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Today, mostly for fun, we want to share a brief sample of something advanced! Some next-level investment bank capital raising and syndication processes… (will blow your mind).
ABOUT THIS VIDEO:
Sometimes people say things like: “Most people in the sector only share simple, common sense advice, they never go through anything advanced”.
Today, mostly for fun, we want to share something advanced, not in the sense that it’s complicated, but in the sense that this is the process companies go through when closing tens of millions of dollars (equity or debt transactions) that people are not exposed to
Most of the time we share simple strategies anybody can use to make dramatic improvements to their capital raise process. We do this because most of the time (95%), it’s the simple things people are missing, and no advanced strategy is going to save them from a fundamental (but simple) mistake.
But today, let’s go down the rabbit hole of the things people who haven’t dealt with this world are missing.
HERE’S WHAT WE COVER (just a short sample for now):
– Inside the mind of investment banks
– Fee tails and what to watch out for
– Exclusivity vs non-exclusivity
– Who pays out-of-pocket expenses?
– Types of insurance investment banks use and why they use it.
– Anti money laundering statements
– Terms

Transcript

Natu Myers:
Natu Myers here again, back with Aeropolis Capital the Turn-Key Dataroom. And today we’re going to talk about the inner workings of investment banks, because, yes, many people who went through the programs and such they’ve raised billions and they’ve raised a lot of money. They’ve been in banking for quite a while. Some people are not adept at it. Some people are very good at their business operations, but it’s just the capital raising side of things that need a bit of some advice. But either way, these findings and these tools will definitely speed up some of what you’re working on as well. Because when we go into the investor data engine, it tends to be really powerful.

Natu Myers:
So, just by getting everything in place first and preempting all the things that may happen before we go hard to the markets and we start opening all those doors, this is the routes to take so that we, one, make the best out of everything we have before we go hard and go to markets and we go out and get thousands of replies and all that. Two, it just gives us some, for the people who aren’t adept, a chance to see what the end looks like or what all of the roadblocks that we face look like.

Natu Myers:
So, with that, let’s get right into it, because we’re going to go through leveraging engagement letters. People may get engagement letters or consultant letters of various types; and our team has worked on deal sizes of all sorts, eight figures, nine figures, and beyond. So, we’ve generated template engagement letters based on our experience of what we’ve seen from top-tier investment banks, not quite the JP Morgan’s, but the ones that are just a cut above and don’t really get a lot of accolades as much; but once they closed deals in the $1-20 billion range.

Natu Myers:
All their collaboration agreements, all of their engagement letters, how they work intrinsically, how they create everything, and so we’re going to walk through that step-by-step. We’re also going to show you how some of our business acquirers summarize their deal flow because in the cases where people have multiple deals or they may get asked what other deals you have, if somebody tells you no, it’s very important and it’s very prudent for one to have a list of deals, of prospective deals, that may be interesting so that if there’s a no, there’s always a potential call because the number one goal is to get on the phone with said investor one way or another.

Natu Myers:
Third, you can witness broker collaboration, and we can walk through that as well. So, this is an action-oriented tactical video, and we’re going to dive into engagement letters right now. So, you’ve been provided with a lot of resources, and one of them is the inner workings of investment banks. You’re going to understand the engagement letters, and we have two samples that we created. We have one that it’s more from a registered FINRA tier two to tier one investment bank that closed billions, is very serious, that dots all their T’s crosses all their I’s.

Natu Myers:
And we have one from a global firm that is more light on the engagement, but it could be retrofitted and you can prepare and see the commonalities. Real quickly, all it is, I mean, you have one section… The first three sections are always the same. You have an introduction of the firm, where they’re registered, and how that they’re happy to see you and work with you and raise money for you. Then you have something that describes what this agreement is, and this particular agreement is with a hypothetical FINRA registered investment bank.

Natu Myers:
It defines things in quotation marks, and it also goes through the scope of services. Some may go deep into the financial analysis, but 99% of people just want to get connected to the investor. So, all these guys do is simply find ways to help people get investors. So, these people here, they advise. They would negotiate, and so the number one thing is to get them on the phone with investors and help them close the deal. Negotiation is the number one priority, in this case.

Natu Myers:
Compensation, this one’s a bit complicated. But long story short, you see some people that have a success fee that’s closed on escrow, closed on when the money comes in an escrow account by a lawyer or his broker dealer. You also have sometimes a fee tail, which entitles people to a certain amounts for a longer period of time. This one is a bit more complicated over the top; but 99% of the time, you’ll see success fees on closing of escrow.

Natu Myers:
And because of the retainer fee’s waived in this particular example, you’re going to see a lot of out-of-pocket expenses when it comes to, in particular, when things come to sophisticated companies that maybe they need an appraisal. Maybe they need to get a lawyer. Sometimes the investment bank won’t pay for out-of-pocket expenses. Sometimes you have cases where there’s a heavy upfront fee, and then there are a lot of… You will have people come to us for you for appraisals, and they would come down, fly down, and do the due diligence and appraisals themselves and hire their own people on your dime. So, it all depends. Mostly for lending, you’d see that.

Natu Myers:
And sometimes they’ll put their banking information here if their worried of transaction fees on closing of escrow. Term and termination, and most importantly, the most important thing for many of these firms is indemnification because this is what keeps people up at nights in terms of the investment bank side. And I would know, because most of my work is with being on the investment bank side. Because, yes, many firms and many firms that are registered to their local securities commission in either America or a commonwealth country would likely have some sort of requirements to have, A, errors and omissions insurance. Canada doesn’t, but 99% of the people do.

Natu Myers:
And all that means is that if somebody makes a mistake when they’re sealing your deal and they omit something, the investor, they will get reimbursed or get some money from their insurance if an investor sues, if they lose money. And lawsuits are just about money. So, sometimes people lose money. If everything goes right, lawsuits may still happen. Sometimes, people have bonded insurance and types of director protection insurance so that if one of the employees of affirm frauds the director by misrepresenting them, then they will be covered, or for stolen equipment or something like that in your office, which is kind of a dated thing in the age of beyond 2020. But, it’s still a thing, obviously.

Natu Myers:
And on the company side, the company has to understand that indemnification clauses are powerful, and it’s meant to set your expectation with what is expected. However, people can still sue with any clause in an agreements. It’s just, but they’ve gone far and many people go far. So, have a long line of indemnification. And go to a lawyer for everything.I just said, to see how it fits into your context, because I’m not a particular lawyer for your situation.

Natu Myers:
If you read the disclaimers at Aeropolis, you understand, we indemnify; and we have our own levels of… You’re supposed to take advice from a lawyer. However, all this material is supposed to make your life easier so that when you go to the lawyer, at least you’ll understand some of the things before you go in and save hundreds of thousands… Well, maybe not hundreds, but a minimum tens of thousands of fees.

Natu Myers:
Next, you see sometimes an addendum for other agreements. This is a bit overkill; and honestly the confidentiality and nondisclosure simply would say it’s similar to the materials of an NDA except on legal requirements, if the law requires it, they may disclose. So, if the SEC or whatever require some documents to be disclosed, it may be disclosed because how else would the SEC file the start of an investigation? So, that’s a lot of what this says.

Natu Myers:
Next, this goes deeper into indemnification and covered people, and there’s even a piece on AML. That’s a bit extra because that should be assumed, but to make it bold here, it helps set their case and helps them look great in front of the SEC. Sometimes you have extra things like signatures and headings. Headings are just for convenience, They’re not part of the agreement, all kinds of extra. So, sometimes you see that as well.

Natu Myers:
But indemnification here as well, and oftentimes these people focused on indemnification. What you should look at is the term, because sometimes the term is really important because when an investment bank would introduce you to an investor and they don’t have the right people… They introduce you to somebody, and then they closed like 24 months later or 12 months later after they introduce you, many investment banks would still like to be compensated for that, understandably, because a lot of investors are slow.

Natu Myers:
Now, that being said, when the investor comes in and when you have your own expectations on how long you want them to work, you want to have that preset in your mind or written down on one of our worksheets so that when you go into a deal like this, then you can set the expectations and then you don’t get blindsided or surprised by any terms. And if you’re working with a fund and so on, that’s really important as well.

Natu Myers:
And we have a lighter agreements that we’ve created; and when we go through this agreement that we created, the same thing; engagements, introductions, scope of work. This one is more on the financial analysis side or the forecasting. Compensation for services, this one has a retainer. Indemnification, disclosure and nondisclosure, and non-circumvention, pretty standard except when required by the whatever Securities Commission, we’ll do it. And this one is pretty straight forward. So, we provide you with that.

Natu Myers:
Next, we can also go through how to best summarize your deal flow. And why would it make sense to summarize your deal flow, and why am I showing you this? Why am I showing you what business buyers and investment banks would do to summarize their deal flow? Well, as you get started with the investor data engine and you work with us to get all the data you need in order to reach investors and to build your own campaigns, one thing is, as you get started, you may have to summarize your deal flow.

Natu Myers:
When you summarize your deal flow, it’s usually when somebody tells you no, because the number one goal for you is to get on the phone with an investor. Sometimes you have to do things that are outside of the box. So, if you show them that you have a lot of deals, then maybe you will at least learn from what they want and be able to iterate and change your message to what people would want. Otherwise, if you have a deal…