When looking to raise capital for your business, you will need to put forward a business pitch to your potential investors through what is commonly referred to as a pitch deck. Notably, as a proprietary company, you are generally prohibited from offering securities in your business to the public. This article will explore the ins and outs of pitch decks and some of the key legal considerations you should keep in mind when drafting one.
What is a Pitch Deck?
Your pitch deck is a presentation that sets out a problem you have identified in a given industry and how your product or service can be used to solve that problem.
Your pitch deck is a tool you will use when seeking early-stage investment. The stages in which you will use a pitch deck in your capital raising journey will usually be limited to between the seed and Series A phases.
Which Type of Offers Can You Make With a Pitch Deck?
Generally, only public companies can offer securities (such as shares or options) to the public. When public companies offer their securities, they will generally have to issue a disclosure document. This document may be a prospectus or an offer information statement for investors and is to be lodged with ASIC.
An exception to this rule is the “small scale offering” exemption, whereby you can make 20 personal offers for up to an accumulative $2,000,000 in a 12-month period. The following three circumstances do not count towards your small scale offering exemption thresholds where the:
- offer is to a sophisticated investor;
- investor is willing to subscribe for more than $500,000 worth of securities; and
- investor is a senior manager of your company.
As potential third-party investors will have access to your pitch deck, there is the risk that it ends up in the hands of an unknown person without your knowledge. Since any offer you make must be personal and directed, you should refrain from drafting your pitch deck in a way that could be construed as being an offer to purchase securities in your company. A good pitch deck will therefore possess a slide that contains a legal disclosure.
Continue reading this article below the formWhat Goes Into a Pitch Deck?
Your pitch deck should succinctly outline the essential details about your business in a way that engages potential investors. While there are no prescribed items that you must include, most pitch decks will follow a formula that includes the following elements:
- solution: what problem am I solving, what is your solution, and how is it better than your competitors;
- market: what is the competitive landscape, who is the customer, and what size is the market;
- team: who is on your management team;
- status: the status of your current financials, including whether you are making sales;
- next steps: specific details about what your company will spend the funds on and why; and
- disclaimer: a legally-drafted slide that includes details about what can and cannot be relied upon and what assumptions have been made.
What is Your Risk?
One of your key legal considerations will be avoiding making false or misleading statements about your company or securities. Likewise, you must not engage in misleading or deceptive conduct about your company or securities, including:
- making false or misleading statements in writing or verbally; or
- misleading or deceiving investors by omitting information.
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Key Takeaways
Being at the stage where you are ready to raise capital is an exciting endeavour. No two pitch decks are the same, just as no two businesses are exactly alike. Be sure to tailor your pitch deck, keeping the following elements in mind:
- the solution you are attempting to solve;
- the competitive landscape and size of the market;
- your management team;
- the status of your current financials;
- specific details about what your company will spend the funds on and why; and
- a disclaimer to qualify potential investors that the deck does not constitute an offer to purchase securities.
If you need assistance reviewing your pitch deck from a legal perspective, our experienced capital raising lawyers can assist as part of our LegalVision membership. You will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today on 1300 544 755 or visit our membership page.
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