If you are Project developer, an early stage company or even a consolidated one in the Energy, Infrastructure or Technology sectors and you are considering :
- Raising capital for your company or Project assets or funding new ones.
- Increasing capital to give entry to a new partner, whether financial or industrial
- Raising debt
Or any combination of those three, you should know that only about 1 out of 100 investment proposals that seek funding reach transaction closing (Sand Hill Road Econometrics, Cambridge Ventures Associates Index).
In our experience, this is overly optimistic as many projects do not even get reviewed and do not even make it into the 100 which do.
Most companies fail to reach their funding objectives due to the following reasons:
1. The funding process is not well understood and therefore not developed. Many developers or companies fail to understand the depth and breadth in which an investor or project financing bank will scrutinize the opportunity. A simple in-house business plan will not suffice. The following two tables highlight just some of the major issues that must be addressed and resolved in a proper business plan and many times are not well identified, managed or simply not addressed in the network of contracts and the full financial model and sensitivity analysis which are closely interrelated.
3. They do not plan the approach to investors properly. They are unfamiliar with the mindset of investors and more importantly the what, where, how and when of investor motivation. The capital markets are a tightly woven group and have their own culture and methods. It is wise to know your target very well before attempting a pitch and much less an engagement.
4. They do not plan the approach to investors properly. They are unfamiliar with the
mindset of investors and more importantly the what, where, how and when of
investor motivation. The capital markets are a tightly woven group and have their own
culture and methods. It is wise to know your target very well before attempting a pitch
and much less an engagement.
But even that is not enough though.
You still have to consider that both Energy, Infrastructure or Technology are sectors that have very specific particularities, sectors in which investors have a high degree of specialization. For example, some investors will only operate in certain sub sectors (wind, solar photovoltaic, biomass to energy…), others only consider a particular stage of development and yet others operate in a limited number of regions and all will have specific requirements in terms of deal size, deal structure or minimum expected return.
For those reasons, your ideal Advisor should combine true sector specialization and global reach.
This article explains the proper approach to the process and to the negotiation, what needs to be done at each stage of the process and what to expect with regards to fees.
In short, how we maximize your deal value, shorten time to completion and increase your chances of success.
You will also understand why Advisors carefully pick clients and the Projects that they work in
Advisors only take on a reduced number of projects/companies every year and only manage opportunities directly originated from clients and principals. Advisors will have direct access to a selected network of investors and lenders who operate in the Energy, Infrastructure and Technology sectors.
Advisors will focus thier services on the technical, legal, economic and transaction process issues of any investment decision, thus providing a global management for the operation
What to look for in a fee structure
You should look for an Advisor that commits to always keeping fees at fair market rates, which means that they are competitive given their experience, specialization and global reach.
Because each transaction is different, the remuneration will be structured on a case-by-case basis. However, the general fee structure should always transparent and aligned with the customer´s interests: it is composed of two types of fees:
1. The Advisory and Transaction Management Fees, these fees accrue along the Transaction Management process. The Advisor should work on fee structure linked to “Deliverables” but within a specified time frame so that it is not left open-ended, that way fees are generally linked to the completion of a task or a milestone within the Transaction process within a specified time frame to which the company or project developer also commits to.
2. A Premium Fee, this fee only becomes due once the Transaction is fully completed. The amount of the Premium Fee is established as a percentage of the value of the transaction in the event that the Investor or Investors contributed by the Advisor completes the Transaction with the Customer.