EnergiMidt Development follows a four stage investment process. The speed at which the evaluation proceeds is strongly influenced by the preparation the entrepreneurs has undertaken prior to seeking funding. The process for a well organised entrepreneur is normally 3-6 months from first serious engagement to funding.
From the moment an investment application is first reviewed, the investment team is making judgments about the quality of the business opportunity, the capabilities and attitudes of the management team, and the likelihood of being able to finalise a deal that makes sense for all parties and constitute a win-win situation. The aim is to quickly identify the investment proposals with the necessary potential, before either party allocates and uses significant resources. We receive many proposals and therefore we screen roughly. Many deals are rejected at the assessment stage. Even the most promising technology will be rejected if we fail to see the business potential.
If EnergiMidt Development concludes the proposal to be potentially suitable for an investment, a term sheet is prepared. The purpose is to reach an agreement on the major parameters of the investment. Usually a term sheet will contain clauses about non-disclosure, exclusiveness, time schedule, pre-money evaluation, subscription amount and price, and who will defray the associated expenses. A term sheet is mostly intentional, but does constitute a binding agreement in the areas of non-disclosure, expenses and exclusivity.
Once a term sheet has been agreed upon by all parties, EnergiMidt Development moves on to the due diligence phase, where any remaining issues will be resolved and the company; technology and market will be reviewed more thoroughly. Depending on the circumstances, relevant third party due diligence items such as an intellectual property rights review, accounting and legal review, and/or human capital review will be commenced. The investor does this to ensure that the given information is correct. During this phase the details of the investment agreement are negotiated and the investment documents finalized.
If the due diligence process does not reveal any damaging information, the investment agreement is signed and EnergiMidt Development takes over part of the ownership in the company and the investment amount is paid to the company.
Often EnergiMidt Development will appoint one of the members of the board of directors and together with other investors have considerable influence on the composition of the board of directors. Furthermore, the performance of the company will be followed through e.g. meetings and reports. During this period EnergiMidt Development can help with advice and network.
In the investment agreement a number of milestones are often described. The milestones must be reached before the next investment tranche is to take place. This is to minimise the risk for the investors. During this period further financing might be considered if the capital requirement has increased.
After 2-7 years EnergiMidt Development will withdraw from the investment. This takes place through an exit where EnergiMidt Development’s shares are traded, either trough an IPO, merger, trade sale or otherwise liquidated.