respond can sometimes hold up completion.

Intellectual Property

Investors will want to ensure that all IP is owned by the business and not by individuals or employees. They will also review what, if any, arrangements you have in place to protect your IP, such as patents.

Health and Safety

Among other sectors, health and safety is of particular importance to businesses operating within construction, engineering, food production, manufacturing and leisure. An investor may ask to review your health and safety policy to ensure that you take these responsibilities seriously.

Insurance

Investors may wish to review the company’s insurance policies to ensure that there is appropriate cover in place.

Anti-bribery

Investors may wish to discuss your approach to preventing and reporting bribery and may review your anti-bribery policy, or ask you to put one in place.

Environmental

If relevant to your business, an investor may want to check that you have all the necessary permits and licenses in relation to environmental matters.

Regulatory

If relevant, an investor may ask for evidence that all relevant regulatory permits are in place in order for the company to conduct its business.

Banking

Investors may review the company’s banking arrangements and facilities, specifically: lenders, facility limits, security arrangements and covenants.

Checklist of items to prepare for legal due diligence
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