Equifaira is a ‘liquidity event planner’ (see post on Equifaira blog, “What is a Liquidity Event”). We are specialists in developing corporate strategies and their execution in areas of corporate governance, financial management and investor relations.
We offer our services to Founders of privately held companies and help them achieve their vision {see post on Equifaira blog, “Why Does Equifaira Select Founder Led Companies?”}. We work with both the Founder and their leadership team with an intent to create a well-managed, successful organization. Our support will guide the company toward the ability to raise their own capital within compliance requirements and applicable securities rules and regulations, as a means to fund growth and expansion. Along with the Founder, we share an ultimate goal of achieving a liquidity event that is fair for all stakeholders, including Equifaira.
Our objective is not only the success of the Founders and fulfillment of their vision but of all those who have contributed to its journey, including all classes of shareholders and potential acquirers of the Founders’ business. To accomplish this, the relationship with the companies we choose must be sound, long-lasting, with a strong expectation that together, we can deliver exceptional results.
As such, we are careful to engage with companies and Founders that we believe will be a good fit for our approach. The initial phase of our engagement process often takes several weeks to months with defined criteria for assessment and a thorough analysis, overseen by a standing committee of senior partners.
While our process requires a commitment from all parties, it is our experience this level of due diligence is worth the investment. The following is an overview of our process and the steps Equifaira takes to carefully select privately held companies with the potential for exceptional results.
1. Founders and Key Personnel
Our clients may be with us for two, three, five years or longer before there is a liquidity event so having a capable and knowledgeable team working in, or with the desire to build, a corporate culture of mutual respect and entrepreneurial spirit is critically important.
We work with Founders who have a strong background and expertise in the business of the company they are building. We look for leaders who demonstrate the ability to work with a qualified senior management team, who can inspire them and be prepared to depend on them.
2. Product or Service
We look for innovative, often disruptive technologies, products or services that we believe will become game-changers and have a significant impact in their targeted market.
This may be a consumer or a commercial product that has regional, national or global marketability and an immediately addressable, multiple billion-dollar market opportunity with rapid growth potential.
3. Stage of Business Development
We prefer the company to be in revenue, or close to it before our involvement. We will assess the need for further product development and the resources required and if not market-ready, how long and how much it will take to reach that stage and generate sales.
4. The Funding Profile
Our pre-engagement assessment establishes whether we can add value to the client by providing expertise and guidance to help them scale up and raise their own growth capital. We will create an equity model to help us understand the planning necessary to reach an eventual liquidity event or other extraordinary returns. This model may illustrate the potential valuation and share price of any current or future offering by the client and the share structure needed to accommodate it.
Within this model, one of our goals is to help the Founder(s) retain control of their company while increasing the number of its shareholders and capitalization. Typically, the company would have begun with funding from family, friends and close business associates, followed by an organized campaign of funding from the ‘exempt market’.
The exemptions that apply may include Accredited Investors (who qualify with certain level of income or net worth), an Offering Memorandum (a substantial document of disclosure and risk) or investment by a corporation (over $150,000). Institutional funding, such as from a venture capital firm or other financial entity, is not usually considered until much later in the journey toward a liquidity event.
A remaining consideration is regulation by the various provincial jurisdictions and any restrictions that may affect how capital is raised and the guidelines necessary to stay in compliance.
5. Acceptability of Equifaira’s Approach
There must be an understanding and acceptance from the Founders, their senior management, board members and active advisors that the partnership with Equifaira will be workable, mutually supportive and successful.
An important part of this approach includes having a member of Equifaira’s management ‘embedded’ in the client’s operations at some level of senior management and be a party to their internal reporting. This allows some oversight of the company’s operations, finance and accounting, sales and marketing activities, etc. to ensure the company is being well-managed, is on plan and is prudent in its use of invested funds.
Our commitment to the client and their success is reinforced by taking a stake in the company ourselves, investing by both share purchase and compensation for Equifaira’s contribution.
6. Legal
Through retained legal counsel, we investigate any legal liability or exposure the client has and the protection of its assets, intangible or otherwise. For example, depending on the type of business, we will review ownership of the intellectual property, copyright on any source code, patents held or pending, trademarks and any unsettled claims. If material contracts are in place, we review the company’s commitments and their effect on future earnings, or what is required to ensure unencumbered future operations.
7. Due Diligence Checklist
Many of the steps described above involve the gathering of the necessary information on actual or potential risks involved in an investment. Included is a detailed examination of the company’s financial records, its past and current management of funding to date and a comprehensive list of items to be investigated, such as costs, benefits and risks.
Some of the results of this examination may be included in a detailed ‘SWOT’ analysis, that is, a weighted assessment of the company’s strengths, weaknesses, opportunities and threats. This not only forms the basis of Equifaira’s decision to continue and engage the client, it can also serve to illustrate those areas of the business that Equifaira’s team can be most effective in developing and executing a corporate strategy – the direction an organization should take with the objective of achieving success in the long term.
8. Approval or Decline
Over the term of Equifaira’s eventual engagement agreement with the company being assessed, there will be a significant amount of our time spent on research, consultation, planning, management duties and expenditure to support their activity, whether it be in finance, marketing, administration, or other area of the operation.
This level of commitment for the long term requires us to reach a decision to select the company that is strongly supported by our own team. Although we have declined to engage many, it may be that the potential client is not far along in its development for Equifaira and our involvement is premature today, but may have generated an assessment result that will have us monitor its progress and revisit the opportunity in the future.
We carefully select…for exceptional results!
