Are you investor ready? Here's your checklist!
Updated: Oct 7
It is one thing to want to raise capital, it's another to be investor ready. Before you can launch your Crowd Sourced Funding (CSF) raise, you need to make sure your company structure can host new shareholders and is ready to bring new investors onboard. This overview walks you through what to have in place before you can call yourself investor ready.
How Investor ready are you?
0%Ready to go
0%Halfway there
0%Just Starting
Table of Contents:
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Valuation and Shares
Understand your numbers before anything else
Typical CSF Share Price
$0.50 to $1
Share Split Timeline
Weeks
Shares You Offer
Ordinary
Q1. What is your company worth?
Your valuation means your pre-money valuation: what the business is worth before new money comes in. Too high and investors get too little equity for their cash. Too low and you give away more than you need to.
Example: How Your Valuation Works
For example, if you raise $500,000 in exchange for 10% equity, your valuation would look like this:
Amount | How you get it | |
Your raise | $500,000 | Your target raise |
For Equity of | 10% | Share of the company offered to investors |
Post-money valuation | $5,000,000 | $500,000 / 10% |
Pre-money valuation | $4,500,000 | $5,000,000 |
Q2. Do you have enough Shareholders?
You need enough shares to issue new ones without heavy dilution. Plenty of companies start with 1,000 shares. At a $4.5m pre-money valuation, that's $4,500 a share, which instantly locks out smaller investors.
The fix is a share split, registered with ASIC. It can take weeks, so start early. Most CSF raises we run price shares between $0.50 and $1.
What type of shares do you have?
Under the Act, you only issue ordinary shares (those that have voting rights). Although, you may have other types of shares in existence, such as class A shares. Other hybrid, derivative, and debt financing instruments including SAFEs, and options, convertibles and loans are also permitted.
Your People and Structure
Who runs it, who owns it, and which entity is raising
Company Structure Requirements for CSF:
Proprietary company making a CSF offer | Public Company | |
Minimum directors | 2 | 3 |
Australian resident directors | Majority ordinarily resident in Australia | At least 2, and for CSF eligibility a majority must ordinarily reside in Australia |
Shareholder cap | Under 50 non-employee shareholders, with CSF shareholders excluded from the normal cap | No cap |
Q4. How many directors do you have?
Pty Ltds need at least 2 directors. Public unlisted companies need at least 3. Either way, at least half must ordinarily live in Australia.
Q5. How many shareholders do you have?
Pty Ltds are normally capped at 50 non-employee shareholders. Investors who join through a CSF raise don't count toward that cap. It's one of the big perks of raising this way.
Q6. Who is actually raising?
If you have more than one entity, be clear which one investors are buying into, including its assets and liabilities.
Whether you're a proprietary or public unlisted company, related party rules apply after a successful CSF raise. Any financial benefit to a director, their spouse, children, parents or related companies needs shareholder approval first, unless an exception applies.
Books and Records
Get these sorted early and your raise runs smoother.
Q7. Who runs your share registry?
Small Pty Ltds often keep the register in-house or with their accountant. Once you raise, CSF shareholders need to be tagged and extra details recorded. You also need to tell ASIC when you:
Issue new shares after a raise
Cancel any shares
Start having CSF shareholders
Stop having CSF shareholders
It's onerous work, which is why we recommend a professional share registry. We can introduce you to the partners we work with.
Q8. Are your books ready?
Company Type | What you need |
Small Pty Ltd | Management accounts to standard, signed off by directors |
Large Pty Ltd, or raised $3m+ | An appointed auditor and audited accounts |
Public Unlisted | AGM, annual report to shareholders within 4 months of FY end, constitution lodged with ASIC |
Are your ASIC records up to date?
Check your directors and their details, shareholders, registered office, principal place of business and share count. It's important not to leave this until the last minute as it can (and has) cause serious delays.
Governance
You might soon have hundreds of shareholders. Your documents need to handle that.
Q10. Is your constitution ready for new shareholders?
No constitution, no raise. If you don't have one, it needs to be drafted and adopted first. If you do, check it covers:
Pre-emptive rights
Founder rights Shareholder meetings
Drag-along and tag-along rights
Other transfer restrictions
Have a shareholders agreement too? Make sure the two work together and the agreement lets new shareholders join easily. Get professional advice here to avoid speed bumps mid-raise.
Q11. Do temporary concessions apply to you?
If you became a public unlisted company between 29 September 2017 and 19 October 2018, you may have had concessions on some corporate obligations.
Click here to uncover the vital questions you must ask yourself before raising capital.
Click here to learn more about equity crowdfunding.
Click here to learn more about IPOs.
Ready to build your crowd?
Every crowd builds on the one before it. Start with your inner circle, grow through your network, and you'll give yourself the best chance of maximising the capital you raise.
