What the VC is looking for from your pitch

How To Pitch

I just read an article on what a VC looks for from an entreprenuere's pitch by Raj Kapoor who is a VC at the Mayfield fund, (before that he sold his company snapfish to Hewlet-Packard) . The Mayfield Fund has over $2.8billion under management, Raj has made some investments in online social networking companies in China, Baihe, Quanr.com and a host of other US and Indian companies.

The article was first posted at www.TechCrunch.com

A VC’s Advice On How To Pitch VCs

Its been almost five years now that I’ve been in venture capital. I finally know what i don’t know.

The one thing I do know is how to give better advice on pitching VCs now that I’ve sat through hundreds of pitches and made 8 investments. I gave some advice in an earlier post—this one builds on it at a deeper level (three years later)

I’ve mentioned in the past that there are some key things you should include in your presentation when you are pitching a VC. David Cowan’s post on what to include is a great starting point. I thought I would expand on this and add some of the nuances within each section. This may not apply to all types of companies but I think it works for internet-related businesses.

Also, I’ve found that if all the informoation below is addressed succinctly in an executive summary or first pitch deck, it can help us make a much faster decision —which is what the entrepreneur wants and so do we. If we believe the story is lacking in too many areas, sometimes we just pass as there is too much else going on. At the same time, providing too much information is a problem as, like you, we are time-strapped and attention-starved. I think most of the points below can be addressed in a few compelling sentences or slides.

1. What Do You Do? The first thing we want to understand is what you do, very simply. What’s the problem/solution or what’s the new experience that you think is exciting? Why is this important to your customers? For mass-market internet businesses we want to understand if this appeals to a wide or narrow audience and if it’s a frequent (daily) habit or something done once in a while (which is tougher to build a brand in the consumers mind). Don’t talk vision or market at this point. Zero in on what you are about.
2. Reveal Your End Game. VCs typically don’t invest in just the first product or service being the end game or in a company’s whose biggest goal in life is to be a feature of a platform or “add-on” acquisition. We want to understand that your product has really big potential and could be a platform possibly for others—like Facebook or Twitter. Don’t be afraid to dream a bit. Here’s an example from one of my companies - “Rubicon Project will start solving the sharp pain point of optimizing ad networks for publishers and will leverage this position to be the trusted platform to help monetize all inventory for a publisher – the Control HQ for all revenue for web publishers”. You won’t be penalized for having audacious goals.
3. What Is The True Size Of Your Market? No, Really. The important point here is whether it’s a big enough market to be interesting to a VC. Too often entrepreneurs simply state the size of the online ad market for an internet content business or the size of a retail category for e-commerce sectors. We’re less interested in the top down market sizing and more focused on your Total Addressable Market (TAM). If you sell widgets, how many customers are really out there that are interested in your widget (segment the market) times what price you get for your widget. The more thoughtful and realistic you are about how you define the customer set, the faster we can make a decision. We don’t mind getting surprised on the upside later on.
4. The Secret Ingredient Is People. Teams are critical and too little time is spent on them in pitches. Don’t just include where you’ve worked but include in your slide or exec summary why this team is the best for this opportunity. In many businesses, domain expertise matters a lot, so highlight that. In some consumer businesses, its less about experience and more about product insight and relentless execution—highlight why you have that. In other words, figure out what’s most important to the task at hand and make sure to tell us how each person will help accomplish that—not just where everyone worked and went to school. In an early stage deal, Team and Market are the most important factors as everything else will change and a great team with wind at their backs will make it happen. Also, be upfront about your holes/weaknesses in the team (and your own weaknesses) and if and when you believe you will need a new CEO. Self awareness is one of the most important traits we look for in leaders.
5. Go-To-Market Strategy. This is often ignored or not given enough thought. What is the path of least resistance that you can take in terms of customers (be specific here), channels, and initial product focus. Your go-to-market strategy should ideally be in your control (versus reliant on big, unproven partnerships) and take as much risk off the table as possible in the least amount of time. You need to go through customer acquisition economics if you pay for customers (lifetime value vs CPA) and why you will spread for free if you don’t require marketing. Address how you will make it as painless as possible for consumers to adopt the solution and how you will build on top of that. Also, your go-to-market focus should not force you into a niche that’s hard to maneuver out of.
6. Be Honest About What Stage You Are At. We need to understand what stage your company is at. Are you at the idea stage or pre-traction in terms of customers and momentum? Do you have momentum but are still working out the business model? Or do you have both momentum and a solid understanding and proof behind the model. The clearer you are about where you are, the faster we can make a decision. Be upfront and honest on the risks and how you will deal with them. If you have momentum, show graphs of key metrics over time (not just a snapshot of where you are)—we want to understand the shape of your growth curves and how your key metrics are performing against your expectations.
7. Your Real Competitive Advantage is Being Different In The Long Term. On the internet, there are at least 25 companies that are or can compete with you on almost anything you do. Often times, it’s all about execution but we want to see if there are fundamental factors which will help you outdo your competition—very hard technology/IP, network effects in your business that will make it hard for others to catch up (such as with Wikipedia, Google AdSense, Facebook, Twitter) or a fundamentally different business model that will be hard for an incumbent to change (for instance, it wouldn’t be easy for Electronic Arts to cannibalize its retail games with free to play online versions). While we want you to list all your competitors (be exhaustive otherwise we won’t have confidence you know your business and have done your homework), its not useful to only show a chart of your competitors comparing features or positioning on a 2×2 chart. That is a very static view and any competitor worth their salt will morph and/or expand features to keep up with competition. If its all about execution and there are no fundamental advantages, then you should focus on why your team will out-execute all the others (a tougher sell but possible).
8. Product, Product, Product. If it’s a live pitch, a demo is really key—but keep it short and to the point. Don’t go into all the cool features—we are most focused on how its simple, intuitive, solves the problem and how well built it is and frictionless from a user experience point of view. You can talk about some of the cool new features but the first meeting isn’t about going through your product requirements. If it’s part of an executive summary or deck, this is harder but at least a few screenshots of the key experience flow are helpful.
9. Plausible Financials. It’s tough to create believable projections for an early stage company. I suggest showing what it takes to get to $50M or $100M of revenue in terms of customers, products, pricing, and so forth, as that’s what we are focused on. Show a simple table of key assumptions to get there and speak to why its believable. We also want to know how much capital you think you will consume to get sustainably cash flow positive so the nitty gritty forecasts do matter—but be able to explain the key drivers and why its capital efficient (profitable under $5-10M of investment) or requires significant investment.
10. The Ask. Make sure to put down how much you want to raise. Often a range is a good strategy as it usually depends on the valuation/dilution. But there should be a minimum amount that makes sense to significantly reduce the risks in the business. Importantly, highlight what risks you will remove and what momentum you expect to have about 6 months before you run out of cash. We are very focused on whether we will be able to successfully raise a round at a higher valuation, so tell us what you think it will take to do that.

I hope this helps. If you can nail the points above, it can be a 30-45 minute meeting and I think you’ll get a quicker and more definitive answer from a VC. Good luck with your pitch!

By Raj Kapoor

Company Culture from both sides of the coin

Company Culture from both sides of the coin

What do I mean , well there are two view points at least, maybe even four, but I will stick to the two of them today, this will be a short post as it has been a long long day. I have been talking to recruiters on and off every day over the last week or so and part of those discussions are what prompted me to this subject.

So the easy part:

Company Culture for the Boss:

The company culture can either grow your bottom line or hurt your bottom line, and staying level is hurting the bottom line by the way IMHO. What can you do to make sure you have a strong culture look for the signs..positive sub-culture groups, war stories on outstanding performance, strong group bonding outside of work,low staff turn over, if people get on outside work they will generally work together better. I know there will be some folk reading this and saying that's crap, "I pay them to work and that's the end of it", that will give you my friend the performance you deserve, flat line ultimately. I always grow a positive culture whenever I can as this makes my life that much easier and keeps a strong bottom line. There is loads to add to this but I am keeping it brief for today, feel free to engage my services if you want to explore further or have a look at www.companyculture.com.

Company Culture for the Employee or prospective Employee:

Take time and find out as much as you can about a company before you join, you may find the culture not so good, but at least you will know, and this will taylor your first 100 days. You can do this work before you target your job hunt if you have the freedom to choose, but do it anyway before you interview, how I hear you cry, well use the social networks and professional, like LinkedIn , Facebook, Eacademy, Spoke, Twitter, Zing, Zoominfo, get in to the discussion groups targeted at your industry of choice and start digging asking question, use the search function to dig folk out from the company, get busy with Google and get searching, there are many ways to find out what you want to know, and I suggest that you do it. If you know the culture of a company you may join you can work out long term what the prospects are going to be for you before you start, and if you will like working in that culture.



Summary:

Culture is not something that only a few people can develop, it is the corporate body that chooses what culture they will make, I used to run a shift in a semiconductor factory that was staffed by ladies of a certain age, that in its self set the culture, I am not saying that you cannot control and redirect slightly and manage behaviour, be we make the culture we work in. There have been document projects that have tried to change the culture, it takes a while and a lot of face time to make that happen, so Entrepreneur make the culture part of your armoury to win, don't let it pull you down, and don't become distanced from it.

Gordon Whyte - WhiteStar Solar Ltd.-Resume

I thought I would do a bit of self advertising on my Blog today.

Over the last two and a half years I have been involved in spinning out a solar cell manufacturing business from a technology incubator center, this has been an interesting but difficult gig, the stuff I have been involved with this gig is as below:

• Feasibility study of Solar Technologies as they are applied in the field, understanding the ultimate cost of energy for a variety of technologies.
• In depth review of the concentrated solar industry, system build, operations and manufacturing challenges and variety of technologies.
• Feasibility study of setting up a low to medium concentrator facility in the UK, Madrid, Asia.
• Developed financial models for all scenarios, modeling cost of product , cash flow, capex and running costs.
• Worked with the turnkey suppliers of solar cell manufacturing lines to develop project plans for the deployment of 20/40MW manufacturing lines , these are companies like Centrotherm, Rena, Oerlikon.
  
• Led on the acquisition of an existing solar cell manufacturing line in central Europe, and developed a plan to run insitu at it's present location.
  
• Led on the acquisition of the equipment only of the above solar cell manufacturing line, while finding a location in the UK to support the operation.
• Developed the supply chain for the operation, working with chemical and wafer suppliers, contract negotiated with the major wafer suppliers, like REC, LDK,NORSUN and other up and coming Asian suppliers.
• Led Business development and helped secure with the team over 20 new customers.
  
• Developed business plans and engaged with the Investment community to raise funding
  
• Helped promote the business at trade shows and conferences around the world
• Help to manage the research and manufacturing business unit that would have been the technology provider.
• Travelled over 200k miles economy, taken every form of transport available, eaten nearly every kind of food known.

• In my spare time researched and performed due diligence on Wind, Waste to energy projects in different regions of the world.
• The team was on average 1.5 to 2 people with the help of the odd friend and consultant
  

Why do I tell you all of this, this the minimum you will need to be prepared to do to get your business started, the hard part/fun part is when you actually see the money and start to build your company, have fun, feel free to catch up with me if you need any help, paid would be good, I have a lot of free custom already.

feel free to peruse my CV below:

Gordon Whyte

E-mail: gordonw63 at yahoo dot com

Executive Profile

Operations Management · Business development · System Implementation

I am a technically aware, dynamic, results-driven executive with a proven record of successfully developing and leading operations in cleantech and high-technology environments. Demonstrated accomplishments in early stage business development and new product introduction across a variety of markets. Change manager adept in startup, reengineering, and high-growth technology environments, Visionary planner and analytical problem solver with a “big picture” mentality. Strong leader adept at managing and motivating cross-functional teams. Excellent communication and relationship building skills. Experienced with developing outsourced manufacturing partners and strategic suppliers. Has over 15 years experience working with venture capital supported companies, both in Europe and North America, he has helped raise private equity funding for five early stage companies.

· Operations Management · Quality Control · Continuous Improvement

· Process Reengineering · Lean Manufacturing · Systems Implementation

· Project Management · Project Outsourcing · Business Development

Core Competencies include:

====================================================================================

Professional Experience

Whitestar Solar Ltd – Blyth, UK 09/07 to present

Chief Operating Officer / General Manager

Responsible for the management of the research center, cell and module manufacturing, research and development, product engineering, evaluating solar technologies and analyzing there impact on the market with regards to cost of product sold, cell performance. Leading the commercialization of the research centers photovoltaic solar cell technology. Prepared the business plan for £20m investment and is engaging with the investment community. Working with various turnkey photovoltaic equipment suppliers to develop a new factory build project, worked with local authorities on selection of suitable manufacturing sites across the UK and explored available grant options.

Ø Preparing business plan for technology spin out, and presented to investors

Ø Establishing supply chain, negotiating key supply agreements.

Ø Leading sales and marketing function, developing customer base to 20 customers

Ø Evaluation and selection of production technologies for large scale manufacturing sites.

Ø Developed technology road map to develop next generation solar cell manufacturing.

Ø Improved production efficiencies by 25% and reduced product cost by 35%

Forth Dimension displays –Dunfermline, UK 10/2004 – 08/2007 www.forthdd.com

Director of Micro display operations

Responsible for manufacturing operations of micro-displays and sub-systems for helmet mounted and projection television applications. Restarted closed micro-display fabrication manufacturing foundry and established robust supply chain. Recruited management team and supporting operations team. Worked within a fabless semiconductor model to supply, develop new silicon backplane and asic driver devices for new products. Reduce customer returns by 40% and improved delivery performance by 50%. This role had extensive travel in China and Taiwan. Help to implement a reorganization of the business to increase the possibility of long term success.

Key Achievements:

Ø Restarted the pilot manufacturing line

Ø Established high volume manufacturing partners for the microdisplay and drive electronics

Ø Implemented ISO 9001 and NPI strategy throughout the company wide.

Ø Negotiated supply agreements with major component suppliers

Ø Implemented SAP 1 for financial modeling and supply chain management.

Ø Restructured the operations to focused on head mounted display core business

Ø Secured funding from venture capital partners of £3m to support restructuring of business

Ø Responsible for continuous increased revenue for 15 months.

Ø Implemented ISO 9001 and NPI strategy, company wide.

rosebank technologies –Edinburgh, UK 06/2003 – 10/2004

Chief Operation Officer

This was a short term project to set up an advanced semiconductor process development organization, using spin-on-glass based thick films and deliver a solution to a tier 1 semiconductor process equipment supplier. Responsible for operations, engineering and development functions. This was an opportunity to recover IP from the liquidated Terahertz Photonics an early stage photonic start-up.

Key Achievements:

Ø Developed business plan for organization and executed

Ø Secured access to business premises and negotiated low start overheads

Ø Led business development with Applied materials for process development project

Ø Secured SMART funding from Scottish Executive for proof of concept project

Ø Co-Authored a Patent on SOG for DTI / STI next generation semiconductors

LITTLE OPTICS, INC. – Annapolis, MD, 02/2002 – 10/2003 www.littleoptics.com

Vice President of Operations

Direct day-to-day operations for this manufacturer of integrated optical ASIC’s for a diverse market covering biotechnology, communications, and the military. Define, develop, and execute manufacturing and outsourcing strategies leading towards a fabless manufacturing model. Oversee administration, human resources, facilities, and quality management. Develop and administer budgets. Monitor company wide projects. Manage and orchestrate wafer fabrication engineering and advanced process development teams. Manage all facets of product delivery. Serve as expert consultant for advanced packaging team. Developed and implemented company wide and outsourcing partner ISO 9001 quality programs. Managed senior operations management team and coached the founding staff. Present program progress to Board of Directors. I helped to raise $7 million in venture capital funding this allowed the organization to position it’s self to be acquired by Nomadics Plc and secure the future for the employees and return shared holders value. I could see my role disappearing as part off the acquisition, so I planned my return to the Scotland and take up the project with Rosebank Technologies.

Key Achievements:

Ø Developed and implemented process improvements to reduce operating costs 35%

Ø Established strategic outsourcing partnerships with a range of manufacturing companies

Ø Aggressively managed supply chain reducing consumable and raw material costs 30%

Ø Instituted and implemented low-cost manufacturing strategy, reducing design cycle time 25%

Ø Directly developed and implemented company wide budget control and planning policies.

Ø Developed an outsource manufacturing base for Wafer fabrication and Packaging services

Ø Secured venture capital funding of $7m

MICRO PHOTONIX INT. CORP. – Phoenix, AZ, 06/2000 – 02/2002

Director of Manufacturing

Managed organization wide operations across three manufacturing divisions for this producer of telecommunication sub systems of this venture capital funded buisness. Established and implemented world-class manufacturing facilities supporting production of lithium niobate integrated optical components and hybrid RF amplifiers and integrated modules. Oversaw implementation of Telcordia and ISO9001 quality programs. Recruited, hired, and managed operations, manufacturing, logistics, and engineering staff. MicroPhotonix was raising capital from the venture capital community just prior to the 9/11 terrorist attack in the USA, the attack caused the VC community to stop there investment activities until they could this impacted our ability negatively to secure adequate funding and the company closed down. I then left to join Little optics.

Key Achievements:

Ø Led design and implementation of four new products in 2001

Ø Successfully negotiated manufacturing licenses for advanced optical components.

Ø Secured manufacturing licenses worth $3m plus in revenues

Ø Supported funding activities raised $13m

Ø Brokered sale of assets and IP to overseas corporation

JDSU – Essex, England, 1995 – 2000

Senior Manufacturing Manager

Oversaw a wide range of manufacturing initiatives for this $24 million venture capital funded opto-electronic component company. Developed and executed production facility from R&D pilot line. Devised and executed process and production control systems. Recruited and developed wafer fabrication and component assembly teams. Led development for future generation of products supporting OC192 applications. I left this role to develop my career with experience of working in the USA in a new start up organization.

Key Achievements:

Ø Assembled teams and established processes to develop world-class manufacturing facility

Ø Led project to develop an efficient process capability, this included new process and equipment introduction, resulting in line yield improvement of 35%

Ø Led project team charged with wide-scale facility expansion/enhancement initiative; increased throughput 200% and component assembly 100%

Ø Supported IPO on the Alternative Investment Market

Ø Supported acquisition of company from IOC to SDL/ JDSU

THE TOWER – Montrose, Scotland, 1993 – 1995

Manufacturing Consultant

Established, developed and managed consultant firm. Developed and executed management and personal development programs. Led reengineering and change management projects supporting small- to medium- sized high-tech companies. Orchestrated and conducted team development courses.

SEAGATE MICROELECTRONICS- Shift Production Manager, 1993-1994

NEC SEMICONDUCTORS (UK) Ltd.-Livingstone, Scotland, 1981-1993

Served as key member of pre-production team charged with establishing innovative six-inch wafer fabrication facility in Europe. Facilitated multiple projects throughout three-year foreign assignment.

Closing down your business ...hope you don't need to use this post.

Closing down your business

Some folks have been talking to me about closing down a business and how hard the process is, emotionally and physically this article may give you some guidelines...also see Roger's other articles on the subject at: www.askthevc.com.

Article by: Roger Glovsky-who is a founding partner of Indigo Venture Law Offices, a business law firm based in Massachusetts, which provides legal counsel to entrepreneurs and high-tech businesses. Mr. Glovsky is also founder of LEXpertise.com, a collaboration and networking site for lawyers, and writes blogs for iLaw2.com and The Virtual Lawyer.

The primary responsibility for shutting down operations and liquidating assets falls on the managers and/or owners of the business, at least until or unless the creditors or court system takes over. This could come as a nasty shock to some investors. Many angel investors or even venture capitalists enter a transaction with the intent of just contributing money. They may be surprised to learn some day that the management team for the company they invested in have all resigned and that no one is remaining to wind down the business, sell off the assets, or pay down the liabilities. Suddenly, one day the investor or owner receives a call (most likely from a creditor) asking what they plan to do with their company and how they plan to address the outstanding liabilities. Not a happy call for the investor or owner.

Whether you are a manager or an owner faced with winding down a business, the goal of the person winding down the company is to fulfill his or her fiduciary obligations and preserve the management's or owner's business reputation. The first step is to assess the financial situation of the business. The second step is to take note that time is of the essence and the longer it takes to do the first step, the more time, money and reputation it will cost the management or owners.

When you buy an existing business, you typically do what is referred to as "due diligence" to make sure you know what you are buying. Similarly, when you are winding down a business, you must do your due diligence to make sure you know what assets and liabilities the company still has and how best to handle them. This is what I call "reverse due diligence". Reverse due diligence involves all of the same information that a buyer or investor might request for a growing business, but for a different purpose: the purpose is for marshaling assets and managing liabilities to maximize value on the downside. In normal due diligence, a buyer will scrutinize financial information and disclosure schedules looking for hidden liabilities that may detract from the value of the acquired company. In reverse due diligence, the person winding down a business is looking for hidden assets that can maximize value and facilitate the settlement of the company's obligations.

So, what information do you need?

1. Financial Information. Most importantly, you need to get a good handle on the financial situation. Are there current financial statements (e.g., P&L, balance sheet, cash flow) prepared by an outside accounting firm? If not, start with the most recent tax return and review all information relating to income, balance sheet, assets, liabilities, and capital structure. Are there internal financial statements prepared by the company? Is there a Quickbooks file (or other accounting software) that can print a transaction report for the current or prior years? What might be the "off-balance-sheet" assets? Seek help from the company’s accountant and financial advisors to make sure that the financial information is accurate and up to date.

2. Taxes. Make a list of all states in which the company is obligated to pay taxes. What is the process in each state for submitting final tax returns? What tax good standing certificates are required for dissolution? What are the outstanding tax obligations (e.g., payroll taxes, estimated taxes, annual taxes, sales taxes)? What obligations are coming up in the near future? What tax obligations or tax filings will be required after the company ceases operations? What money will you need to reserve for payment of taxes after dissolution?

3. Hard Assets. List all assets, including both "hard" assets and intangible assets. Hard assets include computers, equipment, furniture, products, and inventory. Are the assets leased or owned? Are the assets worth more sold separately or combined with other assets (such as a product line or customer contract)? You may want to start with the most recent balance sheet to identify major assets that have been capitalized. Which assets are most valuable? Which assets can be sold easily (e.g., using brokers, auctioneers, eBay, or Craigslist)? Are there any strategic assets that may be desired by vendors, partners or competitors?

4. Soft Assets. Soft assets are intangibles that include securities, accounts receivable, contract rights, bank accounts and cash. Intangibles also include intellectual property such as patents, copyrights, trademarks, websites, blogs, and domain registrations. Is there technical information or process know-how that employees (or former employees) could document and make available for sale? What is the value of the brand and how can it be transferred? Is there software or technology (or other IP) that could be licensed? Can customer lists be sold?

5. Potential Buyers. Can you identify a specific list of potential buyers? Who might have a strategic or competitive business interest in some or all of the assets? Consider vendors, contractors, customers, strategic partners and affiliated entities. Would business brokers or investment bankers be able to find potential buyers? If not, are there auctioneers or liquidators who would help fire sale the assets?

6. Lenders. What loans or financings has the company entered into? Are there other credit arrangements? Make sure that you review executed (i.e., final) drafts of all documents. What do the documents require? Which creditors or obligations take precedence? What happens in the event of default? Are there any personal guarantees? Can the loan or financing arrangements be renegotiated?

7. Employees. What are the current payroll obligations? How should they be managed during the wind down process? What bonuses, vacation pay [Ed. Note: and sales commissions] and accrued expenses are owed? What payroll taxes will be due? What employee benefit plans need to be cancelled or terminated? How will this affect employees on COBRA? Can you save money by switching to a Professional Employer Organization (PEO)? Are there any other forms of compensation (stock, deferred compensation or other incentives) that have not been documented or paid? What employment contracts exist and what restrictions will remain enforce? Can you or a potential buyer solicit employees? Are you treating all employees fairly and equally? How will your actions affect employees that you might want to hire again for a future venture?

8. Customers. Make a list of all current customers, past customers, and prospective customers. Which customers have outstanding receivables? Are there open orders? Should open orders be cancelled or delivered? Which customers have you collected money from but won't be able to deliver products or services? What prepayments from customers should be refunded? How much of the receivables can be collected after the company ceases operation? Which receivables should be written off as uncollectable? At what point should you notify customers that you intend to cease operations? How long can you hold out for a buyer to take over a product line or business? Are there any long term agreements for services? What goodwill can be salvaged or business reputation maintained by transferring unfinished projects to another service provider?

9. Vendors. Make a list of all suppliers and contractors. Be sure to review current versions of all agreements, including any addendums or renewals. Which vendors do you owe money? What leases are there for real estate or equipment? Are there any long term contracts? Can you negotiate an earlier termination or buy-out of the contracts? Can you get the contract modifications in writing? What are the notice requirements and other obligations upon termination? How many days in advance must notice be given? Are some notice requirements sooner than others? Are there any security deposits or prepayments (e.g., insurance) that will be repaid to the company?

10. Records; Compliance. Review all corporate records, paying particular attention to obligations upon dissolution or liquidation of the company's assets. Make sure that you have current copies of all corporate (or LLC) records including charter, bylaws, stockholder agreements (or in the case of an LLC, the Operating Agreement). Are there any security, investment or other financing documents that affect the owners’ rights or the distribution of assets? Are there any documents that assign responsibility or indemnification upon default of obligations? Are there regulatory filings or other compliance obligations? What licenses or registrations does the company have and how should they be withdrawn or terminated? Are there any environmental issues or other compliance obligations that will continue after operations cease?

Review all of the assets and liabilities carefully. Are the assets worth more or less than the company paid for them? Are there any assets with hidden value (such as websites with significant traffic or popular domain names)? We have had some clients sell domain names alone for more than $500K. Some of these assets may have more value to competitors than they do to the failed business.

After you have gathered the information above, you should be able to make a preliminary assessment as to whether the company's net worth is positive or negative. Be sure to review the assessment with the company's accountant, attorney and other professional advisors in order to determine when to cease operations and to plan for the orderly liquidation of assets. The professionals can help to structure and guide the wind down strategy. There are many financial and legal pitfalls for the unwary. It does not have to be time consuming or expensive, but the assessment does require a trained eye to avoid potential issues that might arise later after the assets have been liquidated and the proceeds disbursed.

The above list is just a sample of the most common items to consider before winding down a business. There are many more items that would be included on a typical due diligence checklist. The financial information and due diligence should be performed with the utmost care and accuracy to make sure valuable assets or significant liabilities are not overlooked. Are there may major items that we have failed to mention? What information did you find the most useful in winding down a business?




Gordon