Written by: Magnus Ernegård, Executive Contributor
Executive Contributors at Brainz Magazine are handpicked and invited to contribute because of their knowledge and valuable insight within their area of expertise.
So, here you are in front of your first funding round where the Angel investors would like to understand and know more about your Startup venture. They would now like to perform Due Diligence, where you should be able to gather and show all vital documents, contracts and agreements, including confidential information.
A vast majority of those entrepreneurs /Startup founders I met are outstanding doers, innovative, creative, and energetic. They are all extremely good at picturing a future goal and working backwards to figure out how to get there.
They are most likely gifted at understanding people and how to get them on board with their convincing style for the venture's idea, service or product.
But, starting and running a venture includes also having a robust structure and firm foundation of your Startup with the order, structure and control in place.
Contract management is often put aside by you as an entrepreneur because there are more competing priorities within your long and hectic work week. But still, have the ambition to get your governance, order and control accurate and transparent from the beginning of your venture. And if you missed it is not too late to correct and start implementing, but it will most likely take up more resources.
So, what are then the benefits and importance of having all contracts and agreements systemised in order and control from the beginning?
Firstly, when you have it correctly from the start of your Startup venture, you set the process when you have quite a few contracts and documents. Then when you scale, you add the agreements and contracts to your fast-growing entrepreneurial journey. You are then well prepared and confident in front of your Angel investors and the seed funding round. Later, some VCs might be involved in the often more challenging Series A and B rounds. After some more years, you might consider selling your valuable venture and prepare for an exit. Then you will thank yourself and be pleased and happy you implemented a reliable Contract management process in the early phase of your Startup.
Secondly, with your very filled up agenda, consider focusing on the actual business instead and building relations. As an entrepreneur, you are probably not an expert in governance, valuation exercises, DD preparation, financial planning, ERM and Contract management, and you should most likely not be. As the innovator in the pre-seed phase or when you become an entrepreneur and start up your venture, you should instead prioritize and spend your time on the business and outsource as much administrative work as possible, e.g., to a reliable Startup Service Provider.
Thirdly, you will definitely impress the Angel investors and VCs in front of the Due Diligence process and your daily operation. You not only have big visions and high capacity with an eagerness to succeed but additionally, have good order and control in your venture. That would increase their trust and confidence in you. So, the Business Angels will be excited if you have all the contracts, documents and information fast and efficiently available and thereby able to have all investors’ access to the same information material at the same time.
So, you, with your Startup, have an opportunity to put your best foot forward to show evidence of a robust and well-structured Contract management arrangement and outstanding organisational ability. You will thereby be able to strengthen the Angel investors' and VCs' conviction about you, your team and your venture through a transparent, well-constructed and robust Contract management process throughout your Startup journey.
Research carried out in 2020 by the independent IACCA (International Association for Contract & Commercial Management): Poor Contract Management Costs Companies 9%. OPTIMUM GROUP (as-optimum.com) presents that good Contract Management can enhance the profitability of any business by some 9% of its annual revenue. This positive effect on the bottom line can be achieved by focusing on and implementing a Contract management
system and process.
You may say: A 9 % loss in revenue doesn't seem significant for my Startup as we are targeting a 100% increment. But, the significance of such a percentage loss could be enormous as the business rapidly grows. So, to sum it up, a lack of proper Contract management can be one of the major setbacks to your financial target.
We, BridgeToAngels, are convinced the best way to properly manage your contracts will be to use an intelligent and modern SaaS platform that allows you to make the most of your time and your limited resources. You will, with this, be able to reduce your financial and legal risks and elevate your profitability level and ability to scale. Several Contract management players are out there, but we think Contractify, one of our partners, offers the best and most affordable solution after scanning the market. Today, they are one of the fastest-growing Contract Management Solution providers.
The most crucial reason, in my view, for this is that Contractify is made to manage contracts from a business side of things. Contractify, like BridgeToAngels, sees the great and clear benefits of the entrepreneur focusing on their actual business. For the Startup having Contractify in the background, they can warn you whenever something needs to be done, checked, or make a decision regarding your contracts. Wouldn't it be great to be able to say to the interested Business Angels and VCs? :
"- Here is your login to Contractify, where you will find all the relevant contracts and documents for my Startup venture!"
And that just minutes after they asked you to do a DD?" That is for sure awesome and what Contractify can achieve and provide.
Keep on Starting up in a safe mode.
Magnus Ernegård, Executive Contributor Brainz Magazine
Magnus Ernegård has over 30 years of senior management experience from different industries in multinational industrial companies in various countries. Background in CEO positions, CFO, management consultant, production, business development, innovation, corporate governance, and entrepreneurship. Further, he has, over the years, gained Board and Chairman experiences from Boards within the Automotive, Logistics, IT Consulting, and Textile industries. Today, he is the owner and founder of the Startup support provider company BridgeToAngels based in Sweden and Denmark. Magnus has a proven track record in starting/developing businesses, company split, corporate exits, and organizational effectiveness. Magnus also serves as Advisory Council Member of Gerson Lehrman Group. He holds an MSc from the University of Lund, Sweden.