To shorten transaction times, prepare for investor scrutiny
Organise the Details: Business Plan, IM, and Data Room
The late stage of project development is about dotting the i’s and crossing the t’s and properly organizing to engage investors.
I started covering the late-stage work in a previous note, titled 'Critical Late-Stage Prep Before Approaching Investors,' where the necessity of clarity in project structure and the incorporation and setup of the project SPV (if project financed) were discussed.
This note will focus on summarising and organising information for investors.
Investors will ask for every single one of the documents you have generated and likely some that you haven’t prepared.
However, remember that investors are new to your project and will need to have a complete overview before diving into the details.
They need to see documents that introduce them to your project and to your capital requirements before they proceed to a detailed review of the underlying documents behind the project.
You must summarise the project and organise your information.
As part of late-stage project development preparation, you need to complete:
1) A comprehensive business plan
2) An information memorandum
3) An organised data room
1) A Comprehensive Business Plan
A clear, professional, realistic, and comprehensive business plan is fundamental for entrepreneurs to raise capital, generate investor excitement, and secure meetings with prospective investors. It serves as a CV for projects. ," conveying messages about the management team's grasp of reality, their ability to assess opportunity and risk, their clarity of thought and communication, and their overall effectiveness. The business plan aids entrepreneurs in defining goals and strategies, while simultaneously assisting investors in evaluating the company's potential.
An investor-oriented business plan should contain specific sections, meticulously researched and articulated:
Executive Summary: This is arguably the most crucial section for funding acquisition, serving as a readable, credible, and brief overview of the business plan. It should highlight key points from every section of the completed plan, motivate the reader to review the entire document, and demonstrate an appreciation of investor needs. Although placed at the front, it is best written last, after all other sections are complete, and should ideally be no more than one or two pages. It should include a summary of the project’s target market, major parties in the project structure, expected results, and the funding request.
Description of Industry and Trends: This section describes the industry the business operates within and highlights significant current or emerging trends.
Description of the Business: historical background leading to the current situation. It should describe the general nature of the business, how revenues and profits are generated, and what makes the business unique.
Description of Product/Service: This section focuses on the benefits of the product or service and how it meets a market need. It should include factual documentation supporting market demand, details on pricing and profit margins, and plans for future products.
The Market: Crucial for credibility, this section demonstrates knowledge of current and potential customers. It covers the geographic scope of the market, targeted segments (individuals or businesses), market size and trends, and a general description of customers using demographics where possible. It also addresses customer expectations, demand changes, pricing strategy compared to competitors, and the target end user’s acceptance of the price.
Marketing Strategy and Plan: This is relevant to the business model and the volume of contracted offtake the project has secured and what efforts are needed to increase users/ off takers, including plans for achieving sales projections. It includes market research, positioning against competitors, pricing considerations, communication channels (e.g., website, advertising, PR), distribution methods, and referral development.
Operating Strategies and Plans: This outlines methods for providing services or manufacturing plans, equipment, and supplier needs, cost control etc. Major expectations from the off-taker, suppliers, operations & maintenance providers are summarised here.
Construction cost and schedule: Major milestones as agreed under the EPC contract and costs to construct and payment milestones.
Financial Projections & scenarios: Details from the latest version of the financial model are included, showing realistic, defensible, and comprehensive projections for revenues, income, and expenses in base, optimistic, and pessimistic scenarios. It must justify financial assumptions, define funding requirements for each stage, describe past investment history, and clearly articulate an exit strategy for (if additional equity will be required).
Ownership Structure and Equity: This outlines the equity ownership, including percentages held by officers, directors, and major stockholders, with an emphasis on key project stakeholders and financially strong shareholders.
Management, Organization, Personnel, and Information Systems: This section provides brief backgrounds of key individuals, their value-add, past successes, and history of working together as a team. It also identifies immediate and future personnel needs, initial organizational structure, and compensation packages.
Supporting Documents: List of documents, marketing studies, technical designs, project risk matrix, summary of project contracts, licenses obtained, financial model, equity agreements etc.
Characteristics of a good business plan
A well-prepared business plan must:
Show evidence of Value Creation: Investors are looking for businesses, not just ideas. The plan must demonstrate the project's potential to deliver value for the business or community. It should outline a realistic profit-making scenario showing margins and profit potential. The ultimate goal is to generate sufficient cash flow to cover operating costs, service debt, and remunerate shareholders.
Provide a clear implementation plan: The business plan acts as a strategic guide, defining the opportunity, strategy, resource requirements, risks, and implementation road map, identifying all parties involved so far and those still required to get the project through construction to profitable operations.
2. The Information Memorandum
This is a cornerstone marketing document for potential debt and equity investors. It is a comprehensive document prepared by the project sponsors, often in conjunction with financial and legal advisors, and distributed to prospective arrangers or lenders. It can be prepared by your transaction advisor or by the in-house project development or finance team, if they have experience raising capital. It is complete, working with the sponsors to give investors a condensed form of the project to invite them to participate in funding.
Purpose and Importance: The primary purpose of the IM is to provide investors with sufficient and accurate information to understand the project's value creation and make informed investment decisions. Think of it as a much more condensed version of the business plan that is heavily focused on the project’s financials. It typically includes a summary in succinct form, crisp bullet points if you can, for investor scrutiny, often with more analyses and evaluations than a simple prospectus. The analyses and supporting materials are meticulously prepared by the project team in collaboration with legal teams, project advisors, and consultants.
Key content areas of an Information Memorandum include:
Project Overview and Background: A summary of the project, its general background, purpose, type, location, and status of development.
Project Company Details: Information on the Special Purpose Vehicle (SPV), including its board, top management, ownership structure, and organizational details.
Sponsor Organization and Financial Capacity: Background and track record of the principal officers, their experience in similar projects, the nature of their involvement, and their financial strength.
Market Overview: Major highlights from market analysis, including supply and demand dynamics, existing competition, and market trends for the project's output or service.
Technical Description: Details of the construction and operation of the project, technology involved, facilities, processes, and supporting infrastructure. For natural resource projects, a description of the resource is essential.
Project Contracts Overview: A summary of the key project agreements (e.g., concession agreements, supply, construction, operation and maintenance, off-take contracts), outlining how risks are allocated among participants.
Risk Analysis and Mitigation: Identification of principal risks and benefits of the project to sponsors, lenders, and host government, along with proposed mitigation steps, insurance coverage, and credit support packages.
Financial Model and Projections: The Base Case financial model and different sensitivity analyses are presented, including pro forma financial information, project costs, funding structure, operating revenues and costs, and loan details. This section should explicitly state sponsor expectations, objectives, and lender requirements.
Proposed Financing Terms: The "heart of the memorandum," outlining the amounts, priorities, maturities, and timing of the financing, including debt amount, uses of proceeds, collateral, sources of debt and equity, equity terms, and repayment schedule.
Supporting Appendices: These may include specific studies, reports, and detailed assumptions.
It is important to remember that the information and data contained within the IM must be of high quality and presented professionally to cater to diverse audiences; it must also match the details in the business plan.
General tips for preparing the Business plan and Information Memorandum
You are writing for fellow humans: Investors are humans, too. They want to invest in people as well as the project. The quality of the management team, their perseverance, good judgment, decency, competence, track record, personal financial commitment, and desire to succeed are paramount. Raising money is much easier if investors have confidence in the team.
Understand the purpose of the documents: The plan and IM are written to inform investors of the project, then motivate them towards investing. Tailor the message to the investors' concerns, interests, and level of knowledge, and make it easier for the investor to understand your project and the project’s funding requirements.
Logical Storytelling: A clear, logical flow, typically starting with an overview, followed by the team's track record, project basics (what, when, how, how much), market opportunity, demonstration, and concluding with the project's unique position. The adage "tell them what you're going to tell them, tell them, and then tell them what you've told them" works well.
Clear and Concise Communication: Avoid jargon, esoteric, or technical terms unless you are absolutely certain the audience is familiar with them. The main point should be clear from the outset. Use clear statements with minimal embellishment.
Visual Enhancement: Utilize multimedia, graphics, and photos of the team, products, and facilities to enhance understanding and attract attention, treating slides as visuals to support key points.
Realism and Defensibility: Present realistic, defensible pro forma financial statements and assumptions. Projections for market share, profit, growth, sales, or operating margins should not be outrageous or too different from industry standards; investors prefer to be pleasantly surprised by having reality exceed expectations than to have unrealised promises.
3) The organised data room
Record-keeping skills are one of the most underrated in raising capital.
It is the most mundane, unglamorous part, but it is like water and air for humans. Necessary, yet taken for granted until they are not available.
What is the point of generating all that project information if, when you need it, you cannot easily locate it?
I have seen sponsors and developers with shiny presentations that catch investors' attention, then when the time to dive into due diligence comes, the investor waits months for information to be provided.
Expect that the details generated during project development will be reviewed in detail by investors.
Organise a data room in advance.
Go through the project team’s emails, WhatsApp messages, and separate drives databases, and gather all the project and company information, then organise that into folders and subfolders in a data room that is easily navigable by investors.
This data room can be hosted on free services Google Drive, Dropbox, or other paid services.
An organised data room shows readiness to undergo due diligence processes, which is a necessary step carried out by investors before determining if and under what terms to allocate capital.
Remember that a well-organised data room shortens the timeline to financial close.
Bringing it all home
You know more about your project than investors do; prove that.
Help them understand it well enough to determine if and under what terms they can support the project.
Write a detailed business plan, summarise it into a compelling information memorandum that builds on the sound feasibility studies, project design, risk mitigation, project contracts, and financial model completed.
These two are the first proper introduction investors have to you and your project; they are tools that capture institutional knowledge, provide critical evidence for decision-makers, and serve as promotional materials that signify the project's value to both internal stakeholders and external investors.
The ability to craft and present them with clarity and persuasiveness is indispensable for project sponsors aiming to attract funding, and ultimately deliver impactful, value-creating infrastructure.
Next, organise your data and information. Make it easy for investors to find all you have done and what they need to know to determine how to proceed with your project.
If you want a shorter transaction timeline, this is non-negotiable.
Reviewed to complete this note
Angel Capital: How to Raise Early-Stage Private Equity Financing - Gerald A. Benjamin, Joel B. Margulis
Navigating Project Selection and Execution for Competitive Advantage by John Triantis.
From idea to funded project grant proposals for the digital age (Julia M. Jacobsen, Jan Fay Kress
How to Write a Grant Proposal - Cheryl Carter New, James Aaron
Ethics in Business Decisions and Competitive Advantage by John Triantis
Principles of Project Finance – E R Yescombe
Project Finance for Business Development by John Triantis
Project Financing 8th Edition - Frank Fabozzi, Carmel de Nahlik