EI HPSU advice

percy212

Hello

I am finishing off on an enterprise platform type programme and am in receipt of an EI Cord grant. I am currently working on a business plan for a software product with an identified market in the US of, well lots of money.

If anyone can offer me any advice on what to do to ensure HPSU status, and funding I would really appreciate it. I have a potential investor in the US, but obviously would like to receive matching funding if possible. I feel that EI are quite interested in my idea, but I don't want to spend years waiting for money....

Thanks for any advice.

antoinolachtnai

I would get moved as far forward as possible with your US investor. Be sure to have something in writing with them, even if it is only a letter of intent.

Voltex

Apologies for not offering advice..but I just wanted to say best of luck with your business idea. I get very encouraged for our country the I hear about people getting started in the HPSU segment.

percy212

Thanks Antoin. I am hoping to get a letter this month.

percy212

Anyone know if a letter of intent is binding? If EI will not produce funds to match the investors contribution I won't have enough to build the product, and would like to release the investor from any promise.

antoinolachtnai

No. A letter of intent is not binding in any way.

gnxx

antoinolachtnai wrote: »

No. A letter of intent is not binding in any way.

This is not true. It depends on the wording of the document and the individual clauses.

Often an LOI will contain a number of clauses that are legally binding such as non-disclosure etc.

Most large companies will insist that their legal department review letters of intent before signing.

Remember that any document produced by a company can have legal implications. A document such as a LOI which is often signed by company directors obviously has a legal significance and can be binding.

You should take legal advice on documents of this significance.

gnxx

percy212 wrote: »

Anyone know if a letter of intent is binding? If EI will not produce funds to match the investors contribution I won't have enough to build the product, and would like to release the investor from any promise.

It would be normal practise to state the prerequisites for a letter of intent. In your case it would be subject to funding from Enterprise Ireland. Tell EI that you need a ballpark date for the funding (subject to LOI) and build this deadline into the LOI before getting your investor to sign. This will put some urgency into the agreement.

Best of luck ...

PS. You should get a solicitor familiar with fund raising and dealing with Enterprise Ireland. By doing this (a) you appear very serious and committed to the business and (b) avoid common pitfalls in dealing with Enterprise Ireland legal agreements (c) avoid costly legal mistakes that will bite you later.

percy212

Thanks all. Anyone know a good solicitor for EI matters? I am in Mullingar so midlands or Dublin is ideal. Having said that my accountant is in castlebar! PM me if you don't want to post the info publicly.

Cheers

antoinolachtnai

gnxx wrote: »

This is not true. It depends on the wording of the document and the individual clauses.

Often an LOI will contain a number of clauses that are legally binding such as non-disclosure etc.

Most large companies will insist that their legal department review letters of intent before signing.

Remember that any document produced by a company can have legal implications. A document such as a LOI which is often signed by company directors obviously has a legal significance and can be binding.

You should take legal advice on documents of this significance.

For sure it can have legal significance and anyone should get legal advice before writing such a letter, but it will not be binding. The OP cannot hope to rely on it as he might on a contract.

It is certainly true that these letters might go beyond intent in some ways.

HellFireClub

Personally I think you'd need to have your head examined to have anything whatsoever to do with a state agency in this country when it comes to starting up a business. While I have huge respect for any person who starts up or tries to, I can speak from experience when I say that dealing with any enterprise agency in this state is like some sort of a nightmare.

Best of luck with it OP, but let us know how you get on, I hope you find EI more accommodating than I did...

cousin_borat

Best of luck with the new business OP. Having been through HPSU and made plenty of mistakes that pushed out closing it out there are some basics and gotchas to be aware of.

First of all having secured CORD anytime in the last two years is a great validation for the business. Have you got an EI Development Advisor (DA) assigned? This is step # 1.

Regarding your funding round you need to tell your DA and make sure that EI are kept in the loop. EI will only match funds raised in the same funding round so if any cash from other investors hits your bank account before EI Investment committee approve HPSU then it will not be counted. This is a mistake I made.

There are two basic documents you need to complete for HPSU. A business plan summary which should really be a cut and paste for the most part from your business plan.

3 year financial projections (P&L, Balance Sheet & Cash Flow projections) which feed into EI excel template which generates various ratios. You can use your own cash flow projections template if you have already done so.

There will be some back and forth to make sure the Business Plan summary and financial projections are aligned.

Main thing with software company is that you need to emphasise the sales and marketing component. This is the #1 thing that the EI investment committee look at. Also for your milestones keep them to 3 or 4 and high level.

Regarding legals I'd set aside 5/7k for solicitor depending on how much you wish to do yourself. If you want to do your own Term Sheet then check out Venturing Forward by Diane Mulcahy, read it anyway in fact! You will probably also draw up a letter of application for shareholders. In my opinion these are the only documents you should need and the main work your solicitor should do would be do draw up a revised Memorandum and Articles document for the company. If investors are pushing for seperate shareholders agreement or other documents I'd push back and be quite wary as they're probably not experienced early stage investors. Also if they start looking at ratios such as NPV or IRR then run a mile! IMO Gross Profit margin/Net profit margin % are key and you need to be near or at 80/40% respectively by year 3.

Best of luck!
I have a good accountant contact. I can't recommend solicitor as the one we worked with was a large firm, were terrible and looked for over 24k in fees!

percy212

Any contacts would be greatly appreciated!

percy212

Well, its looking a little complicated at the moment. I have an investor as I said, but EI are asking for reams of further data in my business plan that will take a looooooooong time to collect. I think I may have to pursue other options. Unfortunately the US investor will be lost as a result of these new EI requirements. Sorry Ireland, I can't bring in the projected 15M over the next 3 years because somebody wants to do some more box ticking.

cousin_borat

There are other investors out there. Anyway, What Enterprise Ireland asks for in the Financial Datasheet and the Business Plan summary is what any sane investor would ask for.