Issue link: https://htpgraphics.uberflip.com/i/246991
Funding Section 5 As they are putting in hard cash, Venture Capitalists (and Business Angels) will be keen to see you put in some cash too. This is called "hurt money". It gives the Investors additional confidence that you will be fully committed to the venture and not see it merely as a modification of your research activities. They will expect you to see all of your money going into, and hence your reward coming from, your shares. For this reason they will not support you receiving significant (or even any) consulting fees. This is viewed as taking out money ahead of everyone else (especially them). They are looking to the increase in share value as their reward. They want everyone to be in the venture together, pulling in the same direction. This requirement for detailed target goals (milestones) and the examination of status can mean that the Shareholders' Agreement will be very detailed and lengthy. As with Business Angels, the Venture Capitalist will not be interested directly in the running of the company, but will be keen to assist the company by providing contacts and information. However, it is likely that a Venture Capitalist will expect to constrain many of the freedoms of management to act without consultation or approval and also to have a say in the membership of the board. One way to contact Venture Capitalists is through the British Venture Capital Association's website (www.bvca.co.uk), which has a keyword "matching facility" for identifying relevant Venture Capital firms against your funding level requirement and field of business activity. Dealing with Investors Although it is not necessarily the case that all four types of investor will be involved in any one spin-out, it may well be the case. So, by the time that a Venture Capital firm has invested, in addition to the research originators, there could be four new "groups" of shareholders and an entirely new and complex set of documents (eg new Articles of Association, new Shareholders' Agreement) produced compared to when the company was first established. Of course the interaction and negotiations involved with each of these four is complex and you would benefit from taking experienced advice along the way. Your institution will probably have a published policy detailing the allocation of shares as between you and the institution. Its IP commercialisation organisation will be experienced in finding and negotiating 30