I. Project development and screening
Project development mainly solves the problem of project source of equity investment fund. It mainly includes: industry research: tracking and studying the development trend of new technologies and the dynamics of capital market at home and abroad, and looking for project information through data research, project library recommendation and visiting enterprises; Recommended by intermediaries, angel investors or peers; Recommended by entrepreneurs' unions and chambers of commerce at all levels; Recommended by industry experts; Recommended by government agencies: such as government financial offices, listing offices and high-tech development zone management committees at all levels throughout the country; Industry exhibitions, business plan competitions, venture capital forums, etc. After obtaining the project, the equity investment fund manager screens the projects according to their investment preferences in the industry, region and development stage of the invested enterprise, and selects the projects that meet their investment preferences to enter the preliminary due diligence.
Second, the preliminary due diligence
The core of pre-due diligence is to judge the value of the project to be invested, rather than detailed investigation or investment risk assessment. In the initial due diligence stage, the initial value of the target company is judged from the following aspects: management team, industry entry barriers, industry concentration, market share and main competitors; Business model, development and profit expectation, policy and regulatory environment, etc. Before the initial due diligence, a confidentiality agreement is usually signed with the target company, and both parties promise to keep confidential the trade secrets of the other party that they come into contact with during the communication of investment and financing business for a certain period of time.
Third, the project establishment
After the initial due diligence of the target company is completed, if it is necessary to further promote the investment process of the project, according to the general workflow of the equity investment fund manager, it is usually necessary to go through the project establishment procedures. The initial due diligence of the project is usually completed by the investment manager or investment management team. Through the project start-up procedure, it is beneficial to introduce higher-level investment management team members or directly submit them to investment decision-making members to judge the project quality before further investing more resources to conduct more detailed and in-depth investment evaluation on the target company. On the one hand, it will save the cost of fund management, on the other hand, it will also help to concentrate the limited resources of fund managers on more potential projects.
Four. Sign an investment framework agreement
Before starting formal due diligence, an investment framework agreement, also known as a list of investment terms, is usually signed with the project enterprise. It is usually put forward by the investor, which generally includes the conditions of investment, the main investment terms suggested by the investor, confidentiality terms and exclusive terms. Except for the confidentiality clause and exclusive clause, the content of the investment framework agreement is mainly used as the basis for the next negotiation between the investment and financing parties, and it is not legally binding on both parties.
Verb (short for verb) due diligence
Due diligence is an indispensable link in the business process of equity investment, which is usually regarded as the embodiment of the core competitiveness of investment managers. In the due diligence stage, the investor will conduct a very detailed and in-depth investigation and understanding of the target company. The main contents of due diligence include commerce, finance and law.
Investment decision of intransitive verbs
Equity investment fund managers usually set up investment decision-making committees to exercise investment decision-making power. The members of the investment decision-making committee are composed of investment management professionals who have rich experience and ability in investment management and have enough time and energy to perform their corresponding duties. They are usually members of the senior management team of equity investment fund managers, and sometimes they hire external experts. The appointment of members of the investment decision-making committee and the formulation of rules of procedure are usually the responsibility of the investment manager's board of directors or executive partners. After the due diligence is completed, the investment manager or project team shall submit the due diligence report, investment proposal and other documents to the investment decision-making committee, which will make the final investment decision.
Seven. Sign an investment agreement
For investment projects approved by the investment decision-making committee, the investment and financing parties shall negotiate the terms of the investment agreement and finally sign the investment agreement, stipulating the rights and obligations of both parties. The investment agreement confirms the specific plan of equity investment through a series of specific clauses, and stipulates the control rights and rights distribution of the target company. Usually, venture capital funds mainly invest in the target company by increasing capital, while M&A funds mainly invest in the target company by purchasing stock equity.
Eight. Investment delivery
After the investment agreement comes into effect, it will enter the investment delivery procedure. The equity investment fund manager will transfer the investment funds into the account of the invested enterprise or its shareholders according to the amount and time agreed in the investment agreement. If it is to manage equity investment funds, it needs to be approved by the custodian and transferred to the operation. The invested enterprise shall register the industrial and commercial change of equity according to the investment agreement and relevant laws and regulations, and change the articles of association according to the investment agreement.