Stage 1 · Understand the investor’s decision · Lesson 1 of 4
How an investor reads your file, in order
Before your idea, an investor checks who owns the business, then your documents, your numbers and your risks. This lesson shows that order and helps you prepare your file the same way.
The first question
The first written question is about your shareholders, not your idea
You send your file to a fund or a bank. Often the first written reply looks like this: “Could you send us the shareholder register, with the ownership chain up to the natural persons?”
It comes before any question about your market or your sales. Why do you think that one comes first?
- ABecause they do not trust you
- BBecause the law requires them to know who they are dealing with
- CBecause it is the quickest question
- DBecause your idea does not interest them much
See the answer
Answer B. Because the law requires them to know who they are dealing with
The reading order
An investor reads your file in five stages, and any of them can stop the reading
After ownership, they look at the documents, then the numbers, then the risks. The decision comes last. Each stage relies on the one before: nobody reads accounts without knowing who owns the company.
- Who owns itcompliance
Shareholder register, chain up to natural persons, IDs, source of funds.
- The documentslawyer, analyst
Articles, shareholders’ agreement, audited accounts, licences, titles or leases, tax and social clearances.
- The numbersanalyst
Actual sales, margin, month-by-month cash, use of the funds requested.
- The risksanalyst
The country, the currency, the land, related parties, what happens if you leave.
- The decisioncommittee
The amount, the kind of money, the terms. The file goes to committee.
The order varies from one investor to another: a bank looks at collateral earlier, a fund at the team and the exit. This is common practice, not a rule.
In practice, most investors will not discuss valuation until the first two stages are cleared. So prepare your file in this order. A missing document at stage 2 holds up everything after it, even good numbers.
- Your country before you
- The price of money
- Stress-test your loan
- The 12 gates
- A title is not proof
- Prove, don’t explain
- In your file
- One action for your file
The rest of the lesson
Keep reading with your free account
8 more parts, with the calculations on your own numbers and what to write in your file. The account is free, no commitment.
The words of this lesson
Each word links to its full definition in the glossary.
- Beneficial owner
- The natural person who, at the end of the chain, really owns or controls the company.
- Cap table
- The list of who owns what in your company, in shares and in percentage.
- Related parties
- Any transaction between the company and you, your family, your other companies or your shareholders.
- Policy rate
- The rate at which the central bank lends to banks. It is a floor: banks always lend to you at more than this.
- Security
- What the lender can seize if you do not repay: land, a machine, money your customers owe you.
- Exit
- The moment the investor who became your partner sells their share and gets their money back, usually after 5 to 7 years.
- Unit economics
- What you earn or lose on a single sale, a single customer, a single hectare.
- Land title
- The document attesting a right of ownership over land. In Madagascar it is a starting point, not a proof.
- Tax and social clearance
- The official document saying you are up to date on tax and contributions, or have a payment plan.
- Land status certificate
- The up-to-date position of a plot at the land office: who owns it, and what encumbers it.
- Audited accounts
- Accounts an independent professional has checked and signed an opinion on.
- Working capital
- The money stuck in your stock and in invoices your customers have not yet paid.
- Holding company
- A company that does nothing itself: it owns shares in other companies.
- Tax treaty
- An agreement between two countries so the same income is not taxed twice, often lowering the tax on dividends.
From the lesson to your file
Check in two minutes whether your project fits the funders of the region, then create your account to follow the lessons with your own numbers. Free, no commitment.
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