SG2X PLAYBOOK Fund Management SOP
2 SG2X PLAYBOOK FUND MANAGEMENT SOP | Table of Contents SG2X PLAYBOOK – FUND MANAGEMENT SOP DELIVERABLE OVERVIEW.......................5 INSTRUCTIONS..........................................................................................................................5 PURPOSE OF THIS DOCUMENT 5 HOW TO USE THIS DOCUMENT 5 GOVERNING INFORMATION ABOUT THIS DOCUMENT......................................................................5 QUICK REFERENCE GUIDE......................................................................................................7 INVESTMENT MANAGEMENT ORGANIZATIONAL STRUCTURE & DIVISIONS........................................7 COMMITTEE ROLES & RESPONSIBILITIES....................................................................................11 INDIVIDUAL ROLES & RESPONSIBILITIES 11 PRE-INVESTMENT MILESTONES 13 POST-INVESTMENT MILESTONES...............................................................................................14 MEETING BATTLE RHYTHM 15 STAGES SUMMARIES 18 STAGE 1 Summary: Pipeline Management........................................................................18 STAGE 2 Summary: Active Pipeline Management 19 STAGE 3 Summary: Due Diligence 20 STAGE 4 Summary: Deal Closing.......................................................................................20 STAGE 5 Summary: Portfolio Value Creation 21 STAGE 6 Summary: Monitor & Evaluate 22 HIGH-LEVEL SAMPLE TARGETS.................................................................................................23 SOP DEFINITIONS....................................................................................................................23 STAGE 1: PIPELINE MANAGEMENT......................................................................................25 READ FIRST.............................................................................................................................25 PRINCIPLES 26 SCOPE 27 TARGETS.................................................................................................................................27 FILES AND FOLDERS.................................................................................................................28 TRAINING 28 TOOLS 29 ACTIVITIES...............................................................................................................................31 STEP 0: Onboarding & Training 31 STEP 1: Attract Prospects 33 STEP 2: Complete First Interview Form (FIF)......................................................................41 STEP 3: Obtain Legal Approval 45 STEP 4: “Pitch” Prospect to IM Team 45 STEP 5: Complete the Deal Screening Form (DSF)............................................................46 STEP 6: Present Deal to IIC for Active Pipeline Approval 48 STAGE 2: ACTIVE PIPELINE MANAGEMENT........................................................................50
3 SG2X PLAYBOOK FUND MANAGEMENT SOP | READ FIRST 50 PRINCIPLES..............................................................................................................................51 SCOPE 51 TARGET 52 FILES AND FOLDERS.................................................................................................................52 TOOLS 52 ACTIVITIES 53 STEP 0: Run The Gender-Smart Exec’s Program...............................................................53 STEP 1: Create Active Pipeline Project Plan & Set Up Folders...........................................55 STEP 2: Sign Letter of Intent (LOI) 56 STEP 3: Conduct CDD & Prepare the Financial Model, Draft Terms and e-CIM 58 STEP 4: Negotiate & Sign Term Sheet................................................................................61 STEP 5: Obtain First IC Approval 63 STAGE 3: DUE DILIGENCE.....................................................................................................66 READ FIRST.............................................................................................................................66 SCOPE 67 PRINCIPLES 67 TARGET PER COUNTRY PER YEAR............................................................................................68 FILES AND FOLDERS 68 GENDER EQUALITY BENCHMARKING FRAMEWORKS 68 TOOLS.....................................................................................................................................70 ACTIVITIES 71 STEP 1: Prepare for Formal Due Diligence 71 STEP 2: Review Gathered Documentation.........................................................................75 STEP 3: Conduct Management Interviews 77 STEP 4: Prepare the First 180-Days Project Plan & Statement of Work 79 STEP 5: Prepare Final Confidential Information Memorandum (Final CIM).........................80 STEP 6: Obtain Final IIC & IC Approval..............................................................................81 STAGE 4: DEAL CLOSING......................................................................................................83 READ FIRST.............................................................................................................................83 SCOPE OF STAGE 84 PRINCIPLES 84 FILES AND FOLDERS.................................................................................................................84 ACTIVITIES: SAMPLE CLOSING CHECKLIST..................................................................................84 STAGE 5: PORTFOLIO VALUE CREATION............................................................................86 READ FIRST.............................................................................................................................86 PRINCIPLES 87 SCOPE 90 TARGETS.................................................................................................................................90 TOOLS.....................................................................................................................................90 Project Management Tools 90 Corporate Governance Tools...........................................................................................92
4 SG2X PLAYBOOK FUND MANAGEMENT SOP | Finance & Accounting Tools 94 Human Resource Tools....................................................................................................97 Marketing & Sales Tools 99 Portfolio Company Monitoring & Evaluation Tools 101 ACTIVITIES............................................................................................................................103 STEP 1: Onboard & Build 103 STEP 2: Operate 123 STEP 3: Transfer...............................................................................................................125 STAGE 6: MONITOR & EVALUATE 127 READ FIRST 127 SCOPE OF STAGE...................................................................................................................131 PRINCIPLES 132 TARGET 134 FILES AND FOLDERS...............................................................................................................134 RECOMMENDED TRAININGS.....................................................................................................134 TOOLS 134 KEY ROLES & RESPONSIBILITIES 137 ACTIVITIES.............................................................................................................................138 STEP 1: Kick Off Financial Reporting Process with the IM Team 138 STEP 2: Collect Data & Management Commentary from Portfolio Companies 139 STEP 3: Collect IRIS+ Impact Data from Portfolio Companies..........................................140 STEP 4: Update Portfolio Company Dashboard & Conduct Financial Data and Commentary Analysis 146 STEP 5: Draft External Investor Reports...........................................................................149 STEP 6: Finalize & Send External Investor Reports 150 STEP 7: Make Decision to Hold or Exit Investment 151
4. Use it as a compliance tool to ensure [INV./FUND MANAGER NAME] is working in accordance with the regulatory rules of [DOMICILE OF FUND] and of the countries in which the firm works.
2. Use it when taking your first five to ten companies through the stages of the investment process until you become familiar with the terminology, steps, tools and standards.
2. All changes must first be approved by the SIM or a higher-level decision maker.
3. Use it as a checklist to ensure nothing was missed. Each stage, activity and step should be completed for every deal.
3. The legal team, led by the General Counsel, is responsible for ensuring this document complies with regulatory rules.
This standard operating procedure (SOP) or “playbook” is a tool to be used by all members of the Asset Management team to ensure [INV./FUND MANAGER NAME] uses a systematic approach to investing in SMEs and does not miss anything important that prevents us from making good investment decisions. This SOP was created because there are a number of tools, principles, standards and processes that must be used and followed before the fund invests in a company. This SOP pulls all of these into one master document.
INSTRUCTIONSOVERVIEW
PURPOSE OF THIS DOCUMENT
1. The Senior Investment Manager (SIM) is the owner of this document and accountable for ensuring it is being implemented by members of the Asset Management Division.
1. Read this when joining and onboarding to [INV./FUND MANAGER NAME].
5 SG2X PLAYBOOK FUND MANAGEMENT SOP | SG2X PLAYBOOK – FUND MANAGEMENT SOP DELIVERABLE
HOW TO USE THIS DOCUMENT
The primary goal of this SOP is to drive an efficient, quality and consistent pipeline process through to closing an investment. The SOP also ensures that [INV./FUND MANAGER NAME] is complying with all applicable regulatory requirements in [DOMICILE OF FUND] and locally in the countries in which the fund invests (i.e., ensuring we implement the books and records requirements in [DOMICILE OF FUND], investment committee (IC) approval processes, etc.).
GOVERNING INFORMATION ABOUT THIS DOCUMENT
6. Use this document to suggest upgrades to the process to make it measurably better and more efficient.
5. Use it to find the correct tools – all the tools in this SOP are the latest and most accurate versions. Do not use other tools, especially those marked as “archive” or located in an archive folder.
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6. This document is not static – it should be updated regularly and reviewed no less than annually by the SIM.
5. All members of Asset Management (AM) Division and supporting divisions are responsible for regularly refreshing themselves on the IM Playbook and making suggestions to improve the tools and processes.
4. The SIM and the COO are responsible for training and ensuring compliance with this SOP.
7 SG2X PLAYBOOK FUND MANAGEMENT SOP | QUICK REFERENCE GUIDE I
The country is the main unit of operations for the investment work at [INV./FUND MANAGER NAME]. Each country has three positions. The Relationship Manager (RM), who builds the sourcing network, finds deals, and manages the relationship and project management activities of the deal through the lifecycle of the investment. The Local Legal (LL) counsel who may be full-time or hired on a contractual basis at the firm. The LL reports to the General Counsel (GC) and verifies the legality of an investment and supports the entire closing process. They also provide ongoing legal consulting work to the portfolio. The Portfolio Manager (PM) is responsible for the monitoring and evaluation of the portfolio companies and for supporting the technical aspects of the pre- and post-investment process, in areas of financial, commercial and of
THE COUNTRY TEAM
MangementAssetTeam Director
NVESTMENT MANAGEMENT ORGANIZATIONAL STRUCTURE & DIVISIONS
ManagementAsset CountryLocalRelationship1ManagerLawyerPortfolioManager CountryLocalRelationship2ManagerLawyerPortfolioManager CountryInternalLocalRelationship3ManagerLawyerPortfolioManagerInvestmentCommittee CounselGeneral InvestmentExternalCommitteLegal Team ValueTeamCreation
This section outlines common divisions in an international fund management company and their typical purpose and responsibilities. A typical investment practice is organized as a functionally matrixed organization, with the verticals of the organizational chart being the country(ies) in which the fund operates and/or invests, and the horizontals of the organizational chart being the various teams supporting the overall fund management function. The below is a sample organizational chart, the suggested roles for which are described in detail below:
Responsibilities: ● Finding, investing in, growing and selling assets.
ASSET MANAGEMENT (AM) TEAM Asset management (AM) is responsible for finding, investing, growing and selling assets. AM must implement the investment strategy outlined in [FUND NAME]’s private placement memorandum (PPM) and comply with rules and regulations for [INV./FUND MANAGER NAME] and the countries in which the firm invests. AM is led by the Director of Asset Management (Dir. AM), who oversees the two divisions: Investment Management and the Shared Growth Services (SGS), which work across each country.
SG2X PLAYBOOK FUND MANAGEMENT SOP | tax due diligence, among other work assigned to them by the fund’s Value Creation (which can also be referred to as the “Shared Growth Services” or “SGS”), Legal or Investment Management (IM) teams.
● Leading the investment management and SGS teams.
Responsibilities:
Goals:
● Accomplishment of the impact targets as outlined in [FUND NAME]’s PPM.
● To build and strengthen [INV./FUND MANAGER NAME]’s brand in the country with key stakeholders.
● Ensuring [INV./FUND MANAGER NAME] is compliant with laws and regulations.
● To manage the portfolio and local relationships.
● Adhering to this SOP.
● To source the best deals.
● Building and managing the sourcing network. ● Sourcing prospects. ● Bringing companies through the entire investment process.
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Goals: ● Achievement of the target gross and net IRRs for investors.
9 SG2X PLAYBOOK FUND MANAGEMENT SOP |
A fund manager’s legal team is responsible for evaluating whether a deal is legally permitted under the governing rules of the country and the investment firm. Legal also leads the investment structuring design, regulatory compliance and investment closing activities.
● Approving the final terms. ● Designing the legal agreements. ● Leading the closing. ● Executing legal agreements.
● Reporting to the shareholders, committees and boards.
INVESTMENT MANAGEMENT (IM) TEAM
● Supporting attraction of capital to [FUND NAME].
A fund manager’s investment management (IM) team is responsible for sourcing, research, analysis, due diligence (in partnership with the Shared Growth Services team; see section below), monitoring and evaluation, distributions and exits.
● Designing the structure and terms.
● Managing external stakeholders. ● Implementing the PPM.
● To efficiently evaluate the legality of an investment, ensure the firm and the investment are compliant, and to develop legal agreements.
Goals:
● Overseeing distributions. ● Ensuring [INV./FUND MANAGER NAME] is compliant with all rules and regulations.
LEGAL TEAM
Goals:
Responsibilities: ● Completing the first legal screen.
● Overseeing distributions to investors.
● Monitoring and evaluating the individual investments and the portfolio.
Responsibilities:
● Overseeing the sale of portfolio companies.
SHARED GROWTH SERVICES (SGS) TEAM
● To find, evaluate, invest in, grow, monitor and generate returns from companies in line with the fund’s investment strategy and legal agreements.
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Throughout this document, we will use the word “gender-smart” to describe the ideal future state of SMEs. A gender-smart SME implements the SG2X Playbook and is run by a gender-balanced management team that adopts gender-sensitive policies, practices and services that empower women as entrepreneurs, leaders, employees and consumers, ultimately leading to genderresponsive SME portfolios and economies. Please see the 2X Criteria for industry-accepted indicators and definitions.
● Designing portfolio strategies and building clusters or platform strategies and companies.
● Supporting the country team with tools and resources to efficiently: a. Source deals. b. Complete deal analysis. c. Negotiate term sheets. d. Conduct due diligence – financial, tax, technical, commercial, legal, management. e. Close the investment.
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● Assisting portfolio companies in sourcing external funding, as needed.
● Communicating with investors on company performance.
We recommend fund managers establish a value creation team, also known as the “Shared Growth Services” (SGS) team. The SGS team is “shared” because the costs of the team cannot be borne by any one SME. The team should have experienced executives that have the capacity to work across multiple SMEs that operate in a variety of sectors. The SGS team has a COO, CFO and a Chief Marketing and Sales Officer (CMSO). The SGS COO leads the SGS team and acts as the portfolio company’s COO/CEO during the first 24months of the investment as the local, gender-balanced executive team is trained and apprenticed. The SGS COO oversees implementation of the post-investment First 180-Day Project Plan and the development of the QUICK REFERENCE GUIDE: “GENDER-SMART” DEFINITION
SG2X PLAYBOOK FUND MANAGEMENT SOP
● Build gender-smart management systems within the first six to 12 months.
● Successfully transition the management of the company to the gender-balanced executive team by Month 36.
● Hit $[INV./FUND MANAGER’S TARGET THRESHOLD] EBITDA by Month 60.
● Hire, train and apprentice a gender-balanced executive team to lead the company.
● Prepare the company for sale by Month 60.
● Developing the gender-balanced middle management function via training and apprenticeship. ● Evaluating middle management.
● Operate those systems from six to 24 months in order to improve them.
tools, SOPs and trainings for the operations and administration functions that all portfolio companies are required to implement. The SGS CFO oversees finance and accounting and leads the finance training sections of The Gender-Smart Exec’s Program. The SGS CMSO oversees marketing and sales and the development of the tools, SOPs and trainings for marketing and sales functions that all companies are required to implement. We recommend three experienced executives for the SGS roles, and one to two local managers to support the team. Local managers help with communications and liaising with staff, suppliers and local stakeholders. They should be fluent in English, hard-working and coachable. They will either move into group roles on the SGS team or into operating/portfolio companies.
● Transferring management to the local, gender-balanced team.
Goals: ● Increase the value of the portfolio company.
● Leading operational due diligence, and supporting financial, tax and commercial due diligence. ● Overseeing growth planning. ● Building management systems via implementation of the Playbook.
11 SG2X PLAYBOOK FUND MANAGEMENT SOP |
Responsibilities:
ROLE RESPONSIBILITIES
12 SG2X PLAYBOOK FUND MANAGEMENT SOP |
C
I
● Overseeing operational projects as needed.
● Supporting the sale or scaling of the company.
External Investment Committee (External IC) An external committee that reviews and approves investments on behalf of [FUND NAME]’s investors. Accountable for ensuring each deal complies with [FUND NAME]’s investment criteria.
● Training [INV./FUND MANAGER NAME] and other stakeholders on best practices and lessons learned.
Chief Investment Officer (CIO) Executive Approving all investments and signing on disbursement documents. General Counsel (GC) or Local Legal (LL) Executive Preparing, reviewing and approving all legal documents (those [INV./FUND MANAGER NAME] signs); and reviewing and approving any deal before it comes into the pipeline.
● Providing reports to the IM and AM teams.
● Supporting growth and development at the Board level.
OMMITTEE ROLES & RESPONSIBILITIES
NDIVIDUAL ROLES & RESPONSIBILITIES ROLE TEAM RESPONSIBILITIES
Member Advisory Committee (MAC) An external committee made up of members of [FUND NAME] that reviews conflicts of interest and reviews the overall strategy of [FUND NAME].
Director of Asset Management (Dir. AM) AM Overseeing the IM team and is accountable to the CEO and [FUND NAME] IC for implementing this SOP, designing the ideal
Internal Investment Committee (IIC) The [INV./FUND MANAGER NAME] IIC is made up of the Managing Partners, General Counsel and SGS COO. Reviews deals and votes to advance deals through the various stages of the investment process.
SG2X PLAYBOOK FUND MANAGEMENT SOP | ROLE TEAM RESPONSIBILITIES
Shared Growth Services CMSO (SGS CMSO) SGS Supporting commercial due diligence, implementing the SG2X Playbook in each portfolio company, leading the SGS Sales and Marketing team; running the Growth Mastery Program.
Shared Growth Services CFO (SGS CFO) SGS Supporting financial due diligence, implementing the SG2X Playbook in each portfolio company, leading the SGS Finance and Accounting team; running the CFO100 Program.
Investment Analyst (Analyst) IM Preparing all financial and research related content, documents, and material on a pipeline or portfolio company.
Portfolio Manager IM Managing the monitoring and evaluation work on the portfolio company.
Relationship Manager (RM) IM Finding new companies; leading companies through the investment lifecycle; being the main point of contact between the company promoter and [INV./FUND MANAGER NAME]; managing a good working relationship between [INV./FUND MANAGER NAME] and the company.
Senior Investment Manager (SIM) IM Accountable for training new members, managing internal meetings, implementing this SOP, and managing the overall flow of companies through investment lifecycle.
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portfolio of platform companies. Shared Growth Services COO (SGS COO) SGS Leading the SGS team. Supporting operational due diligence, implementing the SG2X Playbook in each portfolio company, leading the SGS team; supporting The Gender-Smart Exec’s Program.
14 SG2X PLAYBOOK FUND MANAGEMENT SOP | PRE-INVESTMENT MILESTONES SEQUENTIAL OUTPUTS TIMELINE FROM THE DATE THE COMPANY IS ADDED TO THE PIPELINE 1. First Interview Form (FIF) completed Week 1 2. Legal approves prospect Week 1 3. IM Team approves prospect to sourced Week 2 4. Sourced company attends PE Investment Seminar Week 3 to 5 5. Deal Screening Form (DSF) completed Week 4 6. IIC approves to active pipeline Week 4 7. Management starts The Gender-Smart Exec’s Program Week 5 to 8 8. LOI signed Week 5 9. Analysis (commercial due diligence light) completed Week 7 10. e-CIM (business case) completed Week 7 11. Draft Term Sheet approved by IIC Week 8 12. Term sheet signed by pipeline company Week 10 13. [FUND NAME] IC approves for diligence Week 10 14. Term Sheet fully executed by [INV./FUND MANAGER NAME] Week 11 15. Formal due diligence completed Week 13 16. Final CIM completed Week 14 17. Gender-Smart First 180-Day Project Plan developed by SGS Week 14 18. Information packet sent to External IC Week 14 19. Final [FUND NAME] IC approval to close Week 15
15 SG2X PLAYBOOK FUND MANAGEMENT SOP | SEQUENTIAL OUTPUTS TIMELINE FROM THE DATE THE COMPANY IS ADDED TO THE PIPELINE 20. Management completes The Gender-Smart Exec’s Program Week 15 to 18 21. Legal agreements executed Week 17 22.Deal closed Week 18 – the full process takes 4.5 months POST-INVESTMENT MILESTONES SEQUENTIAL OUTPUTS TIMELINE FROM CLOSING 1. Gender-Smart First 180-Days Project Plan finalized and approved by [FUND NAME] IC (Note to Reader: This is when gender-smart actions are identified and incorporated into the company’s investment / growth plan) 4 weeks prior to close 2. Kickoff meeting with management to review GenderSmart First 180-Days Project Plan Week 1 3. SGS management team and departments formalized: Signs updated Position Agreements (PAs) with all management team; updates corporate documents Week 1 4. All Hands meeting held with staff to introduce SGS team Week 2 5. Gender-Smart First 180-Days Project Plan implementation completed Month 6 6. Management team mid-year review completed, CXO Training completed, and apprenticeship started Month 8 7. Revised financial model, growth plan, Year 2 AMP and budget approved by IIC Month 13
16 SG2X PLAYBOOK FUND MANAGEMENT SOP | SEQUENTIAL OUTPUTS TIMELINE FROM CLOSING 8. Annual management team evaluations completed; gender-equal compensation plans finalized Month 13 9. Tranche 2 approved by [FUND NAME] IC Month 13 to 24 10. Tranche 2 closed Year 2 11. Executive team completes apprenticeship Year 2 12. IIC approves SGS transition plan to gender-balanced executive team Year 2.5 13. Tranche 3 approved by [FUND NAME] IC Year 3 14. Tranche 3 closed Year 3 15. Full transition of management to local, genderbalanced team Month 36, End of Year 3 16. Monitoring and evaluation (including gender-smart actions per the First 180-Days Project plan) Ongoing; Starts at closing and quarterly 17. Hold or exit Discussions start in Year 4 MEETING BATTLE RHYTHM MEETING WHEN FREQUENCY OVERVIEW AND KEY POINTS Country Level MeetingsPipeline WednesdayEvery Weekly Each country meets weekly to review new prospects that have come into the top of the pipeline. The FIF is completed prior to this meeting. Here, the “fit” with [FUND NAME]’s investment strategy and existing platforms / clusters that the fund is building is the important discussion to have. The country team votes on a prospect at the country level, which is then promoted to the regional team meeting. Regional Pipeline Meeting MondayEvery Weekly Each Monday the regional team meets to review the new prospective
MeetingManagementAsset
Every ayMond Weekly Reviewing active pipeline projects; portfolio M&E, and SGS projects and other projects (e.g., Investor Deal Call Theupdates).keystep
here is to have the FIFs linked in the running notes – heading into the creation of a DSF – so that SGS and other members can review and flag and issues and/or provide thoughts for the IM team to explore during the drafting of a DSF.
Monthly IIC Meeting
Every Friday Weekly When Asset Management closes out the week and updates the running meeting notes file. Notes that are underlined are tasks for the week and status of completion reports are provided on those. The tasks for the upcoming week are outlined.
ThursdayFirst Monthly When the IIC meets to review new DSFs and vote on promoting deals to the active pipeline. Updates on the current active pipeline deals are also given and any term sheets are reviewed and approved. The output of this meeting feeds into the agenda of the upcoming Investor Deal Call’s agenda (Note to Reader: applicable only if an Investor Deal Call is hosted by the investment firm / fund for
17 SG2X PLAYBOOK FUND MANAGEMENT SOP | MEETING WHEN FREQUENCY OVERVIEW AND KEY POINTS (sourced at country level) deals coming from the country teams. The FIFs are reviewed by the regional team and a vote is made. Again, the fit with the firm’s investment strategy and portfolio is discussed, along with the merits of the deal. The other companies – pre-active pipeline – are also discussed and actions and next steps are outlined.
MeetingWeekManagementAssetinReview
Quarterly [FUND NAME] External IC Meeting N/A Quarterly or as needed When the [FUND NAME] External IC meets to approve STAGE 1 (pre[INV./FUND MANAGER NAME] execution of the term sheet) and final closing of deals.
Quarterly [FUND NAME] External MAC Meeting N/A Quarterly or as needed When the [FUND NAME] External MAC meets to review conflicts of interest of any deals and coinvestments, the [FUND NAME] annual budget and other matters.
18 SG2X PLAYBOOK FUND MANAGEMENT SOP |
current and/or prospective investors).
InvestorQuarterlyMonthly/Deal Call Meeting WednesdayMiddle QuarterlyMonthly/ When the fund’s current and/or prospective investors meet to hear updates provided by [INV./FUND MANAGER NAME] on deals promoted to the active pipeline and current deals in the active pipeline. Short updates on each country and the portfolio are also provided (Note to Reader: applicable only if an Investor Deal Call is hosted by the investment firm / fund for current and/or prospective investors).
PortfolioQuarterly Review (PRM) Meeting withinStarting one day quarter-endof Quarterly When the IIC meets to review the portfolio. The IM M&E team prepares the dashboards and draft investor reports (IRs) prior to the meeting. The main output of the meetings (PRM0, PRM1 and PRM2) is a finalized IR for distribution to investors.
MEETING WHEN FREQUENCY OVERVIEW AND KEY POINTS
● “Pitch” Prospect to IM Team: The RM pitches the deal to the IM team during the weekly, country-level pipeline meeting. Both Legal and the IM team must approve a deal to OnboardTrainingand Gender-Smart Exec’s Program, GenderSmart Networking and Sourcing Trainings Attract Prospects Using Gender-Smart TA and Unbiased Sourcing Techniques Complete First Interview Form (FIF) Using gender metrics from 2X Criteria and collecting gender lens information ObtainApprovalLegal Pitch Deal Internally to IM Team Include company’s gender performance Legal ApprovalIMand Complete DSF Using gender metrics from 2X criteria and collected gender and ESG information
● Onboard and Train: Learn the investment process and standards. This SOP is the main tool used for onboarding and training of the IM, AM or SGS team.
● Complete First Interview Form (FIF): Screening is moving a deal from prospect status to sourced status. It involves using the FIF to first evaluate if the company is legally open for investment, and if it meets the basic investment criteria. The RM must pitch the company to the IM team and, if passed, completes the Deal Screening Form (DSF) and presents the deal to the internal investment committee (IIC). Regular communicating with the company during this time is very important in order to manage expectations and create a trustworthy and transparent brand.
This SOP is organized into six STAGES, which are outlined in detail below.
Present Deal to IIC for ActiveApprovalPipeline Include overview of genderparametersequality ApprovedforActivePipeline
● Obtain Legal Approval: The RM emails the FIF to the legal team (country or regional counsel) to obtain legal approval for the deal.
STAGE 1 SUMMARY: PIPELINE MANAGEMENT
● Attract Prospects: Prospecting begins with having a strong sourcing network. These are relationships (i.e., with professional organizations and individuals that are in regular contact with potential investment opportunities) that are cultivated through regular touchpoints and by bringing value to the interaction. Once established, the networking, marketing and public relations work helps attract investments into the pipeline. Using the investment criteria is key to efficiently rule out companies that might not make it through the unbiased screening and analysis process. Note to Reader: souring networks can sometimes exacerbate traditional gender bias in deal sourcing; the fund manager needs to make sure their sourcing networks are gender-smart and ensure diversity in sourcing and non-biased access to the universe of prospects.
19 SG2X PLAYBOOK FUND MANAGEMENT SOP | STAGES SUMMARIES
● Sign Letter of Intent (LOI): To ensure the promoters understand the non-negotiable requirements of receiving an investment from [INV./FUND MANAGER NAME].
20 SG2X PLAYBOOK FUND MANAGEMENT SOP | advance to the next stages – discussing during the weekly, regional pipeline meeting and completing a DSF.
● Run The Gender-Smart Exec’s Program Training: To begin training management on the management systems that will be built in the Value Creation Stage.
● Negotiate and Sign Term Sheet (TS): If no major “deal killers” presented themselves during the due diligence light step, then the team can advance the deal to term sheet
● Present Deal to IIC For Active Pipeline Approval: Once a company moves into the active pipeline (A-Pipe), the firm invests time and resources to evaluate it for an investment. The IIC is responsible for deciding whether a deal is advanced to the A-Pipe. The investment management team must pitch the deal to the IIC and provide evidence that the deal meets the investment criteria and is a strategic deal for the portfolio.
STAGE 2 SUMMARY: ACTIVE PIPELINE MANAGEMENT
Run The Gender-Smart Exec’s Program Training
Emphasize the importance of employing gender-smart policies and practices Create Active Pipeline Project Plan and Setup Folders Ensure all ESG and genderfocused activities are completed and supporting documents gathered Sign Letter of Intent (LOI) Conduct CDD and prepare the financial model, draft gender-smart terms and eCIM Provide detailed overview of gender equality and ESG narrative Negotiate & Sign GenderSmart Term Sheet (TS) Ensure terms are not discriminatory or biased in nature Obtain First External IC Approval
● Conduct Commercial Due Diligence (CDD) Light and Prepare the Financial Model, Draft Terms and e-CIM: To move deals efficiently and effectively through the analysis stage, resulting in an executive confidential information memorandum (e-CIM).
ApprovedforDueDiligence
● Create Active Pipeline Project Plan and Setup Folders: To ensure [INV./FUND MANAGER NAME] is able to manage expectations with investors and the promoters; and to ensure every team member is clear about their assignments and timeline to complete key tasks and deliverables.
● Complete Deal Screening Form (DSF): The RM holds successive meetings with the company to complete the DSF. This should take no longer than one week. The DSF is presented to the IIC.
● Conduct Management Interviews: The SGS team and RM meet with management and employees to further understand the business and to inform the growth plan.
● Prepare The First 180-Days SOW and Project Plan: SGS and RM update the 180-day project plan based on DD findings.
Conduct Further Market Research & CommercialEnhanceDD ConductInterviewsManagement Use a interviewgender-smartguide;ensureequalparticipationofgenders
ApprovedforClose
● Prepare for Due Diligence: Review what has been done to date, update the DD checklist, assemble the team and develop the schedule.
Prepare for Due Diligence Use DD Request List and Checklist, which gathers documents that speaks to the state of gender equality and ESG at the company ReviewDocumentsGathered Review Operational and HR documentation; Complete Gender-Smart Assessment using SEAF GES
STAGE 3 SUMMARY: DUE DILIGENCE
Prepare Gender-Smart First 180-Days SOW and Project Plan Include corrective actions that will result in a higher gender-smart score Prepare Final CIM Using gender metrics from 2X criteria and collected gender and informationESG Obtain Final External IC Approval
● Obtain First External IC and MAC Approvals: The Asset Management and Legal teams need to schedule and send documents (i.e., e-CIM, term sheet and financial model) to the [FUND NAME]’s external IC and MAC committees for review and vote.
● Review Gathered Documents: Once key DD documents have been gathered from the company, review them for any red flags or issues (e.g., lawsuits, harassment, genderbased violence, etc.). Finance and legal teams should review audit reports, legal and corporate documents, finance records and accounts (assets and liabilities), HR policies, contracts, etc.
● Conduct Further Market Research & Enhance Commercial DD: Enhance the commercial DD that has been completed to date with a deeper look into the financial assumptions. Confirm or update those by completing primary market research.
21 SG2X PLAYBOOK FUND MANAGEMENT SOP | negotiations; using [INV./FUND MANAGER NAME]’s standard term sheet templates is key here to limit the legal complexity of the deal.
● Prepare Final CIM: Pulling the information found during due diligence and building upon the e-CIM drafted during light due diligence to write the final CIM that will be used by the IIC and [FUND NAME] IC to vote on the investment.
● Obtain Final External IC and MAC Approval: Obtain final external IC and MAC approval for the investment. 4 SUMMARY: DEAL CLOSING
22 SG2X PLAYBOOK FUND MANAGEMENT SOP |
STAGE 5 SUMMARY: PORTFOLIO VALUE CREATION
● Operate: For a period of two years (Investment closing to end of Year 2), the SGS team will be accountable to [FUND NAME] for building and operating the SG2X management systems. The SGS team will also work with management to take them through an extensive training program, [INV./FUND MANAGER NAME]’s internal training system. The combination of the classroom training, on the job oversight, coaching and apprenticeship offered to the local team by the SGS team is a key part of the [FUND NAME] value addition to portfolio companies, resulting in gender-smart SMEs run by gender-balanced management teams.
Onboard and Build Implement Gender-Smart First 180-Days Project Plan Operate Demonstrate how a well-run, gender-smart company operates; Implement gendersmart tools Transfer Company run by genderbalanced management team Hold or Exit
STAGE
● Prepare Draft Legal Agreements: Done in parallel with formal DD activities. Preparing the updated corporate agreements, share purchase agreement and other legal documents required to close the investment.
● Implement Closing Checklist: Sign updated corporate documents properly admitting [INV./FUND MANAGER NAME] managed investment vehicles as a shareholder to the company and wire the agreed upon investment tranche to the business.
● Onboard and Build: The SGS team will initially work alongside the team, as their managers, to build the proper systems outlined in the SG2X playbook. These include the reporting, finance and accounting, gender-sensitive HR policies and procedures, management, operating, sales and marketing systems that are standardized to a large degree across all companies and promote women’s economic empowerment.
Prepare for AgreementsLegal ImplementChecklistClosing ClosedDeal
● Transfer: Once the local team has been through a full two years of working under and alongside the SGS team and completing the extensive training program, they will begin to own and manage the key roles of the company, and by the end of Year 3 they will be evaluated. If they pass evaluation, the local team will formally be promoted to their role on the executive team. At this point, [INV./FUND MANAGER NAME] will assume a M&E role and work on distributions of dividends and exits.
Kick Off Internal M&E Process (Quarterly) Collect Financial Data & Commentary from Portfolio Collect 2X Criteria IRIS+ Impact Data from Portfolio Use the 2X Criteria harmonized IRIS+ metrics to assess performancecompany’sagainstagreedupongendermetrics Enter Data into Portfolio Company Dashboards; Conduct Evaluation and Analysis Conduct comprehensive analysis of financial, gender, and impact performance Draft ExternalReportsInvestor Include final evaluation of financial, gender, and impact performance; Showcase SME’s stories of impact Finalize and Send External Reports Hold or Exit
● Collect Financial Data: Collect financial operational data (i.e., accurate and final financial statements), as well as management commentary that follows the provided template from the fund’s portfolio companies.
STAGE 6 SUMMARY: MONITOR & EVALUATE
● Collect Impact Data: Collect the agreed upon impact data from portfolio companies; this might take the form of the 2X Criteria and/or harmonized GIIN IRIS+ metrics or other well-known, industry standard metrics that evaluate the positive (or negative) impact the portfolio company and thereby investment is generating. Note to Reader: we recommend Fund Managers add a specific gender-lens for this activity. The 2X Criteria have been harmonized and integrated into the GIIN IRIS+ metrics (see link above). If other industry standards are used, they should be complemented with the 2X Criteria and underlying indicators.
● Kick Off Internal M&E Process: Kick off the financial and impact reporting internal process with IM team using the provided templates, tools and resources to complete external reporting by the fund’s required deadlines (e.g., 30 days from quarter-end).
23 SG2X PLAYBOOK FUND MANAGEMENT SOP |
● Update Portfolio Company Dashboards & Evaluate Results: Using the provided tool, the IM team is expected to update the internally maintained portfolio company dashboard to create standardized financial statements across the fund’s portfolio (this can be used in
HIGH-LEVEL SAMPLE TARGETS
● Finalize and Send External Investor Reports: Once drafted and reviewed the IM team, the external investor reports will be copyedited by a member of the fund’s team; preferably an individual who has not worked on the reports and has native-level proficiency of English.
25% gross IRR.
Pipeline management efficiency sample targets across the fund (Note to Reader: These targets are to be tailored to your firm’s / fund’s investment strategy; the below targets are based on a fund size of $50M investing across three countries):
● Draft External Investor Reports: Using the provided template, the IM team will draft the external investor report. While the provided tool creates a report for each portfolio company, this can be revised to present the portfolio results at the fund level.
● New-NDA Sourced: A sourced company that has been sent an NDA but has not yet signed.
24
● EBITDA: Earnings before interest, taxes, depreciation and amortization. A proxy for cash flow and often used to calculate the company’s value.
SOP DEFINITIONS
36 months to fully transition leadership from SGS to gender-balanced executive team.
● Cluster: A group of SMEs that have the potential to be pulled under a platform company.
SG2X PLAYBOOK FUND MANAGEMENT SOP | lieu of an ERP software solution). Once entered into the tool, the IM team can then conduct its evaluation and analysis on the portfolio’s results and draft its own valueadded commentary/narration for the external investor report.
2.5% conversion rate – top of funnel to closing (RENEW suggests a 2.5% conversion rate). Eight to 10 deals closed across the region (three countries), or three to five deals closed per year, per country.
Four to five months from FIF to deal closing.
● Decide to Hold or Exit (Year 4+): Starting Year 4, the AM team will decide the best course of action regarding the fund’s portfolio – either holding or exiting its position. As part of this step, the team will focus on collecting and distributing dividends or capital gains from sale of shares, or liquidation proceeds to shareholders.
● Prospect: A prospect is a company that has been identified either from research, a referral from a network partner, or has attended an investment seminar and is entered into the pipeline, but the team has not yet formally had a first discussion with the company.
25 SG2X PLAYBOOK FUND MANAGEMENT SOP |
● Resource Providers (RPs): An individual or organization that helps SMEs access resources – technical or financial. This could be brokers, associations, banks, professional firms, etc.
● “New” Prospect: A new prospect at the regional level, but it has been sourced by the country team.
● Screened company: A screened company is a company on which a full DSF has been completed and it has been presented to the IIC.
● Promoter: The owners of the company.
● SME: A small and medium enterprise with EBITDA of less than $2M.
● Platform Company: An initial company invested by [FUND NAME] in a sector that can acquire other SMEs in the sector, or an umbrella company setup to consolidate portfolio SMEs in a sector, to maximize the collective asset value of the SMEs through shared management services and enhanced value creation for customers.
● Sourced Company: A sourced company has been interviewed by a team member and a first interview form (FIF) has been completed and saved in company’s shared drive; the company has been presented to the country team during the weekly pipeline meeting.
● Post-NDA Heading to DSF Sourced: A sourced company for which the IM team has obtained a signed NDA and for which they are working to build a DSF.
Objective: Source and screen a high volume of deals in an efficient and effective manner; find the best to advance to IIC Targets: Source 200 companies prospected (FIFs) per year, 20 companies advanced to A-pipe per year Indicators of Success: # of FIFs per week, % of prospects advanced to sourced, # of DSFs per month Scope: All activities before the first IIC vote to promote to A-pipe Tools: Investment criteria, NDA, FIF, DSF, country pipeline Time commitment: Average 10 hours per week per team member Main Activities: 1) Prospecting: Networking, investment trainings, oneon-one meetings with companies, communications with company. 2) Screening: desk research and forms, internal screening meetings, prep for IIC Accountable: SIM and RM Responsible: RM and all staff Best Practice: Be very strong at selling the firm’s value proposition. Know and use the investment criteria. Screen out deals as early as possible
Note to Reader: RENEW has found that the success of sourcing and screening SMEs in Africa is largely a function of the quality of our network, and how educated promoters are about investing. We have found that many stakeholders (i.e., resource partners whose clients include SMEs) and entrepreneurs do not understand how private investing works, which creates issues and delays for RENEW as we try to advance companies through the investment process. By building a network of diverse, local stakeholders that refer companies to RENEW, and by running informative and engaging trainings for stakeholders and entrepreneurs (e.g., on the basics of the private investment process), RENEW sees a significant improvement in the volume and quality of companies coming into the top of the pipeline funnel, and in the pace at which companies move through the investment process. It is important that sourcing networks are unbiased and provide a wide array of diverse businesses to ensure the team does not become stuck in a biased sourcing “bubble”.
All team members should be thoroughly trained on the pipeline management tools: The Investment Criteria, the Country Pipeline, the First Interview Form (FIF) and the Deal Screening Form (DSF) to source and screen companies effectively and efficiently. Soft skills training on communicating and selling [INV./FUND MANAGER NAME]’s value proposition to stakeholders and company owners (promoters) should also be done.
QUICK REFERENCE GUIDE: PIPELINE MANAGEMENT
Once companies start to come into the pipeline, the best team members are skilled at the art and science of pipeline management. The “art” of sourcing is relationship building and networking. The best sourcing team members are those that are excellent at public speaking,
26 SG2X PLAYBOOK FUND MANAGEMENT SOP | STAGE 1: PIPELINE MANAGEMENT READ FIRST Pipeline management is the start of the investment process and is therefore the most important steps to get right in order to optimize the investment process, as all later stage activities are positively or negatively impacted by the quality and quantity of the deal coming into the top of the pipeline funnel. Pipeline management begins with rigorous internal training for all members of the Asset Management team. The trainings should be when new team members join [INV./FUND MANAGER NAME], and regular, annual, required trainings for the team. The main training tool is this SOP. Each step should be reviewed, on a regular basis, by the team.
Before presenting a deal to the IIC, have a clear view on the long-term strategy for the deal: The FIF and the DSF help the RM think through not only whether the company meets [INV./FUND MANAGER NAME]’s investment criteria, but it also guides the RM to understand if the company helps achieve [INV./FUND MANAGER NAME]’s investment strategy. The [FUND NAME] investment strategy is [INSERT STRATEGY] achieving $ [TARGET USD VALUE] EBITDA in 60 months and being run by a gender-balanced executive team. When looking at a company, the RM needs to have a vision for the business – what it will look like in the future. Where it will fit into the current portfolio, or if it will become a company under which other SMEs will be acquired.
PRINCIPLES
27 SG2X PLAYBOOK FUND MANAGEMENT SOP | can field questions from stakeholders and SMEs about [INV./FUND MANAGER NAME]’s investment strategy and criteria with ease, and know how to build relationships with stakeholders and promoters. The “science” of sourcing is being disciplined in using the investment criteria and tools to manage a high volume of companies coming into the top of the pipeline funnel. The best sourcing team members also know how to use the criteria to quickly evaluate a deal, can gather key information on a company in one meeting, and know how to regularly work their pipeline management tools.
c) Is there untapped value in the assets?
Sourcing ends when a company is either a) approved by the [INV./FUND MANAGER NAME] Internal Investment Committee (IIC) to advance to the active pipeline or is b) not advanced. It is important for the firm’s reputation and brand to communicate regularly with companies to let them know the outcome of decisions. If it is a “no for now”, the relationship management should continue to encourage the owners and entrepreneurs, and the RM should find ways to add value to the company (e.g., connecting them to resources, recommending trainings, etc.). The company might grow to a point where they meet [INV./FUND MANAGER NAME]’s investment Finally,criteria. the relationship manager (RM), the team member that pitches the deal to the IM team and presents the deal to the IIC for active pipeline approval, needs to be able to articulate how the company aligns with the [INV./FUND MANAGER NAME]’s investment strategy and why they believe in the company. Their ability to pitch the deal, and their ability to objectively present the investment thesis to the IM team and IIC is key. The RM should explain to the promoter that this is their role – to be the champion for their company – and such needs to have access to timely information on the deal.
The following principles should be considered non-negotiable standards that must be adhered to during the pipeline management stage:
The goal is to get an IIC vote on the company in no more than one month from the time the RM met the company to fill out the FIF.
b) Can the SGS team integrate this SME with other portfolio companies to unlock more value in the portfolio?
a) What am I building with this company? Will it be a platform, or part of a cluster of SMEs under a platform?
28 SG2X PLAYBOOK FUND MANAGEMENT SOP |
TARGETS
Always add value to your prospects: Even if the ultimate decision is a “no for now”, be encouraging to companies and help them connect to other, more appropriate investors that might be interested in the deal. By always adding value to the community, [INV./FUND MANAGER NAME] will build a strong brand of transparency and trust, will help further build out the SME investing landscape and ecosystem with other firms, and will drive referrals. SCOPE All activities involved with setting up the sourcing network in a country, managing prospecting and screening deals through the first IIC meeting decision on whether to move a deal into the Active Pipeline Management (STAGE 2).
Note to Reader: Each fund manager has its own deal targets based on the size of the fund and overall objectives. Your investment firm / fund will need to develop these as they pertain to your overall strategy. To provide guidance in establishing these targets, we have outlined below recommendations based on a fund size of $50M that is investing in three countries.
Update the country pipeline tool weekly: A lot of effort is spent on finding prospects, but equal attention should be spent on following up with companies already in the pipeline. The pipeline is also used for reporting to other stakeholders [INV./FUND MANAGER NAME] works with, and to evaluate new marketing and training initiatives rolled out by [INV./FUND MANAGER NAME]. The SIM is accountable for making sure the country pipelines are updated every week. The SIM uses the pipeline to report the pipeline management KPIs to the Dir. AM and COO each month.
Successful SME investing starts at the top of the pipeline funnel with effective sourcing of a high volume of quality, new deals. A standard conversion rate for funds is 2.5%, and three to five investments per target country, per year. If a fund has a target of three countries, this means that 200 new deals must be sourced per year, per country, or an average of four new deals sourced per week.
d) Can the SGS team grow the SME faster and better with better management systems and a strong management team?
Maintain momentum on a deal: Deals that sit at certain stages of the pipeline or active pipeline management process for too long begin to lose their attractiveness. To avoid this, the team should be led by a very strong project manager, and the RM and SIM should both focus on adhering to the target timelines to complete steps in the process. Keeping a good flow of deal through the process also helps the team get better at each step.
Do not advance any deal to the IIC that does not meet [INV./FUND MANAGER NAME]’s investment criteria outlined in the FIF: The FIF has the [INV./FUND MANAGER NAME]’s investment criteria in the form and should always be completed prior to presenting a prospect to the IM team for consideration to advance into the pipeline. The SIM is accountable for ensuring the team is completing the FIF properly and FIFs are saved in the correct folders.
Sourcing A two-hour training on how to source (with an unbiased gender lens), includes the funnel, targets, best practices, and other information found in this document.
Note to Reader: RENEW recommends each fund manager develops or partners with a training provider to support staff growth and development in the following areas. Additional information is included in Step 0: Onboarding & Training below.
● 10 MOUs signed with network members by year one.
The funnel targets for pipeline management from sourced deals to closed deals is outlined below. Minimum pipeline and investment targets per country:
[INSERT RELEVANT
● 200 new prospects met.
TRAININGSUGGESTED DESCRIPTION
A two-hour training to teach how [INV./FUND MANAGER NAME] runs investment seminars. Members must perform a dry run with experienced trainers and attend three seminars as an observer before being allowed to train. (Note to Reader: This training is only suggested for investment firms / fund managers that have an inhouse training function.)
● 20 deals advanced to active pipeline.
29 SG2X PLAYBOOK FUND MANAGEMENT SOP |
Building a Network A two-hour training on how to network. Networking is used to build relationships with stakeholders that support sourcing. Stakeholders include banks, associations, government offices, professional firms, and individual agents.
● Five deals closed. ● 2.5% conversion rate. Other pipeline management targets include:
How TrainerTrains:MANAGER[INV./FUNDNAME]Trainthe
● 20 new companies attending per PE Investment Seminar. ILES AND FOLDERS FILE PATHWAYS]
F
● All network members met with and communicated to no less than two times per year.
TRAINING
● 4 PE Investment Seminars per country per year, or one per quarter (minimum).
● 100 FIFs – prospects pitched. ● 40 DSFs – prospects sourced.
To be completed over multiple meetings with the company once it has been “sourced” (over one week’s time). This must be completed before the sourced deal is presented to the IIC for a decision to advance to the active pipeline.
TOOLS
To be completed after the first meeting. Information should be gathered in one meeting, followed by a review from Legal and a review from the RM to determine that the company does not violate any of the negative screening rules of the firm. Must be completed for all companies to count towards sourcing targets and before being presented to the IM team to advance from “prospect” to “sourced” status.
FILE NAME LINK USE ManagementPipeline Tool Tool - Pipeline Management To track the pipeline in a country. It will be used most frequently by the respective country’s team. It tracks all of the fields we must collect on new companies and provides the project management tool for when a company is promoted to the active pipeline. The tool has instructions in the first tab. The Senior Investment Manager is accountable for ensuring this tool is being used by the team. All team members in a country are responsible for using the tool properly.
TRAININGSUGGESTED DESCRIPTION
Asset andTrainingManagementScheduleTracker
An annual training schedule and tracker for the Asset Management and Admin and Finance division to ensure the AM team is being trained.
First Interview Form (FIF) Tool - First Interview Form (FIF) and First Screening Form
30 SG2X PLAYBOOK FUND MANAGEMENT SOP |
The main tools are the FIF, DSF and country pipeline. The NDA and other communications tools are also provided in the table below.
Deal Screening Form (DSF) Tool - Deal Screening Form (DSF)
Deal CommunicationsSourcing
Deal Snapshot Tool - Deal Snapshot To be completed after the deal has been approved by the IIC to advance to the active pipeline to share with the fund investors and other potential co-investors.
31 SG2X PLAYBOOK FUND MANAGEMENT SOP | FILE NAME LINK USE
Primer on Private Equity for SMEs
Tool - PE Primer for SME To share with companies that want to learn about private equity (PE). This should always be given along with an invitation to attend the Investment Seminar training. Progress Report Tool - Email to Update Companies About Once a company has been approved by the IIC to the active pipeline, use this email
Tool - Template NDA To share with companies what [INV./FUND MANAGER NAME] has asked to gather information on. Note to Reader: This is a sample NDA template that has specific legal provisions that will need to be updated to the investment firm’s / fund manager’s investment strategy and target countries.
Investment Criteria Screen Tool - Investment Criteria Screen Already included in the FIF. This is one of the most important elements of the investment strategy. It should be read and internalized (members are able to share these without reading the script) before being allowed to source deals. The tool must be used to screen all companies prior to presenting them to the Investment Committee (IC). (Note to Reader: The investment criteria included in this tool are high-level and generic, but fairly standard; this tool should be tailored to your firm’s / fund’s investment strategy and criteria.)
AgreementNon-Disclosure(NDA)
Tool - Deal CommunicationsSourcing For outreach when communicating with a new company either by phone or by email. The talking points should be used for new outreach - i.e., they have not attended the Investment Seminar training, but you would like to contact them because you learned about them in the newspaper, or saw them while driving around, etc.
ACTIVITIES
STEP 0: ONBOARDING & TRAINING
Process: 1. All members read this SOP: a. This SOP is the main training tool for the Asset Management Unit and for members of the IM and SGS teams. b. A key tool that the team should spend time memorizing and internalizing is the [INV./FUND MANAGER NAME] - Investment Criteria.
● To have a regular process to upskill the team and to enhance this SOP.
FILE NAME LINK USE
One of the most important initial and recurring steps that an investment firm can do is to train its team on the tools, standards and systems that the firm uses to run its investment work. All team members need to have a deep understanding of the firm’s investment strategy to effectively engage network members and companies. All team members must be able to articulate and use the firm’s investment criteria to efficiently screen deals at the earliest stage possible. Team members need to be able to share the firm’s value proposition to prospects and promoters, use the supporting tools and follow the SOP to ensure critical analysis steps are not missed. Outcomes: ● To ensure all team members at [INV./FUND MANAGER NAME] have a deep and working knowledge of [INV./FUND MANAGER NAME]’s investment criteria, unique value proposition (UVP) and can clearly communicate with stakeholders about [INV./FUND MANAGER NAME].
32 SG2X PLAYBOOK FUND MANAGEMENT SOP |
Email Template Progress template to communicate with promoter as they and [INV./FUND MANAGER NAME] move through the active pipeline process. This tool is important because investing can be an intimidating process for companies. We want sourced companies to know exactly where they are in the process. This also keeps [INV./FUND MANAGER NAME] on track with the project management work. Clear communications also help build [INV./FUND MANAGER NAME]’s trust brand.
b. Investment Strategy Deep Dive (annual): To teach team members about RENEW’s investment strategy and how it ties into all of the SOP activities and tools.
c. Mastering the Investment Criteria (annual): This training walks team members through RENEW’s investment criteria and uses a series of case studies to develop the team members’ skills in using the investment criteria to screen deals.
h. Sourcing (annual): This trains team members on how to source deals, including the tools, steps and best practices they should use when meeting prospects.
j. Stage Training (annual): Team members are trained annually on each stage of this SOP. Each stage covers the purpose, scope, steps, standards and tools of each stage. During these trainings, the team members can also provide feedback about where and how the SOP might be enhanced.
33 SG2X PLAYBOOK FUND MANAGEMENT SOP |
e. Hotwash, Lessons Learned and Best Practices (every six months): This collaborative and engaging discussion reviews the past six months of investing work – pipeline and portfolio activities – to extract lessons learned and best practices that can be used to update this SOP.
f. How We Train - Train the Trainer (every six months): This training teaches team members how the firm runs training programs, and how it is a core strategic pillar for the firm. Specifically, we focus on the PE Investment Seminars for SMEs and stakeholders. The purpose of the PE Investment Seminars (as discussed in STAGE 1, Step 1.F) is to educate attendees on the private investment process. The goal of the PE Investment Seminars is to add value to the private sector ecosystem, build the firm’s brand and attract new companies to the pipeline.
g. Building a Network (annual): This trains the team on how to build a network of stakeholders to source deals. Stakeholders include banks, associations, government offices, professional firms and individual agents.
a. Onboarding (at onboarding): To learn about the firm and be successfully onboarded to the fund management process.
d. Presenting the Firm’s Value Proposition to SMEs (annual): This training teaches team members how to articulate how the firm adds value to the portfolio. It explains the theory behind the SGS team and how to discuss the concept of “control” with promoters in a way they understand the benefits of having the firm as an investment partner.
i. Asset Management Meeting Battle Rhythm (annual): This teaches team members about the various internal meetings and what the standards are for each meeting.
2. All members attend mandatory onboarding and annual trainings, as well as pass competency tests. Note to Author: These should be developed by your investment firm’s / fund’s leadership. Recommended types of trainings that RENEW provides include:
3. SIM tracks which trainings team members completed trainings and provide that information to the COO and CFAO as part of their annual review.
● All trainings must be taken to qualify for promotion and bonuses at [INV./FUND MANAGER NAME].
Standards: ● New team members must attend mandatory trainings, pass competency tests and shadow an experienced member for one month before sourcing deals on their own.
When opening a new country or regional office, team members will learn about the markets and major actors in the private sector space, establish a sourcing network (i.e., signing a Memorandum of Understanding or MOU with resource providers or RPs) and run an investment process training to meet new companies or prospects.
34 SG2X PLAYBOOK FUND MANAGEMENT SOP |
5. New team members obtain written approval from a manager to verify that they are ready to begin sourcing (i.e., become a Relationship Manager or RM).
4. New team members shadow an experienced team member to learn how to source for onea.month:Attend sourcing meetings, trainings and internal meetings to understand how the firm’s pipeline management process works.
Team members must be disciplined about documenting meetings with network members and companies. All KPIs (MOUs signed, deals sourced, deals advanced to A-pipe) should be tracked and reported to the country or regional manager and are part of the team’s evaluation. After the internal training, all staff involved with sourcing should be skilled at communicating [INV./FUND MANAGER NAME]’s value proposition. The SIM will know if the team needs further training if the volume and quality of deals coming into the funnel are poor, or there is a very low conversion rate of companies that pass IIC approval into the active pipeline.
STEP 1: ATTRACT PROSPECTS
● All team members must take mandatory annual trainings.
We suggest that SME-focused investment firms enhance their investment management team’s sourcing capacity to be “gender smart” by asking these questions, per the CDC Gender-Smart Investing Guide:
● Diversity of team: Is there enough diversity among the investment team, enabling us
Once properly onboarded, team members can begin external facing activities, like building a sourcing network member and meeting with prospects.
● All team members must be onboarded, trained and tested on this SOP.
● To raise awareness about [INV./FUND MANAGER NAME]’s in the market.
● Networks: Could our networks be affecting the composition of our pipeline? Are the referrals received male- or female-dominated?
The RM and SIM must meet, educate and build a relationship with potential network members, and find ways to regularly engage them and add value to their stakeholder (potential prospects); otherwise, the relationship can grow stale.
[INV./FUND MANAGER NAME] may sign an MOU with a network member that clarifies what we need from them, and what they should expect to receive from [INV./FUND MANAGER NAME].
A sourcing network is an engaged and educated network of bank loan officers, government organizations, business associations, and private professional firms like law, and accounting and brokerage firms that refer companies to [INV./FUND MANAGER NAME].
1.a Build and Manage a Sourcing Network
● To build the investment acumen and ecosystem in the country.
2. Identify a potential sourcing partner, hereafter referred to as Resource Providers (RPs).
3. Identify people within RPs that interact regularly with SMEs – such as incubators and accelerators, bank loan officers, accounting firms and lawyers.
35 SG2X PLAYBOOK FUND MANAGEMENT SOP | to source a diverse pipeline of companies?
4. Invite them to coffee at the office or a convenient location to introduce them to
● Signed MOUs with network partners. Process:
● To increase the flow of high-quality deals.
● New approaches: Have we considered how to diversify our pipeline by reaching out to women business groups, women’s organizations and conferences, and women entrepreneurship support organizations, as well as events focused on women to establish relationships? Have we considered attending targeted events focused on investing in women-centric sectors such as healthcare or childcare, and have we proactively sought out female founders and partnerships with female entrepreneur networks?
[INV./FUND MANAGER NAME] might also work with sourcing “agents” or brokers that are outside of the firm, but that are compensated for bringing good deals into the pipe that ultimately receive an investment. Legal must approve these arrangements before any form agreements are made with brokers.
1. Attend trade fairs, meeting with professional organizations (law firms, accounting firms, and banks), visit conferences.
Outcomes:
5. Over a series of meetings, educate them on [INV./FUND MANAGER NAME], the differences between private equity and debt financing, and the benefits we bring to companies with whom they work - ideally, they should see that connecting their clients to [INV./FUND MANAGER NAME] provides a benefit to them. The benefits to them are as follows:a.Bank
c. Lawyers: Many times, companies need lawyers to help them negotiate contracts. [INV./FUND MANAGER NAME] also needs local lawyers to represent the portfolio.
b. Capture relevant notes from meetings with RPs in [INSERT APPROPRIATE FILE PATH].
b. Accountants: Many times, accounting firms know the challenges of their clients. They can refer companies that need growth capital to [INV./FUND MANAGER NAME]. [INV./FUND MANAGER NAME] also has portfolio companies that need accountants.
e. Sector and Trade Associations: In many countries, industries or sectors have associations of members which could be prospects. Many associations want an MOU to be signed between [INV./FUND MANAGER NAME] and the association as a symbolic gesture of the partnership. Refer to the template provided above.
36 SG2X PLAYBOOK FUND MANAGEMENT SOP | [INV./FUND MANAGER NAME] and to learn about their work: a. Save names of RPs in the COUNTRY Pipeline tool's Contacts tab
d. BDS Providers: These can be chambers of commerce, consulting firms, brokers, accelerators and incubators - their goal is to help companies secure financing. [INV./FUND MANAGER NAME] can be this source of financing. Investment firm and fund managers need to help BDS providers understand what they require in order to make the investment process smooth and successful.
Loan Officers: Sometimes they meet companies that are very well managed and have big opportunities, but they do not have the collateral needed to take out a loan (a barrier that is exacerbated for women entrepreneurs). [INV./FUND MANAGER NAME] can help these companies procure the assets to become a client for the bank. Ask the loan officer to introduce you to companies such as these.
6. Invite RPs to attend the next investment process training that either [INV./FUND MANAGER NAME] is hosting or recommend a similar training hosted by a technical assistance provider operating in the region (Note to Reader: See Step 1.F below for details). During this training, the RPs should be taught the basics of the private investment process and be able to communicate the same to their SME clients, in particular on equity investing.
7. Follow up with RPs monthly. Provide them with tools, information and invitations to events. The goal is to have the RPs refer companies to [INV./FUND MANAGER
● Stakeholders should be engaged with no less than once per month.
● The RM and SIM are responsible for establishing the sourcing network.
8. Track which RPs referred a company to the most recently hosted Investment Seminar training.
● All meetings should be done to [INV./FUND MANAGER NAME]’s standards (i.e., arrive early, written meeting purpose, outcomes and agenda, printed materials, sharp/clean).
● Face to face meetings should be held with stakeholders no less than twice a year.
1.c Prepare Market Research Reports
Manage Social Media and Public Relations
● MOUs must be approved by legal before sending and signing.
NAME]’s Investment Seminar trainings that are held on a regular basis (minimum of one time per quarter, per country).
Note to Reader: Please insert your firm’s / fund’s social media and public relations strategy to build on your company’s brand recognition for the target countries in which you invest.
1.b
Team members should spend two to three hours a week reading the news, looking at the shelves in supermarkets for new products, meeting with stakeholders, etc. We call this gathering “scuttlebutt”. This formal and informal gathering of market intelligence is some of the
Standards:
● SIM and RM must manage the stakeholder relationships and communications.
● All referrals from the network member should be tagged to the company in order to track the volume and quality of deals coming from the network member.
● SIM or IIC member sign MOUs.
37 SG2X PLAYBOOK FUND MANAGEMENT SOP |
9. At the end of each quarter, the SIM will review the referrals and recognize the RP that has referred the most companies with a thoughtful thank you gift.
● All network points of contact must be entered into the Country Pipeline tool within 24 hours; all columns completed. ● All notes taken during the meeting must be added to a document and saved to the appropriate Google Folder within 24 hours.
3. Prepare research report - Each month, the SIM (and assigned RMs) will research a new sector or update a prior sector that has been researched. The team will spend no less than two days a month reading reports, news and online articles about a sector or industry, and performing primary research - in market surveys, and then compiling those into two-page sector research reports (Note to Reader: It is recommended that you develop a research template to ensure consistency across projects.)
● To learn about existing pipeline, portfolio and/or competing companies.
● To support efficient screening of deals.
● All data is saved in firm’s shared drive, named accordingly, and filed in the appropriate country and sector folders:
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Outcomes:
Process:
a. For weekly news, all files and articles should be saved in the research folder: [INSERT FILE PATH]
● A minimum of six, two-page sector research reports should be prepared by the investment team each year.
2. Collect and prepare important monthly news for each country for the Investor Deal CallEach Month, the SIM will populate the Investor Deal Call Running Notes with the links and short summaries of the most important news for each country in which [INV./FUND MANAGER NAME] is operating and/or investing. (Note to Reader: This is only applicable if an Investor Deal Call is hosted by the investment firm / fund for current and/or prospective investors.)
● To provide [INV./FUND MANAGER NAME] with data to enhance investment decision making.
● To find new partners and companies.
● To establish [INV./FUND MANAGER NAME]’s credibility with investors and stakeholders.
SG2X PLAYBOOK FUND MANAGEMENT SOP | best work a good RM can do and ensures team members always have their pulse on the market. When you find an important piece of information, put it weekly news file and share with the team on Friday.
1. Collect, read and present weekly news on each country - Each Friday, the assigned RM will present important and relevant news on each country during the WIR Meeting.
b. For a research summary, save in [INSERT FILE PATH]
Standards:
● To ensure the team is informed about what is happening in the market.
Some of the best sourcing can be done by getting out of the office and driving around the city and to other parts of the country, which are off the beaten path, to meet with new companies.
2. When “knocking on the gate” be sure to have a friendly demeanor and explain you work for a U.S. investment firm that has been in the region for over a decade and we are learning about businesses that are operating in the area.
39 SG2X PLAYBOOK FUND MANAGEMENT SOP |
1. Twice a month for a half to a full day, visit industrial parks:
1.d Visit the Market
● Data from the research is saved in a database to be used for analysis and financial modeling.
a. Prior to the field visits, gather your business cards and print marketing materials on [INV./FUND MANAGER NAME]. (Note to Reader: RENEW suggest creating informative and visually stimulating one-pagers that can be used to introduce prospective SMEs to your firm / fund)
4. At the end, give them your business card and a copy of your printed marketing materials.
5. Invite them to an upcoming investment process training that either you or a recommended, third-party TA provider is hosting in the coming weeks. (Note to Reader: See Step 1.F below for details).
3. Ask questions – follow the First Interview Form (FIF) flow – but be more passive and inquisitive (not interrogational).
● Find new companies.
7. Enter them into the pipeline when returning to the office and add notes to the appropriate folder.
● Learn about what is happening in the market – new entrants, new products.
Industrial areas are often filled with potential opportunities, and we encourage the team to get out into the field to look for deals.
6. Ask for their email and contact information.
Outcomes:
8. Send a follow-up email thanking them for showing you around the business. Standards:
● All reports should be written well, using [INV./FUND MANAGER NAME] templates and standard formatting.
b. Do research about the companies you might try to visit (use Google Maps).
Process:
1. Learn which companies will be attending and select which companies you want to meet. Remember the purpose is to obtain business contacts (i.e., business cards), meeting companies and learn about competitors and the market.
1.f Run or Offer Training on the Private Investment Process
● To raise the awareness about [INV./FUND MANAGER NAME].
40 SG2X PLAYBOOK FUND MANAGEMENT SOP |
4. Enter business cards into the Country Pipeline tool.
● Enter all companies into the Country Pipeline tool within 24 hours.
Note to Author: RENEW has found that many SME owners in Africa do not fully understand what private equity investing is, how it works, what the basic steps are, and how more technical elements of it work - like company valuations, financial modeling, due diligence, etc. This information gap makes is difficult for the fund manager to handle an efficient sourcing and screening process at a scale needed. It also adds considerable sunk costs and losses for the fund manager, which could already be working from a lean budget given the potentially varying
3. Give them your business card and accept their business card; jot down notes on the company that match the basic fields in the First Interview Form (FIF) (i.e., industry, brief description of what they do, when they started, etc.).
Process:
2. When you meet, introduce yourself and [INV./FUND MANAGER NAME] and use approved talking points (see Deal Sourcing Calls tool).
● Add their email to the marketing list serve for the country.
1.e Attend Networking Events
Standards: ● Each member should try to attend one networking event or trade show each month. These should not just be an opportunity to fill your calendar - the expectation is you find good companies.
● Add all notes from the site visit to firm’s shared drive.
● Enter all businesses contacted in the Country Pipeline tool.
NOTE: This is likely the least effective sourcing activity. Outcomes: ● To meet new companies.
A successful SME investment engagement and change management program begins before an investment is made. Beyond the relationship building that a fund manager and her team uses to source companies, we recommend that all owners and current managers of pipeline companies go through an introduction to private equity (PE) training course.
QUICK REFERENCE GUIDE: DEVELOPING AN EXECUTIVE BUSINESS MANAGEMENT PROGRAM
Prior to investing we recommend fund managers spend considerable amount of time in training potential portfolio companies - SME owners and their current management. In Africa, few understand the industry in which investment funds operate. Owners find it hard to see equity as different from debt or a grant. They might say they understand, but don’t take their verbal assurances for granted. We have found that even returning Diaspora that are seeking investors benefit from basic training on investing and business development.
To address this, RENEW offers a free PE Investment Seminar, a half-day program designed to educate the general business community about private equity. The program helps SME owners and managers understand 1) how the PE industry and the PE business model works, 2) the purpose and role that PE could play in a company’s growth plans and capital structure and how PE is different from other forms of capital, 3) the PE investment process - from sourcing to exit and the challenges investors and companies run into along the way; 4) benefits and drawbacks of having a PE investor join a company, and 5) the secrets to having a successful PE engagement. We also recommend deep dive sessions to further help target companies understand: 1) valuation; 2) term sheets; 3) the investment process - specifically due diligence, and 4) the post-investment process.
Unsure of where to start in developing and hosting a training program that (GSEP)Gender-SmartRENEWthanbusinessentrepreneursdevelopsandexecutives’acumen?LooknofurthertheSG2XWebsite!hasdevelopedTheExec’sPrograminpartnershipwithGlobal
41 SG2X PLAYBOOK FUND MANAGEMENT SOP | size of the fund. Fund managers need a systematic approach to building awareness among SME owners about private equity and a streamlined deal screening process.
For companies that attend the PE Investment Seminar training and have been successfully screened by the investment firm / fund’s investment team and advanced to the active pipeline (i.e., the investment manager commits a budget and resources to analyze the investment), RENEW strongly recommends that the investment firm / fund requires the owners and legacy managers to attend our Gender-Smart Exec’s Program that developed in partnership with Global Affairs Canada and enhanced in partnership with the USAID women’s economic empowerment fund. This is an intensive management and executive training program that teaches executives about the personal habits and corporate disciplines of top performing executives. The program curriculum, presentation decks, session video recordings and accompanying tools are all included on
The goals for this series of training programs are to help the companies self-select whether PE is right for them. In no way do we recommend scaring companies, but, if you are developing your own training, we do recommend the fund management team that delivers the training provide a healthy dose of reality along with general stories (not naming names) during the sessions to bring the training to life. The fund manager should also have portfolio companies share their stories - “the good, the bad and the ugly.” Your honesty and experience will win trust. Admit challenges you have had in the past and also provide examples of success stories. We recommend having current portfolio company owners share their experience with participants.
● SIM and RM run the investment seminars.
● Note to Reader: The investment firm / fund should develop an SOP for their training unit that includes information such as how to schedule, prepare for and host a PE Investment Seminar training.
Standards: ● Quality promotion efforts made with ample frequency and on all platforms to attract the target number of attendees.
● Support staff and/or in-country team assists with the logistics, coordination and hosting of the trainings.
● The number of registrations and attendees should be tracked. In order to reach the recommended target of 20 to 25 quality SMEs in attendance per training, the host will need to secure 75 to 100 registrations. Thus, the firm should train an average of 100 companies per year.
● Companies understand what PE is and if it is a good fit for them.
● The fund reduces the number of false starts and save time and money.
42 SG2X PLAYBOOK FUND MANAGEMENT SOP |
● The fund manager builds their brand in the market.
We also believe training helps investment managers get to know about the SME and interact with the owners and the current management team. The trainers and the IM and SGS teams should attend all training both as reminders and as reinforcement of the training, but to also observe the attendees and meet them at breaks and at the social hour after the session.
the SG2X Playbook website (see the “Entrepreneur” landing page of the website). The GenderSmart Exec’s Program is critical to show the owners and managers what good should look like and helps them begin to identify where they need help, and what the investment manager will be developing in their company, should they become a portfolio company. The Gender-Smart Exec’s Program is also the core management development program supported and run by the SGS team (see below).
● The fund manager’s IM team has a strategic way to source companies.
Outcomes:
● The fund manager’s IM team collects data on target companies and the SME sector via polls taken during the sessions.
Process:
43 SG2X PLAYBOOK FUND MANAGEMENT SOP |
● All pipeline companies must attend an Investment Seminar before they can be presented to the IIC for active pipeline consideration.
● All companies attending the investment seminar must be entered into the Country Pipeline tool.
● Feedback on the training (i.e., attendee’s understanding of the concepts, value-add of the content, etc.) should be collected from attendees using a Feedback Form.
STEP 2: COMPLETE FIRST INTERVIEW FORM (FIF)
● All team members must attend the seminar and network with companies during breaks.
It’s important that the RM establish a good working relationship with the company owners before screening the prospect. This might happen after the first encounter, or after a few casual meetings. Building a solid business relationship starts with a solid interpersonal relationship. Once the company is entered into the pipeline, this is when the clock starts for the step’s targets. All of the relationship building leading up to this step is a sunk cost, required for a smooth pre-investment process. Before holding the first interview with a prospect, the RM’s job is to build a good relationship with the owners and evaluate whether they are interested in an investment or in selling their Ifcompany.theteam member (or RM) believes the prospect has the potential to be a good opportunity, the RM schedules a more formal first meeting to gather information needed to complete the First Interview Form (FIF). Getting the FIF completed shouldn’t take more than one meeting but building a relationship with the company might take multiple informal meetings. The key with the FIF is to gather as much information at the onset of the engagement to be able to evaluate if the prospect meets the investment criteria and will pass IIC approval. Scan the FIF before the meeting, and complete with FIF within 24 hours of the meeting so you do not forget any Duringinformation.themeeting, always take detailed notes. Always make sure you are kind and encouraging. It is about building a brand of trust and we want [INV./FUND MANAGER NAME] to be known as a firm companies come to - the first place - when they need financing to accomplish their business dreams. Always update the Country Pipeline tool once the FIF is completed. Fill in all data forms in the pipeline so the IM team can use the information for reporting and analysis work. Do not miss any fields of information. Once the FIF is completed, the RM must present, or pitch, the deal to the Investment Management team during the weekly country pipeline meeting and be able to articulate why they think the deal fits with [INV./FUND MANAGER NAME]’s investment strategy and our
Outcomes:
1. RM enters the company into the appropriate Country Pipeline tool: a. Complete the Country Pipeline tool. i. Document how [INV./FUND MANAGER NAME] met the company. This impacts the decision and helps us gauge where companies are learning about us. b. Complete all fields to the best of your knowledge.
To decide whether to advance to a sourced status, hold or pass. If the outcome is advancing the company to “sourced” status, then consequently: a) Completed FIF. b) Signed NDA. c) Completed company information in the Country Pipeline tool. Process:
44 SG2X PLAYBOOK FUND MANAGEMENT SOP | overall portfolio construction. This takes time and practice, but after the first few pitches the team member will hone their skills.
c. Note any fields that are missing that need to be collected during the first meeting.
Assuming that this is the first time you meet to “talk business” with the entrepreneur/owner, we recommend you invest time to prepare for this meeting. Remember the most important tools for this stage is the [INV./FUND MANAGER NAME] - Investment Criteria and the FIF.
d. Hint: See this like the “first date” - you should know who you are meeting with.
2. RM researches the prospect: a. The day before the meeting, complete one to two hours of desk research on their company. Learn about the industry and their competitors. b. Try to look for their website or connect with the owners on LinkedIn. c. Search Google News to see if the company has been in the news or if there have been any major new entrants to the market.
b. Identify where the company is and building in adequate travel time – try to be 10 to 15 minutes early.
3. RM schedules the first interview: a. Ideally schedule the first meeting at the company’s place of operations.
d. Enter your name in the RM role.
Focus on the relationship and helping them understand the value [INV./FUND MANAGER NAME] brings beyond capital.
Determine if the company is eligible to receive investment funding from [INV./FUND MANAGER NAME].
f. Take high-quality pictures and videos (at least six) that we can use to market the deal to investors.
5. RM completes the FIF (in full) and updates the appropriate Country Pipeline tool within 24 hours of the meeting.
● The RM is the main point of contact between [INV./FUND MANAGER NAME] and the prospect/company and will be so through the entire investment process. If the RM leaves the firm, they are accountable for onboarding a new RM that is approved by the SIM and/or Dir. AM.
● All prospects must be entered into the Country Pipeline tool, even if they are not advanced through the funnel, and their status must be updated weekly:
SG2X PLAYBOOK FUND MANAGEMENT SOP |
Standards: ● The RM completes the FIF.
e. Take careful notes to enable completion of the FIF.
c. Greet the owner warmly and thank them for inviting you.
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c. Send a calendar invite with a written purpose, outcomes and agenda – so they begin learning about [INV./FUND MANAGER NAME]’s management systems.
a) No fields on a prospect may be left blank in the pipeline.
b. Interview the owner and complete the FIF – make sure to read this the night before so you don’t come off as interviewing the owner but having a conversation.
● FIFs must be completed within 24 hours of the first interview meeting with a prospect.
a. When you arrive, observe the facilities; make note of working conditions, whether the security personnel are following protocols, if the owner is late, etc.
● Pipeline funnel KPIs must be tracked and reported every week/month by the SIM to the Dir. AM.
4. RM conducts the first interview:
● An encouraging tone in all communications must be maintained with companies regardless of whether they advance or not in the pipeline. Miscommunication, negative communications and misunderstanding between the investment firm and the company must be avoided.
d. Present your business card and [INV./FUND MANAGER NAME]’s supporting marketing materials (e.g., a one-pager about the firm / fund).
● The day before the meeting, complete one to two hours of desk research on their company:a)Learn about the industry and their competitors.
c) Search Google News to learn about their industry, their company, their competitors.
46 SG2X PLAYBOOK FUND MANAGEMENT SOP |
b) [INV./FUND MANAGER NAME] will use the data you gather to help with financial modeling, so be thorough and do not miss any fields of information.
● All meetings held with the company must be documented in a running meeting notes file by the RM.
● All prospects being considered by the RM must first be approved by the Legal Team.
● All companies must attend the Investment Seminar training before being presented to the IIC.
● The day of the meeting with the promoter: a) If they come to the office: i. Note whether they arrived on time. ii. Offer them coffee. iii. Bring them into the conference room, which should be cleaned ahead of schedule. b) If you go to them: i. Arrive ahead of schedule. ii. Observe and make notes on the entry process – was it disciplined? iii. Focus on the relationship and helping them understand the value [INV./FUND MANAGER NAME] brings beyond capital. iv. Learn about their company history, owners, product and services, market and key customers, and financial performance. Some questions to guide this conversation are in the FIF. The key here is to take notes and immediately enter information into the FIF after the meeting, so you do not have to waste your and their time and energy going back to get information you need to present the company to the IC. The information you need to present the company to the IC is whether they meet our criteria and the questions to guide you to the answer are in the FIF. Always take notes and always fill in the form and save it to company’s shared drive.
b) Review their website and about the owners (LinkedIn, etc.).
STEP 3: OBTAIN LEGAL APPROVAL
Outcome: ● Legal email approval.
● Legal team should reply to the RM with a decision within 36 hours or three business days.
STEP 4: “PITCH” PROSPECT TO IM TEAM
During the weekly pipeline meeting, the RM pitches the prospect to the IM team and shares the First Interview Form (FIF).
4. After approval, the RM saves the email in the company folder, subfolder Legal.
Standards: ● RM must get Legal approval before advancing to the next stage.
Objective: To ensure [INV./FUND MANAGER NAME] and its investors are allowed to invest in the company before any additional time and resources are spent on the deal.
Process:
3. Legal replies to the RM via email with “approved” or “not approved” along with a reason: a. If not approved the RM has the opportunity to follow up or appeal with additional information.
● All companies must receive a legal “OK” before advancing from a prospect to a sourced company. ● RM must save the Legal approval in the company folder.
47 SG2X PLAYBOOK FUND MANAGEMENT SOP |
1. RM sends the completed First Interview Form (FIF) to Legal – either country, regional or general counsel.
2. Legal team reviews the FIF and determines if [INV./FUND MANAGER NAME] and its investors are allowed to invest in the deal.
c) You will be ready to meet companies once you have been able to ask a [INV./FUND MANAGER NAME] team member during a mock interview the questions that must be asked to gather the info to screen a company, from memory.
Outcomes:
f. The RM should be able to address the IM team’s red flags and areas of concern.
e. The IM team should try to find reasons why the deal is not a strong candidate –in an iron sharpens iron type of discussion.
g. Note to Reader: RENEW does not use a gender-lens to “screen-out” prospective deals. Our firm’s approach is to build SMEs into market-leading, gender-smart companies run by gender-balanced management teams, regardless of their gender-smart “score” or status prior to investment. That said, we strongly encourage investment firms / funds to track the gender profile of their pipeline companies to ensure gender biases are not present in the Pipeline Management process
To get IM team approval to advance – company will move from Prospect to Sourced. Process:
d. The RM should be able to clearly articulate why the think the prospect is a good fit for the portfolio and what we’re building (cluster/platform).
4. SIM updates the decision in the Country Pipeline tool.
To get the IM team’s input and opinion about the deal before advancing to Tool – Deal Screening Form (DSF).
b. The RM’s job is to convince other IM members that the prospect is a strong candidate for the [INVESTOR NETWORK NAME/ ACRONYM] and/or [FUND NAME] portfolio. c. The RM should have a strong case for each criterion.
● All companies should be treated respectfully and encouraged, even if they do not pass a decision stage at [INV./FUND MANAGER NAME].
1. RM adds the prospect and a link to the completed FIF to the Monday pipeline agenda no later than the Friday before the meeting.
5. RM update files and folders in firm’s shared drive:
3. SIM asks for a vote: Do we advance to the Internal Investment Committee?
a. Choices are: Yes, Advance / No, Hold / No, Pass.
Standards:
48 SG2X PLAYBOOK FUND MANAGEMENT SOP |
2. During the weekly country and regional pipeline meeting the RM pitches the deal to the IM team:a.This should take no more than 10 minutes.
a. Relationship Manager creates COMPANY NAME firm’s shared drive folder in the PRE-PIPELINE folder for the country.
b. If yes, the prospect status is now “sourced.”
● If the company is not advanced in the process, they should be given recommendations and, when possible, referred to other investment firms.
|
● All companies must be communicated with in a timely manner about where they are in [INV./FUND MANAGER NAME]’s investment consideration process.
STEP 5: COMPLETE THE DEAL SCREENING FORM (DSF)
5. RM and SGS team conduct site visit:
SG2X PLAYBOOK FUND MANAGEMENT SOP
Outcome: To collect information on the sourced deal to present to the IIC for their approval to Stage 2 within two weeks of meeting a company.
Process:
If an NDA has not been signed at this stage, the RM can offer that [INV./FUND MANAGER NAME] and the company sign the NDA.
2. RM sends the prospect a Non-Disclosure Agreement (NDA), requesting they share key documents:a.NOTE:
49
The DSF, when completed, organizes important information for the IIC to make an informed decision about whether a deal will be a strategic fit for the portfolio, aligns with the firm’s investment strategy and to objectively evaluate the merits of the growth plan, risks and return potential of the deal.
1. RM informs the prospect via email and a phone call that it has passed [INV./FUND MANAGER NAME]’s initial screening, and they will advance to a more detailed review of the opportunity.
4. RM holds follow-up meeting with sourced deal to gather all information needed to complete the Deal Screening Form (DSF):
iv. Corporate documents (Note to Reader: check country requirements.)
a. Notes should be taken by a designated person in the Running Active Pipeline Notes (or running pipeline notes).
3. RM collects key documents: a. RM saves all documents to the firm’s shared drive folder.
b. Key documents being requested: i. Business plan/feasibility study. ii. Excel financial model. iii. Audited financial statements (prior three years, if available).
a. RM pull in any information from the First Interview Form (FIF) into the DSF.
50 SG2X PLAYBOOK FUND MANAGEMENT SOP |
c. Analysts support market research to confirm assumptions about the market size: i. Supporting evidence must be saved in the company folder.
● Votes must be documented in the running active pipeline meeting notes.
d. Analysts review historical financial statements and completed the financial analysis section of the DSF.
9. SIM sends DSF sent via email to the IIC three days before the IIC meeting.
During the active pipeline meeting held monthly, the RM will be given 10 to 15 min to present a company they believe should be considered for an investment. The Deal Screening Form (DSF) should be sent to the IIC three days before the meeting. The SIM will review the DSF and give feedback on whether the RM needs to make improvements. The RM will be given time to present. The RM should rehearse the pitch and be ready to field questions from the team and the IIC.
Outcome: To reach a decision to advance to STAGE 2 by IIC within two weeks of meeting a company.
a. If SGS is not available, then the RM should schedule a call with the SGS team beforehand to obtain their thoughts on what to explore during the site visits and subsequent calls / meetings with the promoter.
b. SGS and RM discuss questions to be asked during the site visit.
● DSF must be sent to IIC three days before the IIC active pipeline meeting.
c. RM takes pictures during site visit. d. RM adds notes from site visit to running notes. 6. RM completes the DSF:
STEP 6: PRESENT DEAL TO IIC FOR ACTIVE PIPELINE APPROVAL
b. RM and analyst review the audit reports and prepare financial analysis.
7. RM shares the DSF with the IM team during the weekly pipeline meeting to get IM team feedback. 8. SIM adds deal to the IIC Active Pipeline meeting agenda.
Standards: ● No company can be promoted to the active pipeline until the promoter(s) has attended the PE Investment Seminar training.
d. RM updates the status of the company in the Country Pipeline tool. 6. RM communicates to the company following the meeting.
1. SIM starts the meeting by presenting the written purpose, outcomes and agenda.
5. All IIC members vote, and the votes are recorded. Majority advances the deal to the active pipeline: a. If the majority of the IIC votes “Yes”, then advance the company to the active pipeline. b. If the majority of the IIC do not want to vote “without more analysis being conducted”, then the deal will be presented at the next IIC meeting for a vote.
c. The RM should then present the high-level points (use the FIF as the guide for the pitch – not the DSF).
a. Remember to be encouraging and supportive.
2. RM presents the deal to the IIC:
f. How much competition is in the market? g. What makes the company unique? Is that defensible? h. How easy is it to build this business on our own?
b. The RM should begin by explaining how the deal fits into the overall portfolio strategy – such as fits into a cluster of companies that could be merged into a larger company, adds value to other portfolio companies, etc.
a. What are the top three reasons we should make this investment?
a. Keep the intro pitch short and concise – five minutes maximum – the IIC should have read the DSF before the meeting.
51 SG2X PLAYBOOK FUND MANAGEMENT SOP | Process:
c. If the majority of the IIC vote “No”, then the company does not pass.
c. What are the assumptions we are building our investment thesis around? How legitimate or solid are these assumptions?
3. The IIC and other team members should ask the RM questions – looking to understand whether the pitch or business case is sound:
d. If we invest and the deal fails to materialize, how will we get our money back in a liquidation? e. How will we exit the investment? Who would buy this?
i. Any sense of the valuation? Can we buy this at a good price?
b. What are the top three reasons not to make the investment?
4. Once discussion has occurred for 20 or so minutes, or if there is a natural slowing of the questions, the SIM calls a vote.
● DSF must be sent to IIC three days before the IIC Active Pipeline meeting.
● No company can be promoted to the active pipeline until the promoter(s) has attended the PE Investment Seminar training.
52 SG2X PLAYBOOK FUND MANAGEMENT SOP | Standards:
● Votes must be documented in the running active pipeline meeting notes.
READ FIRST
To avoid wasted time and deals falling out of the active pipeline, the RM must maintain regular communications with the promoter, use the Active Pipeline Project Plan tool to advance the deal through active pipeline in six weeks or less, and leverage the investment process training (e.g., PE Investment Seminar) to educate the promoter
The RM must ensure the promoters and their management have attended the investment process training before advancing through the active pipeline steps. The training, whether created and hosted by the investment firm/fund or outsourced to a third-party, should cover: a) the Private Investment Process; b) Term Sheets; c) Company Valuation, and d) the Post Investment Experience. This will greatly speed up the rate and success of the company’s progress through the active pipeline stage. It will also reduce confusion and increase understanding of how investing works. (Note to Reader: Please see Stage 1, Step 1.F for more details.)
Objective: Complete first level of analysis to get to an approved term sheet Targets: Two companies per month to e-CIM and Term Sheets
53 SG2X PLAYBOOK FUND MANAGEMENT SOP |
Note to Reader: The active pipeline stage is time consuming and costly for both the investment/fund manager and the company. This is also part of the investment process where, if not managed properly, the investment team can waste a lot of time and money and create frustration with the promoter. RENEW has found that most promoters get overwhelmed and confused with the active pipeline process. Promoters become intimidated by the legal agreements, do not understand valuation or complex structures, and may stop answering calls because they are afraid to share sensitive company information.
Time commitment: Six weeks Main Activities: 1) Signing LOI; 2) DD light; 3) structuring and signing the deal and signing terms; 4) External IC approval
Best Practice: Keep momentum throughout this phase. Use strong project management skills and regular communications with the promoter. If deals begin to slow or the communications go cold, the IM team should evaluate whether to continue to advance or hold; it could be an indicator the promoter has cold feet. Also, have the promoter bring in outside counsel at this stage and be prepared to educate counsel on
QUICK REFERENCE GUIDE: A-PIPE MGT
Once the investment series has been completed, the RM should enroll the promoter and management team into The Gender-Smart Exec’s Program. Even if the company does not make it through the active pipeline, this will add tremendous value to the company and position
Active pipeline management involves analyzing the deal; preparing the Executive Confidential Information Memorandum (e-CIM), which includes organizing [INV./FUND MANAGER NAME]’s analysis of the company’s market, management team, growth plan, risk, and financial projections; structuring the investment; negotiating the investment terms with the promoter; and, presenting the deal to [INV./FUND MANAGER NAME]’s External Investment Committee for approval to due diligence.
Indicators of Success: Number of Term Sheets signed per month; Number of e-CIMs completed per month; Number of weeks to complete e-CIM; Number of weeks to sign Term Sheet Scope: From IIC decision to advance to active pipeline to first External IC approval Tools: Letter of Intent, Term Sheet; ECIM; CIM; financial model; DD checklist; Legal agreement templates
STAGE 2: ACTIVE PIPELINE MANAGEMENT
The following principles are non-negotiable standards that must be adhered to during the active pipeline management stage (Note to Reader: RENEW recommends investment firms / fund managers implement the same):
The RM must maintain regular communications with the promoter.
Ultimately, the RM should push to get to a promoter-signed term sheet as soon as possible. The term sheet negotiations can be emotional for both the promoter and [INV./FUND MANAGER NAME]. Careful preparation and practice will help to make those discussions smooth and successful. Read the standards section in the associated step below.
While this Fund Management SOP applies to individual companies, the AM team should aim to move three to five companies (a “cluster”) at a time through the active pipeline process. This helps achieve economies of scale with trainings, and to allow the SGS team to work across the cluster in STAGE 5.
PRINCIPLES
The stage concludes with [INV./FUND MANAGER NAME]’s External IC meeting, where the IC is asking the RM, SIM and Dir. AM detailed questions about the deal, and then voting on the whether to advance the deal to due diligence or pass.
54 SG2X PLAYBOOK FUND MANAGEMENT SOP | them well with other investors and for long-term growth if they implement the training. If the company does advance through to closing, The Gender-Smart Exec’s Program is the foundation for the value addition stage and sets the company up for faster growth once the SGS team onboards to the executive management role. We recommend batching deals in the active pipeline to make it easy to move companies through the various training programs. Thus, an integrated active pipeline and training schedule should be managed by the SIM and technical assistance team at [INV./FUND MANAGER NAME]). The Gender-Smart Exec’s Program also facilitates relationship building between SGS team (i.e., the trainers) and the pipeline company’s management team.
The RM must enroll the promoter and management into RENEW’s Gender-Smart Exec’s Program.
SCOPE
The RM and the technical assistance team should run trainings in an organized and scheduled manner. At RENEW, we recommend training 20 to 30 companies in The Gender-Smart Exec’s Program at a time. Only admit companies that have been screened by the IM team and who have attended the PE Investment Seminar and accompanying Deep Dives. Assume one to two attendees will become portfolio companies.
The scope of the active pipeline management stage is from the time the IIC approves the sourced company to the active pipeline, to a promoter-signed term sheet and the first [INV./FUND MANAGER NAME] External IC approval.
The RM must ensure the promoter attends RENEW’s PE Investment Seminar, or an equivalent in-house training.
The RM must use the Active Pipeline Project Plan tool to advance the deal through active pipeline in six weeks or less.
Due Diligence Light –Commercial Due Diligence Checklist (CDD) Tool - Due Diligence LightCDD Checklist Used to guide the DD light process, baseline a company’s performance and current state, and gather inputs for the e-CIM, financial model and draft terms and structure.
FILES AND FOLDERS [INSERT RELEVANT FILE PATHWAYS]
● Six weeks from active pipeline decision to a promoter-signed term sheet.
TOOLS FILE NAME LINK USE
Note to Reader 1: RENEW recommends using Google Documents during the creation of this report to enable multiple users to work on the document simultaneously. Note to Reader 2: Please see the table in Stage 3: Due Diligence for a suite of external tools that we recommend investment/fund managers use to baseline gender equality and/or ESG parameters, resulting in a benchmark gendersmart “score”.
55 SG2X PLAYBOOK FUND MANAGEMENT SOP | TARGET
MemorandumInformationConfidentialExecutive (eCIM) Template Tool - Companye-CIM - DATE To develop the business case and the first draft of the CIM for the [FUND NAME] IC first decision. Note to Reader: We recommend using Google documents during the creation of this report to enable multiple users to work on the document simultaneously.
Active Pipeline Project Plan Tool - Active Pipeline Project Plan
Financial Model Template Tool - Financial Model TemplateCOMPANY To build the financial model. This should be done by the financial analyst with oversight from the SGS CFO, and input from the SIM and RM.
To map out the activities and milestones to communicate to stakeholders about dates, and the track weekly work and milestones. Note to Reader: RENEW recommends using Google documents during the creation of this report to enable multiple users to work on the document simultaneously.
56 SG2X PLAYBOOK FUND MANAGEMENT SOP | FILE NAME LINK USE Term Sheets Talking Points for Companies Tool – Term Sheet Talking Points for CompaniesPipeline
TheProgram.Gender-Smart
Exec’s Program is the main human capital development program for the SG2X Playbook and is the tool that the fund manager uses to develop the capacity of gendersmart middle management of portfolio companies and within the investment firm.
All owners and managers of pipeline companies, all new managers hired for portfolio companies, and all members of the investment firm must attend The Gender-Smart Exec’s
Exec’s Program teaches a common language for the various management systems and disciplines that will be built in partnership with the SGS team at the firm / fund. It
Note to Reader: Remember, per STAGE 1, Step 1.F, the RM must ensure the promoters and their management have attended an introductory investment process training, either created and hosted in-house or through RENEW’s PE Investment Seminar training, before advancing through the active pipeline steps. The training should cover: a) the Private Investment Process; b) Term Sheets; c) Company Valuation, and d) the Post Investment Experience. Once the investment process training has been attended, the company should attend RENEW’s GenderSmart Exec’s Program (the curriculum for which is provided as an annex to the SG2X Playbook
Thedeliverable).Gender-Smart
This tool is a primer for companies to learn about the terms that may be used if they make it to a term sheet discussion. Share with companies.
External Model Term Sheets
The Gender-Smart Exec’s Program should be run no less than once per year. RENEW recommends 10% to 15% of the SGS team’s time is spent delivering The Gender-Smart Exec’s Program training, updating the material and doing on-the-job, implementation coaching sessions to reinforce the disciplines. RENEW recommends the firm rotate trainers to develop the skills of the fund manager’s investment management and SGS team. Everyone at the investment firm should participate in training to reinforce their own learning (the best way to learn is to teach others).
See next column ANDE training on term sheets for entrepreneurs: LINK Investor friendly best practices for term sheets in East Africa: LINK Y Combinator has a Series A term sheet Word template: LINK Investment Guide Africa resources, including term sheets: LINK ACTIVITIES
STEP 0: RUN THE GENDER-SMART EXEC’S PROGRAM
Process:
If the fund manager is looking to keep much of the current SME management team, and the owner wishes to continue to play an active role in the company, then the investment manager should not proceed with an investment until the managers and owners have all attended the Exec’s Program. This is a critical step in the process and if skipped will create problems after the investment closes.
● The SGS team gets to know the management team of potential portfolio companies.
If anyone misses a session, they must make up for this session within a week – watch the recorded session and be tested on the material to ensure they watch it. If they get behind it will be difficult for others and the common language will begin to erode within the team.
The Gender-Smart Exec’s Program should be delivered for two hours, one to twice per a week, preferably in the morning from 8am to 10am. Sessions should be an hour and a half of lecture with 30 minutes of group discussion and questions and answers with the instructor.
● Owners and managers of SMEs understand what the SGS team implements should a company receive an investment from the Investment firm.
All attendees of the program must take a test at the end of the program and score 80% or higher to be retained by the investment firm and the company. Only those that pass will be allowed to advance into management roles.
The Gender-Smart Exec’s Program integrates gender-smart strategies into all modules, and attendees are brought through a process to understand why making their company gendersmart is part of their growth strategy. This will be run as other steps in the active pipeline are executed.
Note to Author: Please refer to Gender-Smart Exec’s Program curriculum included in the annex; the investment firm / fund should develop an SOP for their training unit that includes information such as how to schedule, prepare for and host The Gender-Smart Exec’s Program.
Outcomes:
57 SG2X PLAYBOOK FUND MANAGEMENT SOP | explains what good management looks like, why the management system and discipline are important, and how to develop the management system.
● Owners and managers of SMEs understand the gender-smart management systems they should have in place to scale their company.
The Gender-Smart Exec’s Program should be managed by the investment firm’s HR manager and led by a strong trainer that is respected and has experience leading companies (note: this might be the director or a CEO of the investment firm). The SGS and IM teams will also run specific sessions and eventually portfolio executives will rotate into the training to lead sections.
● Owners and managers understand that becoming a gender-smart SME should be part of a company’s growth strategy.
● Owners and managers of SMEs understand what disciplined management looks like.
● The SGS team learns from the market about during break-out sessions.
Outcomes:
58 SG2X PLAYBOOK FUND MANAGEMENT SOP |
1. RM setup the company folders in firm’s shared drive: a. Move the folders in firm’s shared drive from PRE-PIPELINE to the ACTIVE PIPELINE folder in the correct country:
2. RM builds and manages the Active Pipeline Project Plan for the company (see tools):
iv. Review the high-level project plan tab – this provides you with a nice topdown view of the work, and high-level milestones to be achieved.
b. Create a 1. Deal Name – Running Notes in firm’s chosen word processor (we recommend Google Documents) to capture meeting notes on the deal.
Processes:
● To ensure deal folders are setup to capture all information from the company, to be compliant with any applicable record keeping requirements, and to be easily searchable and accessible by the investment team.
● [INV./FUND MANAGER NAME] should seek to have gender-balance in the class.
Standards:
● To ensure the resources, activities, outputs/milestones, roles and timeline is clear to efficiently move the deal through the active pipeline process to closing.
● All management must score 80% or higher in the final exam to continue to be on the management team if they become a [INV./FUND MANAGER NAME] portfolio company.
c. Copy and paste all notes from meetings with the prospect to date into the file.
STEP 1: CREATE ACTIVE PIPELINE PROJECT PLAN & SET UP FOLDERS
● All management must attend all sessions or make up those they missed.
a. Open the Active Pipeline Project Plan and fill in the sections as outlined in the project plan template. i. Save as a new file in using this syntax (YYYY.MM.DD COMPANY NAME A-PIPE Project Plan). ii. Save to a project management folder in the corresponding portfolio company folder.
iii. Enter start date – the date the company was approved by the IIC to advance into the active pipeline – on the “start here”. The end date and other milestones will auto populate based on the targets assigned by [INV./FUND MANAGER NAME].
● The RM owns the Active Pipeline Project Plan.
ii. An IIC member should be assigned to the project plan to support the RM and SIM to make decisions in an efficient manner.
SG2X PLAYBOOK FUND MANAGEMENT SOP |
Standards:
b. Hold kickoff meeting with team to review the Active Pipeline Project Plan:
a. To maintain trust with the promoter is critical at this stage – and this is facilitated by regular and clear communications. Each week on Monday the RM must send a status update email to the company promoter to inform them of where they are in the process. This is a short email that should have its own chain – Subject: COMPANY NAME | [INV./FUND MANAGER NAME] Investment Project Plan Status. See the tool below for the template.
d. Use the Project Plan to drive the team’s priorities and activities for the week ahead. e. The Active Pipeline Project Plan must be updated each week based on the results achieved during the week.
3. RM begins the first of a series of weekly status update emails to the promoter:
v. Review the detailed project plan tab. vi. Assign the names of team members for each section.
i. Important to make sure the team resources are available to implement the project activities in the timeframe assigned.
● The RM is accountable for updating the Active Pipeline Project Plan.
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c. Have the AM Director or SIM review and approve the project plan after the meeting.
● The project plan must be updated weekly.
● A target versus actual must be done on the project plan when the deal closes or is formally terminated to evaluate the RM’s project management performance and to collect lessons learned.
● The Active Pipeline Project Plan is created by the RM and approved by the Dir. AM or SIM within three days of the IIC approval of a company to advance to the active pipeline.
● The project plan is managed by the RM.
b. Each week the stages the company has passed, the current stage it is at, and the remaining stages must be shown to the company in the email. Use green font for “passed”, yellow font for “current”, and red for “remaining”.
b. The LL can accompany the RM during the LOI meeting. For larger companies the SIM and/or Dir. Asset Management can accompany the RM.
● To ensure both parties are clear about what is being sought in the relationship.
4. The RM sets up an in-person meeting to present the draft LOI to the promoter:
c. Do not push the promoter to sign the LOI during the LOI meeting – encourage them to take it home and read it over.
Before presenting the LOI to the promoter it is important to explain that this is not a negotiating document. It is simply to 1) clarify what [INV./FUND MANAGER NAME] understands about their investment needs and purpose, and 2) explain what it means to receive an investment from [INV./FUND MANAGER NAME]. If the promoter does not like the information in the LOI, then the deal should be stopped. These are non-negotiable. Hence the LOI saves considerable time later down the process – after DD light and costly term sheet iterations have been undertaken by [INV./FUND MANAGER NAME] – to eliminate some of the foundational concepts of the investment process and strategy from the negotiating discussion.
Process:
Outcomes:
● To sign the letter of intent (LOI) and ensure the promoter is clear about what it means to receive an investment from [INV./FUND MANAGER NAME] and reduce the risk of confusion or misunderstanding later in the process.
2. The LL and Dir. AM review and approve the draft LOI.
a. Do not send it via email without a discussion.
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STEP 2: SIGN LETTER OF INTENT (LOI)
Note to Reader: At RENEW, we use a Letter of Intent (LOI) as the starting point of the deal negotiation and structure before we begin due diligence light and design the term sheet. We do this because, although it may add time to the process, we have found that the promoter may still not fully grasp the intricacies of equity investing and what it means to receive an investment from RENEW, even though they have verbally confirmed their understanding many times. The LOI is written in letter format and should be easy to read with minimal financial and legal jargon and requires signatures from both parties. This letter is unique to each investment company, so it will be important to develop one that matches your firm’s strategy and protocol.
1. The RM works with the LL and the SIM to prepare a draft LOI using a standardized template approved by the firm’s GC.
3. The CIO signs on behalf of [INV./FUND MANAGER NAME].
● The draft LOI must be presented to the prospects within five business days of receiving the IIC Active Pipeline approval. The LOI expires in 10 business days from being sent to the prospect after the meeting. The LOI must be signed or refused within 15 business days from IIC active pipeline approval.
d. Ask if they have any questions – encourage dialogue and transparency in the discussion; remember this may feel intimidating to the promoter so work hard to put them at ease with the process.
5. RM schedules a follow up meeting three days after the LOI meeting to discuss and ideally sign the draft LOI:
a. If the signature process moves beyond the expiration date, the decision to pursue must be revisited with the Dir. AM; and if the decision is to continue to pursue, then a new LOI must be drafted and resubmitted for signing.
● The RM is accountable for getting the LOI drafted, finalized and signed.
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6. The RM updates the IM team at the weekly Asset Management meeting on the status of the LOI.
7. Once signed, the LOI (in PDF format) is saved to the appropriate prospect’s shared drive folder.
● The LL and Dir. of AM must review and approve the draft LOI.
● [INV./FUND MANAGER NAME] must never pressure the owners to decide; simply explain that you’ll need to refresh the LOI if their review takes longer than the expiration date. STEP 3: CONDUCT CDD & PREPARE THE FINANCIAL MODEL, DRAFT TERMS AND E-CIM Outcomes:
Standards: ● Note to Reader: RENEW recommends the promoter engage a lawyer at this stage, if they have not done so already. While this is a cost on the promoter, it is important that they have their own counsel advising them through the investment process. The investment firm / fund should encourage their counsel to attend the PE Investment Seminar training (or in-house equivalent), so they are familiar with the investment process as well. The investment firm’s / fund’s LL should be prepared to educate outside counsel on equity financing during this stage. In the past, RENEW has encountered delays and had to abandon deals because the promoter waited too long to bring in outside counsel.
Process:
● To prepare the Financial Model, the Executive Confidential Information Memorandum (eCIM) and Term Sheet.
● To have a stronger view on the investment growth plan, assumptions, risks and return potential.
1. The RM holds a “brain trust” meeting with the SIM, SGS COO/CFO and IIC to develop bullet points of the e-CIM (business case and assumptions) and update the Due Diligence Light – CDD Checklist to ensure the best thinking has been gathered from the team to guide the DD light:
62 SG2X PLAYBOOK FUND MANAGEMENT SOP |
iii. Attending: IIC, SGS COO and CFO, Investment Analyst, SIM and RM.
v. Outcomes: Bullets for each section that guide the Due Diligence LightCDD Checklist and Financial Model; draft e-CIM.
a. Drawing on information from the Deal Screening Form (DSF) and company provided files, the SGS CFO, Investment Analyst, RM, SIM and IIC meet to write/review/update bullet points under each section of the e-CIM and assumptions for the growth plan and financial model. The DSF, audited financial statements and any business plan or growth plan provided by the company are key inputs for this meeting. Important here are to identify the assumptions [INV./FUND MANAGER NAME] has about the business for each section of the eCIM; to flag key risks that need to be researched. The e-CIM frames the discussion and captures the assumptions that the team must test during the first light due diligence (Due Diligence Light - CDD Checklist), and then the more fulsome due diligence. Specifically, the financial drivers and the assumptions –those that drive the profitability, cash flow and IRR – should be articulated. These assumptions must be documented during this meeting and used by the IM analyst and SGS CFO during their desk research and drafting of the draft financial model. Ideally the company has provided their audited financial statements, which can be the best source of information on the company’s performance.
iv. Purpose: to outline the main sections of the e-CIM, with special attention on the business case/growth plan, financial assumptions.
2. RM holds meeting with SGS CFO, COO and IM analysts to update the Due Diligence Light - CDD Checklist, and assign team members sections of the checklists to complete: a. RM remembers to update the activities and milestones into the Active Pipeline Project Plan tracker.
b. “Brain trust” meeting framework: i. Length: Two hours. ii. Lead: RM.
c. Multiple iterations between the terms and the financial model are necessary.
6. RM coordinates with the IM and SGS teams to write e-CIM: a. RM oversees most of the drafting. b. SGS CFO and IM analyst prepare the financial sections. c. Legal supports the drafting of the structure and terms.
5. RM holds meeting with SIM, Legal, SGS CFO and IM analyst to design the structure and draft term sheet:
a. Activities and team members responsible added to tool. b. Save all interview notes, secondary research findings and reference materials in the firm’s appropriate shared drive folder.
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3. RM leads the IM and SGS team to implement the Due Diligence Light - CDD Checklist (a blend of secondary and primary research on the deal):
a. Legal will select the template from the model term sheets folder. b. SGS CFO and IM analysts will be prepared to make real-time updates to the model.
4. SGS CFO and IM analyst develop draft financial model using the financial model template: a. SGS CFO and IM analysts develop a written narrative of the Financial Model, including the key assumptions and where to change those assumptions, so the IC can read and modify the model.
d. RM works to pull it all together in “one voice” and aligns the formatting and writing standards to comply with the [INV./FUND MANAGER NAME] style guide. e. RM sends the draft e-CIM, Financial Model and Term Sheet to the IIC.
7. RM holds IIC meeting to review and approve the draft e-CIM, Financial Model and Term Sheet:a. IIC must get the information three days before the meeting. b. The RM should lead the meeting. c. The meeting should take one and a half to two hours.
b. As you will see in the Due Diligence Light - CDD Checklist, part of the baselining work that the team will conduct will be to establish a high-level gender-smart “score” or assessment for the pipeline company by checking the availability of gender-smart policies and practices. (Note to Reader: RENEW recommends a more robust and in-depth analysis be conducted during Stage 3: Due Diligence using a standardized framework, such as the SEAF Gender Equality Scorecard© Manual and the accompanying GES Calculation Sheet.)
10. RM recirculate final versions to the IIC via links and saves to the appropriate [FUND NAME] IC folders for [FUND NAME] IC approval.
Outcomes:
8. RM works with the IM team to update the draft e-CIM, Financial Model and Term Sheet based on feedback from the IIC.
● All IM and SGS team members must support the RM to hit the targets.
This is a critical and emotional stage of the engagement with the promoter and should be handled with care. Please carefully review the standards section before beginning any negotiations with the promoter.
STEP 4: NEGOTIATE & SIGN TERM SHEET
d. The RM should seek conditional approval (i.e., approve if XYZ is reviewed and checks out) from the IIC.
● The RM must use the [INV./FUND MANAGER NAME] style and formatting guide when preparing the e-CIM to avoid lengthy formatting and copyediting iterations that could slow the process. Require all new members of the IM team take basic writing classes, and design and use a training for the team on how to develop key external documents.
Standards: ● The “brain trust” meeting must happen just after a deal has been promoted to the active pipeline to ensure the IIC, Legal, IM and SGS teams are clear about the investment and growth plan for the company. This meeting is used to guide the due diligence light (CDD) and reduce unnecessary analysis. Use the e-CIM template during the meeting for the agenda and populate sections of the e-CIM with assumptions and next steps to further explore in the CDD.
● Everyone must save all source files in company’s shared drive to meet any applicable record keeping requirements.
9. RM sends the final e-CIM to a quality control copyeditor (we suggest someone with native-level English proficiency).
● Legal must approve the term sheet before sharing externally.
● The RM owns the e-CIM and all deliverables.
11. Legal and RM prepare the final Term Sheet to share with the promoter.
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● Financial Model assumptions are backed by research.
b. Select roles and responsibilities for the meeting.
65 SG2X PLAYBOOK FUND MANAGEMENT SOP |
● To design a win-win solution that all parties are excited about.
● To advance to a go/no-go on the Term Sheet in the most effective manner possible and maintaining a strong working relationship with the promoter.
2. RM schedules a Term Sheet review meeting with the promoter; preferably do this in person.
5. If successful, the RM saves the signed Term Sheet to the appropriate firm’s shared drive folder and emails the link to the IIC:
a. Celebrate the moment when the Term Sheet is signed – toast with a drink or coffee or sweets (we’re engaged!).
Standards: ● Draft terms should be prepared three weeks after a deal has been approved for active pipeline.
c. The RM should be the lead communicator during the meeting.
4. RM obtains the promoter’s signature on the Term Sheet (Remember: [INV./FUND MANAGER NAME] must not sign the Term Sheet until External IC approval is obtained):
6. RM sends a follow up email to the promoter with the signed Term Sheet and outlines the next steps – see due diligence.
d. Limit the number of [INV./FUND MANAGER NAME] members in the room – this can intimidate the promoter.
Process:
● To obtain to a signed Term Sheet by the promoter for [FUND NAME] IC approval.
a. Dry run the meeting internally with the IM team.
1. RM meets with the IIC, SIM and Legal to prepare for the term sheet negotiation meeting with the promoter:
7. RM works with the SGS CFO, Investment Analyst, and Legal to update the Financial Model and e-CIM to reflect the agreed terms.
a. If negotiations fail, the RM schedules a “Hotwash” meeting with the IIC, IM and Legal team to review lessons learned that will be incorporated into this SOP.
8. RM saves all final files in the [FUND NAME] IC folder for the [FUND NAME] IC meeting and coordinates with Stakeholder Engagement & Innovation Unit to inform the interested investors on next steps.
3. RM leads negotiations with the promoter over two to three meetings, if necessary (see standards below).
● Model Term Sheets must be used; effort should be made to minimize the number of changes made to the model terms – this greatly increases the efficiency of the legal team during the closing process. (Note to Reader: Please see the linked term sheet resources and templates included in the Tools Table above, which can act as a good starting point for creating your investment firm’s / fund’s model term sheets.)
● Term Sheets must have an expiration date of no longer than 30 days from presenting to the company, unless special approval has been given by the IIC.
● Term Sheets must be shared in person or on a call, and then sent via email; never send a term sheet before a walk-through meeting.
b) Never get angry, never yell, never lose your composure.
e) Share your interests and values – what we care about at [INV./FUND MANAGER NAME] – a productive working relationship, building a world class company, implementing gender-smart systems we know help companies grow, generating a great return for all shareholders (including them), etc.
● When negotiating: a) Enter the negotiation clear about which areas of the Term Sheet are open for negotiation and new options can be created. Also know what cannot be negotiated. Know the best alternative to a negotiated agreement (BATNA) – this is the course of action that [INV./FUND MANAGER NAME] will take if a negotiation fails and no agreement can be reached. Having this walk-away point clear can help focus the team.
d) Always seek to understand their points, first. Do this by repeating what you heard them say in summary format back to them before presenting your points. Ask them to verify if you have captured their points accurately. Try to extract what their interests are – what they care most about. Try to distill those out of the conversation.
● Term Sheets must be approved by Legal and the IIC before being presented to the company.
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c) If the promoter pushes back – and even gets emotional – do not take it as an affront to you. Separate your ego from the discussion and focus on cooperation and the relationship first. Even say “first and foremost, we care about a good working relationship and finding a win-win solution; something we’re both excited about”.
f) If your initial terms are rejected, work through options. Remember, what you can negotiate with should be understood before the meeting. Your and their interests should be used to draft the options.
External IC reaches a decision as to whether to advance a pipeline company to STAGE 3. Process: 1. Dir. of AM starts the meeting by presenting the written purpose, outcomes and agenda.
At the end of STAGE 2, the IM team is required to present the results of the CDD light steps and outputs (i.e., the e-CIM, Financial Model and Term Sheet) to the External IC for their review and vote as to whether the pipeline company will advance to STAGE 3. The CDD light materials should be sent to the External IC seven days before the meeting. The Dir. of AM will present the teams finding, supported by the SIM and RM.
a. Keep the intro pitch short and concise – five minutes maximum – the IC should have read the materials prior to the meeting.
● Schedule the initial meeting for two to three hours minimum. And schedule a series of meetings at the start so the promoter knows there’s a schedule.
● IIC is responsible for reviewing the draft and approving the final negotiated terms and providing input to the revised terms.
i) We recommend working through the options in the room.
h) Then use the criteria to select the best options.
● Legal is responsible for writing and finalizing the Term Sheet.
g) Next, co-create criteria that you both agree will be used to evaluate the options.
67 SG2X PLAYBOOK FUND MANAGEMENT SOP |
b. The Dir. of AM should begin by explaining how the deal fits into the overall portfolio strategy – such as fits into a cluster of companies that could be merged into a larger company, adds value to other portfolio companies, etc.
● RM is responsible for managing comms with the promoter, scheduling and hosting the meetings and overseeing the Term Sheet negotiation process.
● Avoid ending the meeting in the middle of the negotiation and when energy is low, or tensions are high. Always try to find options before the meeting concludes.
STEP 5: OBTAIN FIRST IC APPROVAL
2. Dir. of AM presents the deal to the External IC:
Outcome:
5. All External IC members vote, and the votes are recorded. Majority advances the deal to STAGE 3:
g. How easy is it to build this business on our own?
6. RM communicates to the company following the meeting.
3. The External IC will be given time to ask the Dir. of AM, SIM and RM questions – looking to understand whether the investment deal is sound:
a. Remember to be encouraging and supportive.
a. If the majority of the IIC votes “Yes”, then advance the company to STAGE 3.
c. The Dir. of AM should then present the high-level findings of the CDD light activities.
Standards: ● e-CIM, Financial Model and Term Sheet must be sent to External IC seven days before the External IC meeting. ● Votes must be documented in the running active pipeline meeting notes.
d. If we invest and the deal fails to materialize, how will we get our money back in a liquidation? e. How much competition is in the market?
h. Take us through the financial model. Are your underlying assumptions sound and/or where are they based in? i. Walk us through the deal terms and investment structure – what is the company valuation? Is this a good price? How will we exit the investment?
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a. What are the top three reasons we should make this investment?
b. What are the top three reasons not to make the investment?
c. What are the assumptions we are building our investment thesis around? How legitimate or solid are these assumptions?
b. If the majority of the IIC vote “No”, then the company does not pass. c. RM updates the status of the company in the Country Pipeline tool.
4. Once discussion has occurred for 45 or so minutes, or if there is a natural slowing of the questions, the Dir. of AM calls a vote.
f. What makes the company unique? Is that defensible?
DD should also be a time to baseline the key financial and impact metrics of the company, including the company’s financial management systems, marketing and sales activities, governance systems and structures, HR systems and policies, etc. As SGS baselines the management systems the company has, they can compare this with what they know the company needs to achieve the growth plan and add any corrective actions to the First 180-Days Project Plan.
The DD findings are presented in the Final Confidential Information Memorandum (Final CIM), and the deal needs to be approved by the IIC and External IC before closing.
Tools: e-CIM; DD plan and checklists; Final CIM; First 180-Days Statement of Work; First 180-Days Project Plan
Time Commitment: 50 to 80 hours, four weeks from signing a Term Sheet to final External IC approval
Main Activities: 1) Due diligence; 2) Preparing the Final CIM and model; 3) Preparing the First 180-Days Statement of Work and Project Plan; 4) Obtaining final External IC approval
QUICK REFERENCE GUIDE: DD Objective: Evaluate the risks and return potential for the deal and recommend a final decision
69 SG2X PLAYBOOK FUND MANAGEMENT SOP | STAGE 3: DUE DILIGENCE READ FIRST
The IM and SGS team should spend 50 to 80 hours on DD. The SGS team should spend extra time validating the financial assumptions by conducting interviews with current and potential customers, looking more closely at the competition, evaluating the risks and mitigation plans
Scope: From Term Sheet signing to final [FUND NAME] IC approval
At this stage, a good amount of due diligence (DD) has been completed as part of the Active Pipeline Management Stage - drafting the e-CIM, the Financial Model and the Term Sheet. All of this information should be properly stored in folders; so, a good place to begin DD is to run a status check on the current folders and files that have been gathered and prepared to date.
The SGS team should spend a few days at the company to see how the company and team functions on a daily basis and to begin identifying areas that can be enhanced during the first 180 days.
The goal of due diligence (DD) is to identify any unknown risks and further explore and stress-test assumptions that form the foundation for the growth plan in the e-CIM and financial model.
DD is also the time that the SGS team prepares their plans for adding value to the portfolio company immediately after closing. Their plans are captured in the First 180-Days Project Plan. SGS will also prepare the company’s first year budget and annual management plan (AMP) to align with the final financial model, terms and DuringCIM.DD the SGS team should aim to build a good working relationship with the management team of the potential company. The SGS team should be cautious not to become overly enamored with the management team or the owner. Rather, stay objective and build a good working relationship on equal terms.
Accountable: RM leads the due diligence with multiple AM team members supporting them Best Practice: Use checklists for DD to
The main outputs of the DD Stage include:
● Find creative ways to rephrase questions and continually ask and re-ask, to find out as much information as possible during diligence. The RM should ask repeatedly, whenever you meet with the owner or other executives:
● A complete data room with information on the company, market and all supporting documents gathered from the company, customers, suppliers, etc. and referenced in the CIM.
Note that DD will overlap with STAGE 4, preparation of legal agreements and investment closing. Generally, the definitive investment agreements will be negotiated and drafted during the latter portion of the DD stage, so that the investment agreements are finalized concurrently with presentation of the final CIM to the IIC, External IC and fund investors (as appropriate/required). In addition, certain items that can be prepared in advance for the closing process can be started while DD is ongoing.
SCOPE DD takes place from the time the External IC makes its first approval to when the External IC makes their final approval. In some cases, a due diligence budget is prepared along with the due diligence plan, which needs to be reviewed and approved by the CIO.
PRINCIPLES
● A final Financial Model.
● The Final Confidential Information Memorandum (Final CIM) that incorporates DD findings.
70 SG2X PLAYBOOK FUND MANAGEMENT SOP | (e.g., assume a risk scenario will happen – how much of the investment can we recoup?), and checking the quality of machine suppliers and raw material suppliers.
● A First 180-Days Statement of Work and First 180-Days Project Plan that outlines the corrective action plans the [INV./FUND MANAGER NAME] SGS team will follow postinvestment to help the company start down the path of becoming a gender-smart SME.
● Never be judgmental, but rather act unfazed if serious issues arise. Doing so will encourage the company’s team to be forthright with you.
The following principles are non-negotiable standards that must be adhered to during the due diligence stage:
● The RM and all support teams working on DD must use the Due Diligence Project Plan and Checklist referenced in the “Tools” table below.
● The RM and all participating in DD must document all interview notes and save all research documents in the appropriate company folders, using the naming and file management protocol.
● The RM must use references and citations in the CIM and save all files in the appropriate “sources and citations” supporting folder.
c) "What keeps you up at night?"
Consider checking the following: Are we consciously or unconsciously asking different questions of women and men in due diligence? We need to ensure we are asking the same questions to an equal number of both male and female managers and employees.
TOOL LINK USE Note to Reader: In terms of RENEW’s approach towards gender-lens investing, RENEW does not “screen out” companies that are under consideration for the pipeline based on their gender-smart “scores” or status; rather, RENEW believes that any SME (no matter how bad their baseline score may be) can become a market-leading, gender-smart SME run by a gender-balanced management team if they are: 1) coachable and open to RENEW’s SGS team taking control over key decisions and leading the management team; and 2) are fully willing to work in partnership with the SGS team to implement all components of The GenderSmart Exec’s Program and the SG2X Playbook. As such, it is important that RENEW and other fund managers following this strategy baseline a pipeline company’s gender-smart “score” during the Due Diligence stage, so that a determination can be made about where/how the SGS team can add value (e.g., overhauling a company’s payment structures so that it is implementing gender-equal policies concerning salaries, raises and bonuses). The following externally published scorecards and/or frameworks are well-known standards in the impact investing industry.
b) "Is there anything you wish you knew about your business five years ago, that you know now?"
ORGANIZATION
a) "Is there anything important I should know about that I will find out about later, that might surprise me?"
Ensure you are avoiding gender biases during the DD stage. Ask regularly if you are getting a balanced perspective from men or women: suppliers, staff, management, customers, etc. Before you begin, review CDC Gender Smart Investing Guide for Fund Managers.
TARGET PER COUNTRY PER YEAR
FILES AND FOLDERS [INSERT FILE PATHWAYS]
Example: Complete a full due diligence review on the 20 companies that are advanced to the active pipeline.
GENDER EQUALITY BENCHMARKING FRAMEWORKS
Small Enterprise Assistance Fund (SEAF) Tool - SEAF Gender ManualScorecard©Equality Investment/fund managers use this tool to assess the gender equality “score” of pipeline and portfolio companies against several parameters, including pay equity, workforce participation, leadership and governance,
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RELEVANT
The 2X Challenge Criteria were developed in 2018 to help 2X Challenge members identify which transactions could be reported towards the common $3 billion target in investments that benefit women. Since their launch, the criteria have emerged as a go-to standard for gender lens investing for DFIs and other investors. The criteria can be used as gender-lens screening for pipeline companies, to assess an existing portfolio company’s baseline to identify areas of improvement, or to monitor and evaluate an existing portfolio company’s results against agreed upon metrics - the criteria have been harmonized with the GIIN IRIS+ metrics
professional development, workplace environment and value chains. SMEs can also use this tool to benchmark their performance against these key areas and identify priorities for growth. The Manual includes relevant assessment questions and scoring instructions, as well as example templates that can be used to collect the relevant information during due diligence light. Note: RENEW prefers and uses this tool and has created an Excel-based Calculation Sheet to accompany the GES Manual.
72 SG2X PLAYBOOK FUND MANAGEMENT SOP | ORGANIZATION
The WEPs Gender Gap Analysis Tool is a joint
TOOL LINK USE Tool – SEAF GES Calculation Sheet
2X Challenge 2X Challenge Criteria
The Gender (GEM)MainstreamingEqualityFramework
MEDA's GEM Framework includes an extensive assessment that evaluates a company's capacity and performance in gender equality mainstreaming and environmental sustainability across a slew of qualitative questions and quantitative datapoints, thereby enabling the assessor to identify opportunities for improvement. The Full Assessment instructions start on page 33 of the tool, with the Interview Template starting on page 51 and the quantitative map starting on page 78.
The Women's WEPs Gender
Mennonite AssociatesDevelopmentEconomic(MEDA)
USE
TOOL LINK
The tool includes two parts: 1) an email template requesting that the company provides important information to facilitate the due diligence process; and 2) a request list that outlines the required documentation we will need to collect from the pipeline company for our review. This should be sent to all companies as the first step in conducting formal due diligence.
Gap Analysis Tool project of the UN Global Compact, UN Women and several multi-lateral development banks and donors. The tool is an online assessment that helps companies identify strengths, gaps, and opportunities to improve their performance in the realm of gender equality. The assessment questions are based on real-life company practice, international standards and indicators.
73 SG2X PLAYBOOK FUND MANAGEMENT SOP | ORGANIZATION
Tool - Due Diligence Project Plan and ChecklistCOMPANY
Final CIM Template Tool - CompanyFinal CIM - DATE This tool contains the template for the final CIM. The final CIM should be based on
Due Diligence Project Plan and Checklists
PrinciplesEmpowerment
TOOLS NAME LINK USE Due Diligence Request List Tool - Due Diligence Request ListCOMPANY
To guide the team during due diligence and ensure nothing is missed. This is our main diligence tool and guides our internal diligence process. At the start of diligence, the project lead for the deal should create a project plan using this tool. The main tab contains a dashboard to track the status of each specific area of diligence, and each tab thereafter outlines detailed questions and criteria to investigate during the diligence process, which functions as our DD Checklist. These questions should be customized for each company, depending on the company’s business and sector. Any diligence notes, issues or concerns uncovered during the diligence process should be tracked in this tool.
InterviewManagementGuide ToolInterviewManagementGuide
Template180-DaysGender-SmartManagementPortfolio-FirstSOW
To use as the starting point to guide the sixmonth post-investment work plan for the SGS team. The First 180-Days Project Plan must be updated with corrective actions identified by the IM and SGS team during due diligence light and/or formal due diligence and from feedback from the [FUND NAME] IC, that are not conditions to close.
Gender-Smart First 180-Days Statement of Work Tool -
A standardized interview guide/questionnaire the SGS team will use when conducting management interviews under Step 4 for formal due diligence. The guide covers the broad topics of current state, future state, case for change, barriers and strategies.
information from the e-CIM, updated and expanded upon with information learned during due diligence. The DD findings should be added as a narrative to the final CIM and should explain every material issue or concern discovered during diligence. The project lead is responsible for overseeing drafting of the final CIM. The final CIM will be presented to the IC at the end of the diligence process.
74 SG2X PLAYBOOK FUND MANAGEMENT SOP | NAME LINK USE
To establish an agreement between the SGS team and the promoters and existing management of the company about how SGS will work with the company. This Statement of Work (SOW) should be updated with corrective actions identified by the IM and SGS teams during due diligence light and/or formal due diligence and from feedback from the External IC.
Gender-Smart First 180-Days Project Plan ToolPlan180-DaysGender-SmartManagementPortfolio-FirstProjectTemplate
STEP 1: PREPARE FOR FORMAL DUE DILIGENCE
This step aligns with the work required to complete the Prepare and Manage tab of the Due Diligence Project Plan and Checklist tool. The RM owns this tool and leads the various teams and company stakeholders through the DD process.
Outcomes:
● To prepare the Due Diligence Request List for the company and prepare for the kick-off meeting.
Process: 1. RM reviews the DD folders, makes sure the files are properly named and organized, and updates information in the Due Diligence Project Plan and Checklist and the Due Diligence Request List that has already been gathered or provided.
a. Begin with the template but review it and make company-specific revisions or updates to address any items or issues unique to the company, or to include DD questions that have already been identified throughout the prior stages (for example, from the initial IC approvals).
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c. Ensure the teams understand where to save files and remind them of the file naming protocol. d. Ensure the team is clear about the timeline.
b. This tool must be managed by the RM to track the diligence progress, notes and other findings.
4. RM uses the Due Diligence Request List to create a request list for the company.
a. Generally, nothing should be deleted from the request list, only added to the extent there are company or business specific requests that are not addressed in the standard template. The requests in the Due Diligence Request List should align with the questions and subject areas identified in the Due Diligence Project Plan and Checklist.
● To review the due diligence work that has currently been done, identify gaps, update the Due Diligence Project Plan and Checklist, assign owners to each DD section process and define the DD timeline.
2. RM holds internal DD kickoff meeting with Legal, IM and SGS to review the Due Diligence Project Plan and Checklist and make enhancements based on feedback from the External IC and IIC.
3. RM schedules a recurring 30-minute, weekly DD check-in meeting with the team to update the checklist and to share progress updates.
b. Outcomes: Shared understanding of why we do DD, what good DD looks like, and how DD works – from both [INV./FUND MANAGER NAME]’s side and the pipeline company’s side.
● To share best practices with the company’s management team to ensure a smooth and efficient DD process.
● Each time you use a tool, you must “save as” and create a new version specific to that company.
Process:
Standards:
● The company’s management understands what is needed from them during due diligence and why it is important for them to be responsive and collaborative during this time.
6. RM sets up a shared folder in firm’s shared drive and where the pipeline company’s DD point of contact (POC) will be given access to upload files.
1. RM schedules and prepare for the in-person DD kick-off meeting with the company’s CEO and management team:
5. RM share the draft Due Diligence Project Plan and Checklist and draft Due Diligence Request List with Legal and SIM for comments. Once any feedback is incorporated, obtain signoff on the Due Diligence Project Plan and Checklist from the Dir. of AM.
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● The RM is responsible for developing the diligence plan, checklist and tools, with support from the IM, SGS and Legal teams.
a. The folder structure should align with the topics/numbering in the Due Diligence Request List.
a. Purpose: To begin the due diligence process with the company and ensure everyone understands the why, what and how DD works to maximize success.
● The Dir. AM must approve each DD project plan and checklist before holding the kickoff meeting with the Company. Step 1.a: Hold Kickoff Meeting with Company Management Outcomes:
● The company’s management team understands what to expect during due diligence and why [INV./FUND MANAGER NAME] is doing it.
● Make sure that all company management/executives involved in the DD process are present at the kick-off meeting.
● RM must first get buy-in from the promoter/CEO before beginning DD. Do this by holding a pre-kick-off call with the promoter/CEO to ask them to introduce [INV./FUND MANAGER NAME] and to encourage their team to be cooperative and transparent with [INV./FUND MANAGER NAME] and their requests.
Standards:
● RM must appoint one person on the company’s management team to be the due diligence lead from the pipeline company’s side. They should be dedicated to gathering information for [INV./FUND MANAGER NAME] or for requesting the appropriate company team member to gather the files.
2. RM has a prep call with the Promoter/CEO to explain the POA and ask them to introduce [INV./FUND MANAGER NAME] and encourage the team to be very responsive and supportive of [INV./FUND MANAGER NAME] during DD.
3. RM invites the SGS COO and local lawyer to the meeting.
c. Agenda: 1. Review POA, 2. Why DD?, 3. What Good DD Look Like?, 4. How DD Works – for Both Sides, 5. Q&A, 6. Next Steps – Completing the DD Request List.
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b. Walk through the request list and the overall DD process and timeline. Introduce members of the [INV./FUND MANAGER NAME] team who will be involved in the diligence and set clear roles, responsibilities and expectations for the company’s management team. The timeline and process should be based on the internal Due Diligence Checklist prepared in Step 1. c. Select a DD POC at the pipeline company.
d. What to bring: i. The TOOL - Due Diligence Request List. ii. Slides – use the investment process training (e.g., RENEW’s PE Investment Seminar) slide deck as source material.
4. Promoter/CEO opens the meeting and turns it over to the RM to run the meeting: a. Promoter/CEO welcomes the team and invites the RM to run the meeting. Note to Reader: It is important for the CEO to show they are aligned with investment firm / fund during DD.
5. RM send the pipeline company DD POC a soft copy of the DD Request List and grants them access to the shared company’s shared drive folders (i.e., grant them access via company’s shared drive).
To collect all the required documentation and information outlined in the Due Diligence Request List needed to evaluate the risks of the company.
Standards:
78 SG2X PLAYBOOK FUND MANAGEMENT SOP | Step 1.b: Gather Documents Outcomes:●
b. Make sure that the company also completes the gender equality, environmental, health and safety questionnaire attached as Exhibit A to the Due Diligence Request List.
2. Once the company has responded to each item and completed the questionnaire, RM instructs them to execute and return a copy of the request list to [INV./FUND MANAGER
a. If there is anything the company only has in hard copy form, RM requests that they scan it and upload a PDF copy (or offer to collect the hard copy documents and do this for them).
● That all due diligence requests (completed Due Diligence Request List) have been satisfied by the company within one week.
● The Due Diligence Request List should be filled in and executed within two business days of the kickoff meeting. All documents should be uploaded within one week of executing the DD Request List.
a. Given the size and nature of the investment, many companies will not have documents that are responsive to all of the items in the request list and certain requests may not be applicable for certain types of companies and businesses.
5. Once all the Due Diligence Request List files are uploaded to the company’s shared drive, RM emails the pipeline company DD POC and Promoter/CEO thanking them for their support and informing them they have uploaded all required documents, along with the next steps.
Process:
3. RM instructs the pipeline company DD POC to begin collecting documentation for everything they marked as “have” and uploading it to the corresponding subfolder in the company’s shared drive folder.
4. RM reviews the shared folders daily to monitor progress and ensure that files are being uploaded for every item the company indicated it has.
1. After sending the Due Diligence Request List to the pipeline company DD POC, RM holds a follow up call to ensure they understand all of the documents. Instruct them to mark each item requested, whether they “have”, “don’t have”, or if it is “N/A”.
NAME]:a.Entrepreneurs must sign and return the Due Diligence Request List which includes the foreign corrupt practices act (FCPA) certification at the start of due diligence.
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Document issues and updated findings are fully outlined in the Due Diligence Project Plan and Checklist.
2. IM analyst and the SGS CFO complete the Financial, Accounting, Tax tab. Findings should be documented in the correct row of the Financial, Accounting, Tax tab. Major issues or red flags should be immediately raised to the RM.
These steps will be performed in parallel by the various subject matter teams. A team or team member will be assigned a tab to complete in the Due Diligence Project Plan and Checklists by the RM during the Prepare for Formal Due Diligence step. A majority of the work in this step is complete the checklist.
● Using your own copy of the Due Diligence Request List, RM keeps track of the documents that the company is uploading to ensure that they have provided documents responding to everything they indicated they “have”.
1. Legal team completes the Legal, Gov, Contracts tab (to be conducted by the local legal counsel). Findings should be documented in the correct row of the Legal, Gov, Contracts tab. Major issues or red flags should be immediately raised to the RM.
● All diligence files saved in firm’s shared drive for record keeping purposes.
a. Be sure the documents are current and be sure to communicate to the closing team anything that must be addressed immediately so as not to hold up closing.
● To conduct the fulsome DD review.
a. Be sure to reconcile the cash on the balance sheet with the bank statements to test the accuracy of the balance sheet; look at six months of statements in order to see cash flow management and cycles (i.e., is it a boom-and-bust business?).
Evaluate processes for payments, sales and collection to understand the cycle of
b. In addition, be sure to review shareholders’ agreements, corporate documents and other legal agreements to assess whether any third-party consents or approvals will be necessary for the proposed investment, due to the change of control of the company. Flag any third-party consents to the closing team, as these will be a long-lead item to obtain and must be included as a condition precedent to closing.
● RM must stay in close communication with the pipeline company’s chosen DD POC to ensure the smooth and efficient upload of documents. If the company appears to be lagging in the pace at which it is finding and uploading documents, consider having the deal lead go sit with the company for a working session (or multiple working sessions) until the document upload process is complete.
STEP 2: REVIEW GATHERED DOCUMENTATION
Process:
Outcomes:
80 SG2X PLAYBOOK FUND MANAGEMENT SOP | the business. Evaluate days of sales outstanding (DSO), margins, inventory, fixed assets, controls, risks, etc.
3. SGS COO complete the Admin & Operations tab. Findings should be documented in the correct row of the Admin & Operations tab. Major issues or red flags should be immediately raised to the RM.
b. Be sure to look at copies of the entrepreneur’s degrees and other certifications and evaluate any leverage points should you later run into relational challenges.
4. SGS CFO should review the findings from the Commercial due diligence (DD Light) conducted earlier in the Active Pipeline stage and determine the additional information needed to raise confidence of the financial assumptions and model, and to address any concerns raised by the IC. SGS CFO complete the Commercial tab. Findings should be documented in the correct row of the Commercial tab. Major issues or red flags should be immediately raised to the RM.
● Engage the “experts” on the team to lead each piece of due diligence. That is, the local legal counsel should lead the legal review, the accounting and finance team will lead the financial review and the SGS team and deal lead will conduct the commercial and operational review.
● The RM must follow the folder structure, file naming protocols, and be sure to regularly clean up folders to make sure all notes from meetings with management and other stakeholders are being documented and stored. The RM must pay close attention to version control and regularly clean up folders to ensure the latest version of the files are clearly marked. This will save time when the company moves into due diligence. If done well, due diligence will be relatively easy to move into because all of the files and information gather to that point will be easy to find and reference.
6. Based on findings from Step 5 above, RM, SGS COO and Legal complete a gendersmart assessment using the SEAF Gender Equality Scorecard© and accompanying Calculation Sheet, which will result in a robust gender-smart baseline “score” from which the SGS team will re-evaluate the company after the first 180 days, post-investment has passed.
7. RM ensures all outstanding items raised by the External IC and the IIC have been addressed for the document review.
5. RM, SGS COO and Legal complete the ESG and Gender-Smart checklists. RM reviews the company’s responses to the gender equality, environmental, health and safety questions. If the company has responded affirmatively to any of these questions, raise this to the attention of the Dir. of AM to discuss whether and what additional diligence will be required. Depending on the severity of the issue, external gender and/or environmental consultants may be necessary.
a. Review the detailed STEP 3 below for information on how to conduct management interviews.
Standards:
This should be led by the SGS team and is part of the Admin and Operations due diligence checklist section. We pull out management interviews as a separate “step” (i.e., they should be conducted as a part of STEP 2 above) because there are important standards that should be followed. It is important that the SGS COO lead these interviews, given [INV./FUND MANAGER NAME]’s gender-smart strategy, wherein during for the first three years, the management team reports to SGS. These interviews allow SGS to evaluate the team and use the inputs from the management team to refine the First 180-Days Statement of Work and the First 180-Days Project Plan.
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STEP 3: CONDUCT MANAGEMENT INTERVIEWS
1. SGS and RM prepare the management and employee interview guide. a. For management – Use the Management Interview Guide.
Outcomes:
● To assess the company’s current management team and identify any gaps, particularly in the area of gender equality.
a. Themes of the current state, future state, challenges and barriers, case for change and initiatives that were gathered from the management interviews. Theming involves a rigorous review of the raw meeting notes, organizing the
4. RM and SGS prepares a summary report of the interviews:
● To use the assessment to build a gender-smart hiring plan, update the growth plan, and develop the First 180-Days Statement of Work and the First 180-Days Project Plan.
2. RM works with Company DD POC to schedule interviews.
3. SGS and RM interview members of the company’s management team.
b. SGS and RM must take verbatim meeting notes with their computer.
● Raise any significant issues that could have the potential to be “deal killers” immediately upon identifying them. Do not sit on this information, as there is no point in continuing to expend resources on DD if there are significant problems that could prevent the deal from advancing.
● Management plan and compensation model.
a. SGS and RM interview six to twelve male and female employees. Ensure an even balance between female and male employees as much as possible.
● Be in constant communication with the company during the DD review - if documents or answers the company provided raise more questions, ask for follow up information. Keep asking questions until you are satisfied you have all the documentation or information you need. Do not leave any stone unturned.
Process:
● All interviews must be documented in verbatim notes.
● All management team members should be interviewed.
Standards:
● The RM and team must spend time at the company during this step. Request a desk at the company. Do not be afraid to speak with members of the team. Speak with members of the management, finance and operations teams. Ensure that you are obtaining a balanced perspective from both female and male team members, and positions in the company.
82 SG2X PLAYBOOK FUND MANAGEMENT SOP | notes under heading “themes”, and making sure there is enough data points to validate the theme (three to five people have mentioned something like this).
6. SGS presents findings and management plan to IIC for approval. Incorporate any comments or feedback from IIC.
b. Proposed performance plan including gender-equal, performance-based pay, incentives and benefits.
● RM must use a running meeting notes file to capture discussions with the promoter and management. A common mistake is that these notes get scattered in various places and in emails. As a result, when and if various team members ask questions to the promoter that they believe they have already answered in prior discussions, the promoters can get frustrated and create tension with [INV./FUND MANAGER NAME]. It also damages [INV./FUND MANAGER NAME]’s trust brand. Eventually, [INV./FUND MANAGER NAME] will use a CRM, which will help to organize and capture information as the deal moves through the active pipeline process. Until then, use a single running meeting notes with the promoter to capture all discussions.
7. Once IIC approval is received, update the First 180-Days Project Plan and begin developing job descriptions and recruitment plan in collaboration with the firm’s / fund’s HR department.
● Management interviews should follow the gameboard framework: current state, future state, case for change, barriers, strategies. During the current state discussion, challenges should be explored, and root causes sought.
● Employees should be assured that nothing will be attributed to them unless they specifically want it to be. And that interview notes are confidential and only used by the [INV./FUND MANAGER NAME] team.
5. SGS develops enhanced management plan and compensation model: a. The proposed org structure and management team with vacancies.
3. SGS presents the First 180-Days Project Plan to the IIC for feedback and upgrades.
b) A draft 12-month budget aligned to the five-year financial model, base case.
Standards:
1. The SGS team reviews the e-CIM (commercial DD) and Financial Model and prepares the company’s 5-year strategic growth plan (3 pages), annual management plan (AMP), first year 12-month budget and 13-week cash flow (13WCF), collectively the first year SGS plan.
5. SGS updates the First 180-Days Project Plan and First 180-Days Statement of Work to the promoter and management for their buy in and signatures.
● The AMP, budget and 13-week cash flow must be co-created with the management team.
Process:
4. SGS prepares the draft organizational structure and position agreements for the company and executive team positions.
2. SGS updates the First 180-Days Project Plan based on formal due diligence findings, outlining corrective actions that will take place immediately post-investment to start the company on its path towards becoming a market-leading gender-smart SME.
● The managers must have graduated The Exec’s Program to become part of the exec team.
Outcomes:
● The promoter must sign the First 180-Days Project Plan and First 180-Days Statement of Work as a condition to close.
c) A completed First 180-Days Statement of Work and First 180-Days Project Plan signed off by IIC, [FUND NAME] IC and the promoter.
83 SG2X PLAYBOOK FUND MANAGEMENT SOP |
● No less than six employees, equal between male and female, should be interviewed at different levels of the organizational structure. REPARE THE FIRST 180-DAYS PROJECT PLAN & STATEMENT OF WORK
d) A draft 13-week cash flow, aligned to the budget.
● To ensure the SGS team has a clear onboarding, six-month and annual plan for the company, including:
a) A draft Annual Management Plan (AMP) and OKRs aligned to the five-year strategic growth plan.
STEP 4: P
4. RM coordinate with the legal team to ensure that any diligence issues, items or risks that need to be addressed in the definitive investment documentation are addressed. For example, to list any CPs to the closing for obtaining third-party approvals or for rectifying any other DD issues pre-closing or including post-closing covenants to remedy any DD issues that may be dealt with post-closing, if appropriate.
● To update the financial model with any revisions to assumptions or new assumptions based on the DD findings.
2. RM and the SGS and Legal team synthesize the DD findings and key issues in the Final CIM, using the Final CIM template:
a. Identify whether there are any follow-up questions, outstanding issues or pieces missing in order to ensure a fulsome DD review has been completed and all questions have been answered. If not, go back to the company for that information.
Outcomes:
● To turn the Executive Confidential Information Memorandum (e-CIM) into the more fulsome, Final Confidential Information Memorandum (Final CIM), incorporating information and findings learned through due diligence.
Standards:
STEP 6: OBTAIN FINAL IIC & IC APPROVAL Outcome:
Process: 1. RM holds meeting with SGS and Legal to review the key findings and material issues from the due diligence analysis in Step 3.
All team members must use [INV./FUND MANAGER NAME]’s writing standards and style guide.
a. The Final CIM should build off of the information in the e-CIM and provide a more fulsome, narrative analysis of the investment. Include findings from the due diligence review in the Final CIM where appropriate.
3. SGS CFO and IM analyst update the Financial Model, if necessary, to fix any revisions to assumptions (or include new assumptions) based on the due diligence findings.
● To synthesize all of the information and diligence findings, across all sources and teams, and summarize the key issues and risks for the deal.
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STEP 5: PREPARE FINAL CONFIDENTIAL INFORMATION MEMORANDUM (FINAL CIM)
All supporting documents and materials must be saved in the appropriate folders.
a. Present the DD findings and any key risks or issues to the IIC. The IIC will vote whether to advance. If the IIC approves, then the Final CIM and model will be shared with the External IC for their review and final approval.
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1. RM shares the Final CIM and model with the IIC by email and asks for their review anda.feedback.Setatimeline to collect their feedback. Schedule a 60 min meeting to review the CIM and ask if there are any outstanding issues.
To share [INV./FUND MANAGER NAME]’s final due diligence findings with the IIC and the External IC to make an informed final decision on whether to invest in the deal.
●
3. Assuming the IIC approves, SIM or Dir. AM schedules the [FUND NAME] IC meeting.a.Get legal approval on all files. b. Upload files to the company’s shared drive shared with the [FUND NAME] IC.
4. Run final [FUND NAME] IC approval meeting. a. Follow to [FUND NAME] IC SOP.
5. Receive any final feedback or questions from the External IC. The External IC will then vote on whether to proceed with closing the investment.
2. RM schedules IIC final approval meeting:
Process:
6. If the External IC approves the investment, continue to the remaining stages in this SOP. Standards: ● IC documents must be sent three days before the IC meeting. ● Final vote must be documented.
86 SG2X PLAYBOOK FUND MANAGEMENT SOP | STAGE 4: DEAL CLOSING READ FIRST Note to Reader: Preparation of legal agreements will be unique to each investment. However, RENEW recommends that the investment firm / fund manager draft templates and precedent agreements that should be used to the extent possible, to ensure standardization of terms and efficiency in drafting. Various sections of the legal agreements will need to be tailored to each investment, to ensure that appropriate conditions precedent or other clauses are included to address any risks or issues specific to the investment. A Local Legal Counsel (LL) should be engaged to ensure that the legal agreements comply with necessary local regulations. Once the legal agreements are executed, the investment closing process begins.
The best practice is to work with a LL to develop a jurisdiction-specific closing checklist, and follow the checklist, updating it with lessons learned after each deal closing. In addition, a standalone legal closing checklist should be prepared (or incorporated into the above) to ensure tracking of all the legal agreements, conditions precedent and other deliverables required by the legal agreements.
Objective: Complete all steps needed to close the investment in accordance with the rules and regulations governing the investment Targets: Close the investment within three weeks of final External IC approval
Indicators of Success: No missed steps Scope: All legal work related to closing the investment Tools: Legal agreements; legal closing checklist Time commitment: Three weeks of mostly full-time support from local legal team and RM, with considerable support from the general counsel and IIC lead. Main Activities: Execution of the closing checklists Accountable: General Counsel, with support from the Local Legal team Best Practice: RM and legal team work closely together in an intense three-week period to close the investment. Strong project management, close collaboration with the promoter, and regular updates (daily huddles) should be used
The investment closing process is highly mechanical and will be tailored to each jurisdiction and deal type (e.g., debt versus equity). It is very important to follow each of the steps in the closing process, as these are the steps that will be necessary to ensure that the investment is properly registered as a foreign investment and that any returns can be repatriated. These are also the steps necessary to ensure receipt of all licenses, approvals or permits necessary to make the investment and for the company to operate (or continue to operate) as contemplated. Depending on the jurisdiction, it is crucial that the closing steps are done properly and at the right stage of the closing process, as this may not be able to be corrected after the fact if a step is missed.
Only once you have triple checked that all conditions precedent (CPs) have been completed, all signatures on legal agreements have been received, all documents are in hand, and all incountry steps have been completed, should any funds be wired. The best practice, if possible, is to wire funds to a bank account that we have joint control over (signatory rights over) so at
QUICK REFERENCE GUIDE: CLOSING
Finally, be prepared for closing to take twice as long as you might think it will, particularly depending on the jurisdiction. Build in ample time to ensure all closing steps are completed and hold daily huddles with key team members to ensure closing activities are being executed in proper order. Regular communications with the promoter are also important to ensure no delays are created from their side. Often the promoters might bring in their own legal counsel at this stage. This can create further delays. Ideally, the promoter had already hired a lawyer earlier in the process, so that this stage is not disrupted by new actors.
PRINCIPLES
● Engage a local legal counsel to advise you and to help navigate the closing process with any local government offices and regulatory bodies; each country is different. Closing Checklist Note to Reader: Below is an example closing checklist used by the RENEW team for closing equity investments in Uganda. Each jurisdiction and each type
minimum, in a worst-case scenario if something goes wrong, the company cannot walk away with your funds as your signature will be required on withdrawals.
SCOPE OF STAGE
The actual investment closing steps take place after final IC approval. Once formal due diligence has been completed, the investment agreements are negotiated and ready for execution, and the IIC and External IC have given final approval, the closing process commences. It covers the period of time from final IC approval through the company receiving the investment and completing any in-country registrations or approvals that may be necessary.
The following principles are non-negotiable standards that must be adhered to during the deal closing stage: Use an investment closing checklist. See an example closing checklist for a Ugandan equity investment below.
FILES AND FOLDERS [INSERT RELEVANT FILE PATHWAYS] ACTIVITIES: SAMPLE CLOSING CHECKLIST NAME LINK USE Sample Closing Checklist Tool - Sample
87 SG2X PLAYBOOK FUND MANAGEMENT SOP |
Negotiation and drafting of the definitive investment agreements will take place concurrently with latter portion of the formal due diligence review in Stage 3, so that the investment agreements are finalized (subject to any comments from the IIC or External IC provided during their final approvals) concurrently with presentation of the due diligence findings and Final CIM to the IC. In addition, certain items that can be prepared in advance for the closing process can be started while formal due diligence is ongoing.
●
88 SG2X PLAYBOOK FUND MANAGEMENT SOP | NAME LINK USE of investment (e.g., debt, equity) will require a closing checklist tailored to that specific jurisdiction’s rules and regulations. Consult local counsel to develop the checklists and continually refine them after each deal closing to incorporate lessons learned.
1) After ten years of SME investing in East Africa, we have learned that most SMEs struggle to implement their growth plans because they need stronger management systems and teams to execute the plan; 2) There is a dearth of affordable local middle management that has the experience needed to run management divisions of a company as it aggressively scales; 3) Training helps but a more hands-on approach to, where classroom training is reinforced with on-thejob implementation support accelerates adoption of best practices and speed of execution; 4) SMEs as standalone companies may be challenging to exit. Rather, by using a shared growth team (SGS team) across a cluster of complementary SMEs under a platform, an experienced shared growth team can work across multiple companies and help integrate them into a larger company that may be more profitable and attractive to larger investors.
The value creation stage can be broken down into three phases: 1) Build: When SGS builds the management systems of the company; 2) Operate: When SGS runs departments of the company and trains and apprentices a local gender-balanced exec team; 3) Transfer: When SGS formally transfers the management over to the trained, local, gender-balanced executive team. At the end of the three-year value creation stage, the goal is for the company to have hit its growth plan targets and is being run by a skilled gender-balanced, local executive team.
approach to value creation is active, and can be summarized as a build, operate and transfer (BOT) model. We use this approach for a few reasons:
As much as possible, the SGS team must use a systematic approach to building the management systems and apprenticing and training the gender-balanced exec team. This not
In our approach to portfolio value creation, the SGS team act like a managing partner (e.g., investor-operator, buy-build investor, business partner), and assumes management of key departments of the company for a period of time. The current management is trained and tested and if retained, become the deputy Chief Experience Officer (CXO) and begin an apprenticeship period under the SGS leadership, along with receiving regular trainings.
89 SG2X PLAYBOOK FUND MANAGEMENT SOP |
QUICK REFERENCE GUIDE: VALUE CREATION
STAGE 5: PORTFOLIO VALUE CREATION READ FIRST Note to Reader: Portfolio value creation is the work required to increase the value of the portfolio. Different investors use different approaches to add and unlock value in their portfolio – some are passive, some are RENEW’sactive.
Objective: To build the management systems and team that maximize likelihood of successful growth plan execution, and company integration with other portfolio companies Targets: 100% implementation of the First 180-Days Project Plan Indicators of Success: Completion of the checklists Scope: Building the management systems of the company within the first six months Tools: First 180-Days Statement of Work; First 180-Days Project Plan; The Exec’s Program tools Time commitment: 50% of SGS team’s time Main Activities: apprenticeship;implementation;Checklisttraining;coaching and transition Accountable: SGS COO Best Practice: Company management see the SGS team as their managers
Much of the work done to build the management systems happens in the first six months (180 days) of the SGS team’s engagement with the company and is outlined in the First 180-Days Project Plan, and the First 180-Days Statement of Work (SOW) signed by the company management and SGS team. By the time the First 180-Days Project Plan begins, the SGS team knows the management team and understands the company, because they have been running the team through The Gender-Smart Exec’s Program, interviewed them during CDD, and led many parts of the analysis and formal DD on the deal. When the investment closes, the SGS team should be able to move into the management role of the company and begin implementing the First 180-Days Project Plan (outlined below) quickly and smoothly. The project plan will help guide the team in building gender-smart management systems in the company.
Practice what you preach. [INV./FUND MANAGER NAME] must live by what we expect our portfolio companies to implement. [INV./FUND MANAGER NAME] should model the business disciplines that they expect SME management to implement from the SG2X Playbook. If [INV./FUND MANAGER NAME] expects an SME to prepare and deliver smart-looking presentations and report financials monthly, do so at [INV./FUND MANAGER NAME]. If [INV./FUND MANAGER NAME] expects women in leadership teams at the SME, [INV./FUND MANAGER NAME] should have women in leadership positions, as well. Test everything in this Playbook at [INV./FUND MANAGER NAME] before implementing at companies.
90 SG2X PLAYBOOK FUND MANAGEMENT SOP | only allows the SGS team to perfect the process but allows them to perform this work across multiple companies at the same time. It also creates standard systems and practices across the portfolio to foster synergies, management integration and diversity, consolidated reporting, and faster integration into platform companies.
PRINCIPLES
The following principles are non-negotiable standards that must be adhered to during the value creation stage:
Manage the company for three years during the rapid scale up growth phase of the company. This should be clear to the owners and management, been reflected in the terms and definitive legal agreements, and introduced to the management months before when they started The Gender-Smart Exec’s Program. [INV./FUND MANAGER NAME] acts as a managing partner, and leads departments of the company, to help the company adopt best practices and to upskill the management team and implement gender-smart practices to the company.
(STAGE 2) Invest in a “cluster” or “batch” of SMEs in similar sectors at the same time. This helps IM and SGS maximize the efficiency of their investment work, training, management, knowledge sharing and human capital development across multiple companies, and for the creation of platform companies. Platform companies are made
Get immediate buy-in to make the company gender-smart. With SME owners and management, we recommend the fund manager make it clear from the start that making the company gender-smart is a key part of its growth strategy. Present clear evidence that gender-smart companies outperform non-gender-smart companies across several financial indicators.
Adhere to a zero-tolerance rule for ethical violations. This is obvious, but a message you should repeatedly emphasize. You will be under pressure to hit deadlines. There will be a number of projects that are dependent on one another, and you may be tempted to pay a bribe or facilitation fee to get something done. Simply, do not do it. This will put you, the fund and the portfolio company at risk of legal action. If you believe you are encountering delays because someone expects a bribe, document the incident and inform your manager immediately.
Focus on two main time-bound objectives. 1) Building and transitioning management to a gender-balanced executive team by month 36; and 2) Hit $[TARGET USD VALUE] EBITDA by month 60. While other objectives will be defined, we recommend the fund manager keep their goals simple and clear and communicate them regularly to their teams in the firm and at their companies.
Run the SGS team like its own management consulting business. Staff the SGS team with operational expertise and strong project managers and invest heavily in knowledge sharing of lessons learned and best practices from portfolio management experience. At steady state, the SGS team made up of five experienced and trained operators should be capable of handling five operating companies.
Deliver excellent trainings and immediate implementation support at the company level. All SGS members should be good trainers. Note to Reader: RENEW estimates anywhere between 50 to 100 hours of training and/or coaching needs to be delivered to companies prior to investing, and a minimum of two hours per week, or eight hours per month, of training be performed for the first two years of an investment. But training alone is not enough. The SGS team member leading the training must also implement what they are training, and coach the local management team to implement the training.
Always be respectful towards owners and management, but firm on the process. If someone internally at the portfolio company is resisting work that you are trying to accomplish, first empathize. Try to understand that your involvement in the portfolio company may be intimidating and seen as a threat to their job, so consider having oneon-one coaching and/or mentoring conversation to understand why they may be resisting an employee or manager’s course of action – it may be as simple as them not understanding the importance behind a best practice, or a more structured solution such as a 3-month corrective action plan. Never call them out or embarrass anyone publicly. Always start by asking how they are doing and learn something about their personal story (e.g., where they went to school, how many kids they have, etc.). Ideally, much of this relationship and rapport building has already been done in the pre-investment stage, but we recommend it continues during the “Build”, “Operate” and “Transfer”
91 SG2X PLAYBOOK FUND MANAGEMENT SOP | up of multiple SMEs in the same sector and have the potential to achieve impact and financial goals faster than stand-alone SMEs.
Use objectives and key results (OKRs) as the main management system for all companies. As taught in The Gender-Smart Exec’s Program, the OKR system is the management system that should be used by all companies. This standardizes the planning and review process across the portfolio and provides a portfolio-wide planning schedule.
Focus on a few critical disciplines and implement them rigorously. Always fall back to the core disciplines of the Playbook, and if they are not being done right, stop and go back until they are being done right. Do not let anyone on the SGS team stray from the Playbook. Every single SGS team member should be committed to implementing the Playbook or it will not work. Remember that 80% of the results are going to come from 20% of the work. Focus on building the few critical business disciplines outlined in this Playbook, memorize them and do not overdo it. Note to Reader: RENEW believes these are disciplined use of: 1) The OKR system to manage planning and implementation, 2) The weekly Legend and “I Musts” (or equivalent in-house project management plan/software) as the most tactical plan to drive projects forward, 3) Calendars to increase management’s ability to plan and get things done, 4) A 13-week cash flow to track and forecast cash flow; 5) A weekly and monthly KPIs dashboard to get the team focused on measurable performance; 6) A system to close the books every month by the 10th and send the financial statements and a TvA analysis to the Exec and SGS team by the 15th; 7) Meeting disciplines and purpose, outcomes and agenda (POA), all of which include gender-smart considerations.
Pay special attention to change management. For many on the management team, it will feel like there is a lot of change occurring. SGS should have regular, informal and formal check ins with the management team to help them manage the change they are experiencing so it doesn’t overwhelm them and burn them out. Explain that the goal of the changes SGS is making is to support the company’s growth.
Stick with the process. The SGS team may try to “win over” the legacy management team and employees, and in so doing entertain one-off requests. Do not do this. Be kind but stick with the policies in the employee manual. The SGS team should be familiar with the HR policies. Never stray from the policies, unless all the fund manager’s partners agree.
Replace legacy management that resists change. Some legacy management might not change, and it is important that this resistance does not pull down the overall performance of the company. Make it clear that managers will be trained and motivated to stay on board under the new strategy. If a manager is not willing or able to perform their role in six months (despite one-on-one coaching and/or mentoring sessions, per the bullet point above, and after being put on a corrective action plan), then consider removing them from their role.
92 SG2X PLAYBOOK FUND MANAGEMENT SOP | phases. However, if an understanding and/or solution cannot be reached, consider removing the individual from their role.
Use strong delegation skills during the operate step. Delegation is a simple process but hard for many to follow. It begins with communicating the “why” and “what good looks like” for whatever is being delegated, training on the “how” via SOPs, and then giving the delegate time to implement. SGS should offer check-in meetings to help the local manager feel supported and to answer questions. Much of this is done during the apprenticeship stage.
93 SG2X PLAYBOOK FUND MANAGEMENT SOP | SCOPE
TARGETS
SGS has fully transitioned management to a gender-balanced executive team by month 36.
The scope of value addition begins before the closing (T minus 180 days), and for three years after the investment closing. It is broken into four activities: 1) prepare (pre-investment), 2) build, 3) operate and 4) transfer.
TOOLS Project Management Tools NAME LINK USE Master Planning SOP Tool - Master Planning SOP This comprehensive tool provides a framework to develop a company's: 1) 20Year Guiding Statements, 2) Five-Year Strategic Plan, and 3) Annual Management Plan (AMP). Further, it explains how to translate the company’s SMART Objectives and Key Results (OKRs) of their AMP into actionable projects and then use the AMP in their monthly and weekly meetings.
Other growth, impact and financial targets are created for each company and platform company and are reflected in the company’s CIM.
Within the first 180 days of an investment, all checklist items have been completed by the SGS team and status report has been shared with the IIC.
The company reaches $[TARGET USD VALUE] EBITDA by month 60.
Executing Battle Rhythms SOP Tool - Executing Battle Rhythms SOP
An accompanying tool to the Master Planning SOP, the Executing Battle Rhythms SOP, provides a detailed overview of the meeting cadence that SME executives and managers should follow in pursuit of implementing the
The first 180 days involves building the management systems of the company by implementing a number of checklists across the management departments of the company.
tactical and long-term plans of the AMP.
The ultimate guide for implementing The GenderSmart Exec's Program training (complimenting the First 180-Days Project Plan), this tool outlines the core disciplines, lessons and best practices outlined throughout the program, providing executives with a Gantt chart implementation roadmap. While the tool can be used outside of the realm of The Exec's Program, the SG2X Playbook requires all company executives and senior management to take the training. Governance USE
A thought piece published by Harvard Business Review on executive communication, this article provides five key messages that executives must communicate with their teams to ensure vision and mission alignment and the achievement of core objectives and key results. These messages include organizational structure and hierarchy, financial results, the leader's sense of his/her job, time management and corporate culture.
Tools NAME LINK
Exec's Program Implementation Roadmap Tool Tool - Exec's Program Implementation Roadmap
94 SG2X PLAYBOOK FUND MANAGEMENT SOP | NAME LINK USE
HBR: 5 Messages Leaders Must Manage Tool - 5 Messages Leaders Must Manage
Corporate
This SOP summarizes how fund managers, and their portfolio companies can work together to set up and manage a gender-smart Board. In the SOP, there are additional tools to help executives set up and manage a Board, including a Sample Statement of Work, Sample Board Ethics Policy, Sample Board Agenda, Sample Board Meeting Minutes, Sample Email Templates, etc.
95 SG2X PLAYBOOK FUND MANAGEMENT SOP | NAME LINK USE
Setting Up & Managing a Gender-Smart Board SOP Tool - Setting Up & Managing a Gender-Smart Board SOP
This IFC guidebook "specifically addresses the challenges and opportunities faced by SMEs at the various stages of their lifecycles, offering tailored corporate recommendations.governance The Guidebook includes the Action Planning Tool to help SME owners, investors, and managers take a pragmatic approach to governance, as a means of strengthening their businesses over the long term.” Note: this is a third-party resource published by the IFC.
SME Governance Guidebook Tool - SME Governance Guidebook
Board Diversity Charter Tool - Board Diversity Charter
This template provides SMEs with a straightforward Board Charter that positions SMEs to pledge that at least 30% of their Board members are women, thus support gender equality and diversity on the
NCNA Code of Ethics for Board Members
To be used in the event an SME or fund manager is looking for robust governance and financial reporting templates to be completed and shared before Board meetings. This template provides detailed instructions on how to complete the Summary Report, Financial Report, and Non-Financial Statistical Report tabs. Note: this is a third-party resource published by Hayes Knight.
Running Effective Board Meetings SOP Tool - Running Effective Board Meetings SOP Written with an SME executive audience in mind, this tool should be provided to and used by the SME management team as the investee company and the fund manager go about setting up the company's governance systems. The tool helps set expectations and compliments the Setting Up & Managing a GenderSmart Board SOP.
96 SG2X PLAYBOOK FUND MANAGEMENT SOP |
This Code of Ethics for Board Members template provides a starting point that companies to further tailor towards the specifics of their board.
Tool – Code of Ethics for Board Members
Governance Reporting Template Tool - Governance Reporting Template
NAME LINK USE Board. Note: this is a thirdparty resource published by The Boardroom Africa & Alitheia Capital.
13-Week Cash Flow OnePager Tool - 13-Week Cash Flow One-Pager
13 Steps to Close the Books Guide
The 13-Week Cash Flow tool provides a company with a means to forecast weekly cash inputs less cash outputs, providing a company with an accurate projection of their cash runway over a rolling 13-week basis. The SME should regularly use this tool to help them make informed financial decisions.
13 Steps to Close the Books Guide
The purpose of this document is to provide an SME's accounting and finance department with a simple, sector-agnostic stepby-step guide on how to close their accounting books monthly, a discipline that all SMEs should commit to upholding.
97 SG2X PLAYBOOK FUND MANAGEMENT SOP | Finance & Accounting Tools NAME LINK USE
An accompanying one-pager to the 13-Week Cash Flow Tool, this document provides a high-level overview of the steps a company must take to update and maintain the 13-Week Cash Flow Tool.
Mastering Cash Flow Tool Tool - Mastering Cash Flow This tool allows executives to calculate their marginal cash flow to determine if volume is hurting their growth, their Cash Conversion Cycle (CCC). The CCC will determine the number of days it takes from the time of purchase to getting money in the bank and the impact on
13-Week Cash Flow Tool 13-Week Cash Flow Tool
98 SG2X PLAYBOOK FUND MANAGEMENT SOP | NAME LINK USE cash by making marginal improvements to the seven levers of cash flow.
Tool - Accounting Policies & Procedures Manual
This "how-to" guide provides a high-level overview of the seven steps required to create a business budget and offers links to existing templates that companies can access online for free. Note: this is a third-party resource published by Bench.
A Guide to the IFRS for IFRSSMEsfor SMEs Standards Supporting Materials
The International Financial Reporting Standard (IFRS) for SMEs is a set of globally accepted financial reporting principles tailored to SMEs' capabilities and needs. The IFRS organization published a guide, supporting materials, and a free self-guided training module that SMEs can use to better understand and apply the IFRS accounting principles to their company's financial reporting.
How-To Guide for Creating a Business Budget
While there are several examples of accounting policies and procedures manual templates available online, RENEW finds this manual to be comprehensive without being overburdensome. RENEW updated it to fit the context of SMEs operating in Africa. SMEs can adopt the sample accounting policies and
Accounting Policies & Procedures Manual
IFRS for SMEs Modules
Tool - A Guide to the IFRS for ToolSMEs- IFRS for SMEs Standards Supporting ToolMaterials- IFRS for SMEs Modules
Tool - How-To Guide for Creating a Business Budget
This helpful article provides SMEs with an overview of: 1) what exactly a finance department is, 2) the main objectives of this department, 3) the functions it carries out, 4) the elements comprising this department, 5) positions required to run this department, and lastly 6) the importance of knowing information technology when running the finances of an organization. Note: this is a third-party resource published by Cleverism.
Financial Policies & Procedures Manual Tool - Financial Policies & Procedures Manual
99 SG2X PLAYBOOK FUND MANAGEMENT SOP | NAME LINK USE procedures outlined in the tool to strengthen their accounting function and systems. Note: this is a thirdparty resource originally published by Wegner CPAs that has been modified by RENEW.
Similar to the tool above, the Financial Policies & Procedures Manual published by the State of Victoria of Australia provides a solid foundation upon which SMEs can tailor the sample financial policies and procedures to the specific sector, context and needs of the company's finance department. RENEW updated it to better fit the context of SMEs operating in Africa. Note: this is a thirdparty resource published by
Setting up A Finance Department Tool - Setting Up a Finance Department
100 SG2X PLAYBOOK FUND MANAGEMENT SOP | NAME LINK USE the State Government of Victoria that has been modified by RENEW. Human Resource Tools NAME LINK USE
Template Tool - Job Interview Questionnaire Template
The sample interview questionnaire can be used as a foundation upon which SMEs can build for or tailor to their specific company (i.e., sector) or the role for which they are hiring (i.e., adding in technical, role-specific questions). The questionnaire provides a blend of standard and behavioral questions, blending in gender sensitivity, where appropriate.
Performance Review Template Tool - Performance Review Template
Questionnaire
Job Interview
The sample performance review template comprises four parts: 1) the performance review SOP; 2) the employee self-evaluation; 3) the manager evaluation of an employee; and 4) the incentive plan. Similar to the Job Interview Questionnaire template, this tool can be tailored to the company's specific needs and employee evaluation requirements.
E-Myth: Creating Your Organization Chart Guide Tool - Creating Your Organization Chart Guide E-Myth is a well-known book on entrepreneurship and an online business coaching platform. E-Myth published a "how to" eight-step guide on creating and completing a
101 SG2X PLAYBOOK FUND MANAGEMENT SOP | NAME LINK USE well-balanced and effective organization chart as part of the suite of free resources available to entrepreneurs. Note: This is a third-party resource published by EMyth Worldwide.
10 Simple Strategies to Run Inclusive Meetings Tool - 10 Simple Strategies to Run Inclusive Meetings Sourced from three articles, this simple one-pager provides companies with ten
Tool - Gender Diversity Tool - Tackling Unconscious ToolBias - Gender Neutral Job ToolDescriptions-Gender Pay Gap Analysis
6 Steps to Writing a Great Position Agreement and Template Tool - 6 Steps to Writing a Great Position Agreement and Template RENEW created a gendersmart, six-step guide on writing a clear, accurate and adaptable position agreement, including a position agreement template. Companies are also encouraged to review EMyth's Position Agreement Guide, which provides a slightly more in-depth overview on how to write a position agreement and position agreement template.
CDC Gender Toolkit: Gender Diversity CDC Gender Toolkit: Tackling Unconscious Bias CDC Gender Toolkit: Gender Neutral Job Toolkit: Gender Pay Gap Analysis
The CDC Gender Toolkit consists of detailed guidance and a suite of tools, templates, and analysis to help companies identify and prevent gender biases from entering their HR and recruiting systems, processes, and functions. Note: These are third-party resources published by the CDC.
CDCDescriptionsGender
Checklist: Things to Consider Tool - Communications & Gender Checklist: Things to Consider This short guide outlines tips for applying a gender and inclusion lens while developing and reviewing written and audio-visual communications materials. Note: This is a third-party resource published by Value for Women.
NAME LINK USE Inc.com: Seven Essential Elements of a Marketing Plan Tool - Seven Essential Elements of a Marketing Plan
First Round Interview: Leslie's Compass: A Framework for Go-ToMarket Strategy Tool - Leslie's Compass: A Framework for Go-To-Market Strategy
102 SG2X PLAYBOOK FUND MANAGEMENT SOP | NAME LINK USE strategies on how team members can run inclusive and gender-smart meetings. The strategies are meetingtype agnostic.
The article published by First Round Review provides a conceptual framework for how companies can approach the complex and nuanced relationship between marketing and sales. The tool provides an overview of the two "approaches" to determine whether marketing or sales takes the lead (i.e., marketing serves sales or sales serves
Marketing & Sales Tools
Value for Women: Communications & Gender
This article by Inc.com provides companies with a high-level list of seven essential components of a marketing plan that helps keeps a sales pipeline full.
The Harvard Business Review article provides advice on approaching the "art of selling" for individuals who may not be well-versed or inexperienced in sales, outlining six actionable principles to follow and emphasizing them through the showcasing of two short cases studies.
BCG: Closing the Gender Gap in Sales Leadership Tool - Closing the Gender Gap in Sales Leadership
HBR: How to Improve Your Sales Skills, Even If You're Not a Salesperson Tool - How to Improve Your Sales Skills, Even If You're Not a Salesperson
103 SG2X PLAYBOOK FUND MANAGEMENT SOP | NAME LINK USE marketing). Marketing Assessment Tool Tool - Marketing Assessment This complimentary tool helps companies work through Leslie's Compass: Go-To-Market Strategy Framework and should only be used after reading through the article. In essence, the tools help put a conceptual framework and thought to paper, pushing companies to go through the exercise of determining whether marketing or sales should lead for their company's products and services.
Sales Pipeline Tool Tool - Sales Pipeline An example of a sales pipeline tool that can be used as a foundation for a
This article by BCG discusses the reality of the significant gender gap in the sales function of a company. It provides four concrete "interventions" for companies to enact that will help improve gender equality in their sales department.
NAME LINK USE
One of the biggest challenges that SMEs face is knowing when to hire someone. Often, it is an intuitive decision driven by persuasive manager and is not rooted in objective data. The Labor Efficiency Analysis tool pushes SMEs to look at the number behind the hiring decision, showing for which
company's sales function. The pipeline tool is separated into four categories: the sales lead information, the company's relationship management of said lead, the value of the lead, and the stage of the lead within the sales pipeline. The tool can be used for B2B or B2C companies; the columns simply have to be tweaked to fit the company's product and services.
This simple financial KPIs template empowers companies to calculate financial ratios and metrics that will assist with their financial decision making, enrich their investor and stakeholder reporting (e.g., Board meetings), and provide insight on the company's overall "financial health."
NAME LINK USE Simple Financial KPIs Template Tool - Simple Financial KPIs Template
Labor Efficiency Analysis Tool Tool - Labor Efficiency Analysis Tool
104 SG2X PLAYBOOK FUND MANAGEMENT SOP |
Portfolio Company Monitoring & Evaluation Tools
NAME LINK USE department(s) and when it is appropriate to hire new staff.
105 SG2X PLAYBOOK FUND MANAGEMENT SOP |
Global Impact Investing Network's IRIS+ and 2X Challenge Metrics Tool - Global Impact Investing Network's IRIS+ and 2X Challenge Metrics Leading development finance institutions and The GIIN have co-developed a set of gender impact metrics that will be adopted by members of the 2X Challenge and encouraged to be adopted by SMEs in general. The metrics are structured around the 2X Challenge Criteria, and cover data points on women's economic empowerment and gender equality.
This stage is focused on implementing a series of checklists across the standard management departments of a company to ensure the systems and disciplines are built in the new portfolio company. Outcomes:
Executive ReportingDashboard Template Tool - Executive ReportingDashboard Template This template provides companies with the means to start and build upon an internal executive reporting dashboard that can be maintained by the CEO and used to reference essential company metrics quickly. The dashboard outlines several critical ratio calculations and presents targets versus actual variance analysis for several units, including HR (employment), Operations, Finance, etc.
ACTIVITIES STEP 1: ONBOARD & BUILD
● Managers have a growth mindset: All managers have a healthy morning routine that includes 30-minutes of exercise, reading their personal vision statement out loud, drinking 1 liter of water, reading something inspirational (devotional, book), journaling (what they are excited about, what a good day would be, grateful for), and reviewing the calendar for the day.
● The company and management have a strong project management capacity: All managers are using the company Weekly Legend and never miss the Monday Legend meeting, Wednesday stand-up and Friday Week in Review meetings. The Legend template will be provided. At 9am on Monday morning all managers must attend the Legend meeting to kick off the week and review division goals and managers individual “I Musts” - all managers share their I Musts and ask for feedback. Immediately after the Legend meeting, managers must map their I Musts to their calendar. On Wednesday all managers must attend a short 15-minute stand up meeting to confirm they are on track to hitting their personal and division I Musts; on Friday at 5pm all managers must attend the Week in Review (WIR) meeting to evaluate Targets vs Actuals for their division and personal “I Musts”. They will also set goals for the next week. The meeting closes with “Shout-Outs”, where managers recognize other team members for exceptional work. Every week the COO shares a discipline in the Legend and reads it out loud during the Monday and Friday meetings to reinforce The Exec Program disciplines. Each and every management sets three “I Musts” every week and maps time on their calendars for that project work. All managers religiously use their calendars to manage their work and meetings for the week. The SGS COO and portfolio company CEO must check calendar use two to three times per month, more frequently during the adoption phase, to ensure this discipline takes hold.
● The company has a gender-balanced, functioning board: The Board of Directors is set up and meeting monthly for the first six months, quarterly thereafter. Every Board
● The company understands the new values, principles and systems that will be used to run the company going forward and why they are so important.
● Management translates annual goals to quarterly OKRs and uses that for their quarterly plans: All managers are using the quarterly OKRs system to guide their weekly project work. All managers participate in a monthly manager KR TvA meeting and report out on KPIs TvA for their divisions.
● Legacy management are trained and evaluated and, where necessary, replaced.
● All management can articulate the company’s gender-smart guiding statements and five-year strategy and annual management plan: All managers have memorized and are able to recite the company’s guiding statements, the company’s five-year SMART goals and the company’s OKRs as outlined in the AMP.
● Within the first 180 days, the SGS team will develop the standard set of gender-smart management systems and disciplines in the new portfolio company.
106 SG2X PLAYBOOK FUND MANAGEMENT SOP |
● Management is trained on and using effective meeting disciplines: All managers must commit to running effective and inclusive meetings. All managers must use a calendar to schedule meetings and every invite must have a purpose, outcomes and agenda spelled out in advance of the meeting by the meeting owner. All meetings must start and end on time, and someone in every meeting must be assigned to take notes and send around a link to the notes and next steps within 30 min of the end of the meeting. For recurring meetings, the next steps from the prior meeting must be reviewed at the start of the meeting. Everyone in the meeting must commit to doing their next steps in between meetings.
● The company is using a daily, weekly and monthly reporting system: A dashboard for the company has been developed and is visible for all staff to see - electronic and/or physical. The SGS COO will track five to 10 KPIs each week or day and share those with the company. The KPIs should be gender-smart and have clear targets that are communicated to the staff. The dashboard should be shared with the investment manager and Board on a regular schedule.
● Standard Operating Procedures (SOPs) are written for each unit: Every manager has written SOPs for the core functions in their units, using a gender-lens. All staff under the manager must be trained on the SOPs and sign a document acknowledging that they will implement the SOPs.
● The company closes their books and provides management with financial reports by the 10th of every month: The company will be set up on an electronic accounting system. The company will have an update finance manual that is signed off by the SGS CFO. The company must be able to close their books by the 5th of every month and generate accurate financial statements with TvA variance analysis no later than the 10th of every month, delivering everything to leadership no later than the 15th of every month.
107 SG2X PLAYBOOK FUND MANAGEMENT SOP | meeting is well run using a PPT. The materials (financials and PPT) are sent out to the Board by the SGS COO no less than three days prior to the meeting. A secretary is assigned to take notes during the meeting, and next steps and resolutions are shared within two business days of the Board meeting. The management team must meet a day after the Board meeting to review decisions and changes to the plan.
● The company has and uses a budget: The company must have a budget developed and approved by the Board of Directors within the first 30-days and run a monthly TvA
● The company’s organizational structure aligns with the growth plan and all managers have signed position agreements: An organizational chart is developed and approved by the board. The org chart must have specific names of divisions and gender-balanced managers, gender-smart KPIs and what that unit is accountable for on the org chart. Position agreements (PAs) for all managers must be developed in a gender-smart way and signed by the manager and the COO. All managers must have developed and signed PAs for their direct reports. Thus, the first two layers of the company must have PAs developed and signed. Career tracks must be developed for all positions in the company ensuring equal opportunity and women’s career advancement and inserted in the HR manual.
● The SGS team, owners (shareholders, board), management and employees all understand the company’s five-year growth plan and SMART goals, annual management plan and OKRs, and that the company will become gender-smart as part of the company’s growth plan.
Step 1.a: Implement Project Management Checklist
● The company is forecasting cash flow: Within 30-days, the company must be using a daily or weekly 13-week cash flow forecast. Updates must never be missed.
● The company has a clear marketing plan: must have a gender-smart marketing strategy written down that includes the company’s target market (demographic and geographic), its branding guidelines, its marketing messages, marketing channels, marketing plans, and have developed key marketing tools (logo, website, document templates [word, ppt, excel]).
● The SGS team is introduced by the owners to employees at a company all-hands as the acting managers of the executive team and company.
108 SG2X PLAYBOOK FUND MANAGEMENT SOP | meeting with leadership to present targets versus actuals for operational and financial KPIs along with variance analysis. This report must be shared with the board.
● SGS and the management team are running three weekly project management meetings - the Monday Legend, Wednesday Standup, and Friday Week in Review.
● The company has an internal training program built on The Gender-Smart Exec’s Program: All middle managers and above have attended The Gender-Smart Exec’s Program and committed to the disciplines.
The first priority of the SGS team is to build a strong project management function at the top of the company. Project management encompasses the planning and execution modules of The Exec’s Program. SGS will thus implement the Project Management systems into the portfolio company. When successfully implemented the company will have achieved the following outcomes within six months.
● The company has adopted a gender-smart HR manual and policies: The Employee Handbook has been tailored to the company, approved by legal, adopted and immediately implemented. The Employee Handbook has been shared with all staff, and every member must sign the Handbook. Gender-smart HR policies and practices must be kept and enforced. The most important policies cover the worst forms of GenderBased Violence (GBV) and are Harassment, Sexual Harassment and Sexual Exploitation, Human Rights, Anti-Human Trafficking and Grievance Procedures. Signage about GBV, gender discrimination, equality and empowerment must be put in visible locations around the company’s physical space. All staff must receive training on these policies to raise awareness; even if the company itself complies with these policies, it may be that these issues are present in its supply chain.
Outcomes:
Tools and SOPs: ● Master Planning SOP ● AMP ● Legend ● Monthly Manager TvA Meeting Process / DEADLINEChecklist:CHECKLIST RESPONSIBLE Day 5 Hold
The company has adopted the OKR system to manage the company, and all management and their respective teams know their unit’s quarterly OKRs and monthly key results.
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❏ All
❏ Monday
● The company has adopted monthly OKR meetings, weekly Exec team meetings, and weekly unit team meetings as the company’s meeting battle rhythm.
Day 15 Implement
All Hands meeting held with owners and SGS team to introduce SGS team and explain how decisions and management will be handled going forward per the First 180-Days Project Plan Statement made by owners and SGS team about the importance of gender-equality and how becoming a gender-smart company will be key to the company’s future growth
●
● The SGS team and management are creating monthly management and financial reports for the Board and for the Asset Management team. all staff meeting to introduce and empower SGS team
109 SG2X PLAYBOOK FUND MANAGEMENT SOP |
● The company has adopted the Legend as the weekly project management tool, and all management and unit staff set three “I Musts” each week and map that time to their calendars.
All Hands email sent to all staff, with message about gender-equality and the roles and responsibilities of the new SGS team and the current owners and management Hands social / meal held to meet all staff SGS Team weekly Legend and daily calendar with management Legend meeting held at 9am - all SGS Team
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Day 30 Complete the company’s five-year strategic plan and annual management plan A gender-smart planning team is established from within the company and with the SGS team
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Five-year strategic plan finalized into two-to-threepage SMART objectives and initiatives and shared with management AMP and budget developed, aligned to five-year strategic plan, and presented to Board AMP and budget submitted to AM team for review and approval AMP and budget submitted and approved by Board
Final AMP and budget targets shared with management and specific Objectives assigned to specific units / managers
All
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management set three “I Musts” and map time to their calendar Wednesday Standup meeting held at 9am to check in on “I Musts” Friday Week in Review meeting held at 5pm to review Musts” and plan next week All management is using their calendar for meetings and project work on their “I Musts”
110 SG2X PLAYBOOK FUND MANAGEMENT SOP | DEADLINE CHECKLIST RESPONSIBLE
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SGS Team Day 30 Setup quarterly OKR system for management SGS team trained management on the OKR system, how to develop OKRs Quarter’s OKRs developed by all management Management meeting held for all management to present their unit 30-, 60- and 90-day plan (OKRs) SGS COO scheduled monthly management TvA meetings Managers
“I
111 SG2X PLAYBOOK FUND MANAGEMENT SOP | DEADLINE CHECKLIST RESPONSIBLE ❏ TvA for the first 60- and 90-days are report shared with SGS and AM teams and the Board Day 45 Share annual goals with all staff ❏ Management team can articulate the company’s guiding statements, five-year strategic SMART objectives, and annual goals ❏ All Hands meeting held to present the AMP goals, managers, titles, org structure, and OKRs and KPIs by division ❏ Gender-smart signage put up throughout the facilities SGS Team Day 90 Hold one-on-ones coaching with managers ❏ SGS team trains management on CFR system (conversation, feedback, recognition) ❏ SGS team runs monthly CFR meetings with direct reports ❏ SGS team submits monthly feedback on management team performance ❏ SGS COO prepares updates to staffing plan ❏ SGS COO presents update staffing plan to AM team and Board for approval SGS Team Day 90 Implement disciplines audit of management ❏ SGS COO shares disciplines review report with Asset Management team ❏ SGS COO completes discipline review of current management ❏ Corrective action plan developed SGS Team Standards:
● All of the activities executed by the fund manager’s SGS team in the first 180 days assume that everyone that is on the SGS team and working with the SGS team has taken the Exec’s Program.
Outcomes:
112 SG2X PLAYBOOK FUND MANAGEMENT SOP |
● Board commits in writing to become a gender-smart company within 24 months.
● The Board has committed to making the company gender-smart within 24 months and that it is a key part of the company’s growth strategy.
● Management understands how to set up, run and manage a gender-diverse board.
● The Company has a functioning Board (or advisory board).
We immediately build a strong project management function at the top of the company. This will initially be led by the fund manager’s SGS team to show management what good looks like.
Step 1.b: Implement Corporate Governance Checklist
● The organizational structure and gender-equal management compensation has been set by the board.
● The annual management plan (AMP) and annual budget have been approved by the board.
Meeting disciplines taught during The Gender-Smart Exec’s Program will be strictly enforced.
● The Board has committed to building a gender-balanced executive team within 24 months.
● Targets versus Actuals (TvA) for the AMP, Budget, and Quarterly OKRs must be reported to the AM Team and Board each quarter, and no later than the 15th of the month following the end of the quarter.
● Aggregate and individual percentage (%) accomplishment of weekly “I Musts” should be tracked by the SGS team leading the Unit and corrective action plans should be developed for any team member consistently missing their I Musts.
● The Board has committed to bringing on women and men into Board positions (advisors or voting).
● A governance weekly checklist has been created and the executives in training have been on how to use them.
● The company is willing and able to generate timely and accurate financial and management reports for the Board and Asset Management team.
● A management dashboard of financial and operational KPIs should be reported to the Asset Management team on a monthly basis.
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RESPONSIBLE Day
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❏ Commitment
113 SG2X PLAYBOOK FUND MANAGEMENT SOP | Tools and SOPs: ● Setting up and managing a gender-smart Board SOP ● Running effective Board meetings SOP ● Board code of ethics tool ● Board diversity charter tool ● Board minutes tool Process /
DEADLINEChecklist:CHECKLIST 30 the Board Board members appointed First Board meeting scheduled and held Board positions named Board code of ethics policy signed Board diversity charter adopted/signed Board commitment signed to make the company gender-smart within 24 months Board meeting schedule set (monthly for first 6 months, then at least quarterly) AM Team 60 to becoming a gender-smart company* Organizational chart approved by Board of Directors Recruitment plan to fill any vacant positions in the management team, and development plans for key management members has been presented and approved by to Board made in writing and saved SGS Team and Company Board 60 Update management compensation* Compensation plans (ensuring gender pay equity) have been set for key management positions, based on performance objectives linked to the AMP and annual budget and presented to and approved SGS Team and Company Board
Commit
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Day
Establish
Day
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114 SG2X PLAYBOOK FUND MANAGEMENT SOP | DEADLINE CHECKLIST RESPONSIBLE by Board Day 90 Approve third-party auditor ❏ The Board has approved an external auditor; audit schedule and review process are in place AM Team and Company Board Day 60 Agree on management reporting frequency and format ❏ Management sends Board Reports, including accurate financial statements, three business prior all Board meetings. ❏ Board approves report format and frequency SGS Team and Company Board
*Starts during Stage 3: Due Diligence as part of the work done to complete the First 180-Days Statement of Work and First 180-Days Project Plan
Step 1.c: Implement Operations and Facilities Checklists
● The Board must meet monthly for the first year, and quarterly thereafter.
The SGS COO will oversee a facilities improvement program to enhance the cleanliness of the work environment, eliminating broken equipment and other facilities issues. Then the SGS COO will oversee a workplace enhancement program. After this, the focus will be on getting operating procedures documented in SOPs, tracking KPIs for key operating activities and reporting on those KPIs, training the team on how to execute those procedures to the standards of the company, and working on operation enhancement protocols (Kaizen) to improve KPIs.
Standards:
●
All staff commit to relevant national and internationally-accepted health and safety laws and/or practices – in general, follow a “no broken windows; no broken lights” policy.
● All Board meetings must be captured in meeting minutes and signed by the Board members.
● The operating premises of the company is dramatically improved, and staff feel a sense of pride.
● SOPs are documented.
Outcomes:
● The company is positioned to receive international certifications per the industry/sector in which it operates.
115 SG2X PLAYBOOK FUND MANAGEMENT SOP | ● Staff have received job-specific training on their SOPs. ● KPIs are being tracked and baseline data, targets and improvement plans have been developed and started implementation. ● Operating dashboard has been developed and is being updated daily/weekly. ● Quality control function has been established and reports to the COO. ● An operations weekly checklist has been created and the executives in review having been trained on how to use them. Tools and SOPs: ● KPIs reporting template. Process / DEADLINEChecklist:CHECKLIST RESPONSIBLE Day 30 Enhance Facilities – Increase Workplace Pride ❏ Facilities before pictures taken* ❏ Facilities improvement plan developed* ❏ Facilities improvement plan implemented ❏ Facilities enhancement completed ❏ Facilities after pictures taken ❏ Facilities manager named ❏ Facilities management standard operating procedures (SOPs) developed ❏ Facilities standards daily and weekly checklist created ❏ No broken windows ❏ No lights out ❏ No trash anywhere ❏ No chipped paint - fresh painted facilities ❏ No piles of unnecessary parts or equipment ❏ Labels and signage for certifications clear and touched up ❏ Company logo and key messages free of blemishes ❏ Guard area clean and uniforms neatly pressed SGS Team
116 SG2X PLAYBOOK FUND MANAGEMENT SOP | DEADLINE CHECKLIST RESPONSIBLE ❏ Staff wearing uniforms ❏ Daily facilities scorecard report presented to SGS COO at COB each day ❏ New facility commissioned and open house hosted (press / PR event) Day 90 Enhance production process ❏ Production processes mapped in flow chart* ❏ Production improvement plan created (business process reengineering) ❏ Production KPIs baselined* ❏ BPR plan implemented and KPIs tracked and reported to COO ❏ Production SOP plan drafted* ❏ Production SOPs written and approved by SGS COO ❏ SOPs put into operating manual (playbook) ❏ SOP review/update schedule developed and mapped to calendars ❏ Operations team trained on SOPs SGS Team Day 90 Implement Quality Control / Quality Assurance System ❏ Quality control system designed and documented in SOP ❏ Quality control manager hired ❏ Quality control report developed ❏ Quality control system and reporting commenced Local Team Day 90 Corporate Dashboard and Reporting ❏ Corporate production, operations and financial KPIs determined ❏ Dashboard SOP developed SGS Team
117 SG2X PLAYBOOK FUND MANAGEMENT SOP | DEADLINE CHECKLIST RESPONSIBLE ❏ Dashboard owner named ❏ Dashboard shared with Board ❏ KPIs baselined ❏ KPI improvement plan and targets developed ❏ KPI improvement plan implemented ❏ Daily, weekly and monthly dashboard reports begin Day 180 Procure and Install Machines Per Investment Plan ❏ Three contracts gathered from machine suppliers (if applicable and should have been done during preinvestment)* ❏ Contract signed with machinery supplier to purchase machines and building renovation ❏ Layout plan documented ❏ Layout modifications implemented by facilities team ❏ Facilities layout and specs reviewed and approved by vendor ❏ Equipment shipped ❏ Equipment arrived, installed and tested ❏ Training on equipment provided to operations team ❏ Equipment operations and maintenance SOP documented ❏ Spare parts purchased and supplier information documented ❏ Machines commissioned SGS Team Day 90 Supplier Engagement Enhancements ❏ Raw material suppliers catalogued* ❏ Raw material spec sheets created* ❏ Raw material supplier products tested* ❏ Raw material RPFs developed and shared with SGS Team
Statement
Tools and SOPs: manual tool budget tool
● The Company uses a 13-week/90-day cash flow.
* Starts during Stage 3: Due Diligence as part of the work done to complete the First 180-Days of Work and First 180-Days Project Plan : No lights out and no windows broken.
● The Company and accounting team have and use a finance manual.
● A finance and accounting weekly operating checklists created and the executives in training have been on how to use them.
“We commit to closing the books every month and using a 90 day or 13-week cash flow every day or week.”
● The Company has defined gender-smart KPIs and monitors them through regular internal reporting.
Standards
● The Company has a good accounting system with appropriate internal controls.
● Annual
● Finance
●
Outcomes:
● The Company has and tracks their financial performance against an annual budget.
118 SG2X PLAYBOOK FUND MANAGEMENT SOP | DEADLINE CHECKLIST RESPONSIBLE suppliers ❏ Supplier proposals reviewed ❏ Suppliers selected ❏ Supplier agreements prepared ❏ Supplier agreements signed ❏ Sourcing started with suppliers
Step 1.d: Implement Finance and Accounting Checklist
● The Company produced timely and accurate financial statements 15 days from the end of the month.
The SGS CFO will initially implement a 13-week or 90-day cash flow forecast tool. This helps the SGS CFO understand the status of the suppliers and customers, receivables aging schedule, payables aging schedule, and begin tightening the accounting system.
Plan* ❏ All due diligence issues resolved ❏ Bank account and cash withdrawals and check writing owned by SGS team ❏ Issues resolution document presented to Board SGS Team Day 30 Monthly Financial Closing and Reporting ❏ Monthly
commenced ❏ Receivables
developed SGS Team Day 60 Due Diligence Corrective Action Plan ❏ Corrective
RESPONSIBLE Day 15 Commence Daily/Weekly
and
DEADLINEChecklist:CHECKLIST Cash 90-day cash flow forecast flow forecasting and payables aging report 13week cash flow shared with and Track Annual Budget Targets vs Actuals budget budget approved by budget shared with management and targets assigned to TvA report action plan in included Project finance report template approved by SGS procedure
developed* ❏ 12-month
Board ❏ 12-month
due diligence and
119 SG2X PLAYBOOK FUND MANAGEMENT SOP | ● 13-week cash flow tool ● Closing checklist tool ● Finance Board report tool Process /
departments ❏ Monthly
(13 WCF)
in the First 180-Days
CFO ❏ Closing
developed and documented in SGS Team
❏ 12-month
Management ❏ 13-week or
developed ❏ Weekly cash
management every Monday SGS Team Day 30 Finalize
developed to address issues flagged
120 SG2X PLAYBOOK FUND MANAGEMENT SOP | DEADLINE CHECKLIST RESPONSIBLE finance manual ❏ KPIs developed for finance department ❏ Daily, Weekly, Monthly, Quarterly KPI report approved by SGS CFO ❏ Daily and weekly KPI reporting commence and presented to SGS CFO Day 60 Build Accounting and Finance Team ❏ SGS CFO evaluates accounting and finance department functions and identifies what is working and not working* ❏ Finance team interviewed* ❏ Opinion report on the finance and accounting function presented to the AM team* ❏ Finance manual drafted with controls and procedures* ❏ Finance org structure and team hired ❏ Finance and accounting team review of finance manual ❏ Finance and accounting team sign code of ethics form and finance and accounting manual ❏ SGS CFO approved finance and accounting manual and accounting team roles and responsibilities SGS Team Day 60 Restructure and Control Cost ❏ Detailed costing completed* ❏ Cost cutting / reducing strategies developed* ❏ Revised product costing / pricing model completed* ❏ Revised cost schedule and cost improvement plan developed* SGS Team
Standards
Step 1.e: Implement Human Resources Checklists
121 SG2X PLAYBOOK FUND MANAGEMENT SOP | DEADLINE CHECKLIST RESPONSIBLE ❏ Costing schedule approved by SGS CFO ❏ Costing schedule implemented and monitored, with TvA reported to SGS CFO and SGS COO ❏ New costing assumptions revised in the model and budget, pricing strategies devised with the marketing team and revised reforecast shared with SGS COO and Board Day 90 Develop Plan to Improve Profitability/EBITDA Growth ❏ Profit or growth strategy defined* ❏ 90-day profit improvement plan developed ❏ 90-day profit improvement plan approved by board ❏ 90-day profit improvement plan started SGS Team Day 180 Begin Identifying Investments ❏ Investment plan developed* ❏ 180-day capital investment plan developed ❏ 180-day capital investment plan approved by board ❏ 180-day capital investment plan started SGS Team
● The books must be closed by the 5th of the month, financial statements generated by the 10th of every month, and final financial statements sent to SGS CFO/investment fund by the 15th along with a short report and budget TvA.
● The 13-Week Cash Flow must be used and updated weekly.
*Starts during Stage 3: Due Diligence as part of the work done to complete the First 180-Days Statement of Work and First 180-Days Project Plan
The SGS COO will initially improve the company’s HR manual and policies to move the company towards becoming gender smart. The SGS COO will then set up an internal training program, which may be run out of a central location if multiple companies utilize it, to keep
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The Company has a clear advancement plan for key positions ensuring equal opportunity and women’s career advancement.
: ● Gender-smart
the Employee Handbook ❏ HR
❏ Gender-smart
122 SG2X PLAYBOOK FUND MANAGEMENT SOP |
● The
defined* ❏ HR
developed
implemented ❏ Employee
desired,
● Internal training and human capital development program developed for management providing two hours of training each week within 60 days.
❏ HR
Outcomes:
● An HR weekly operating checklist has been created and the executives in training have been on how to use them. and SOPs employee handbook Gender-Smart Exec’s Program HR policies manual adopted through manual held with staff* HR desired state defined, and gap analysis gender-smart improvement management plan to address issues flagged in due diligence included in the First 180-Days Project Plan* improvement plan Handbook with gender-sensitive
tailored to the company’s specific needs
● Management commits to begin “a gender-smart workforce.” HR policies updated within 45 days (adopting the Gender-Smart Employee Handbook):
reviewed - gaps identified* ❏ Interviews
SGS Team
Tools
and
management sharp on The Gender-Smart Exec Program disciplines they were trained on prior to the investment closing. A major element of the Playbook’s Theory of Success is that companies that create a highly engaging learning environment for their employees will perform well.
The Company has enhanced recruitment strategy with a gender lens. The Company has an enhanced benefits package ensuring pay equity and gender-smart benefits.
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curriculum Process / Checklist: DEADLINE CHECKLIST RESPONSIBLE Day 15 Gender-smart
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and
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123 SG2X PLAYBOOK FUND MANAGEMENT SOP | DEADLINE CHECKLIST RESPONSIBLE policies and procedures ❏ All Hands meeting held to review improvements with staff ❏ Employee Handbook shared with staff ❏ Employee Handbook signed by staff ❏ New Employee Handbook rolled-out at Company Day 30 Management Training Program developed ❏ Training schedule developed ❏ The Gender-Smart Exec’s Program training refresher (i.e., a refresher “bootcamp” and deep dives into the training program topics) ❏ All management receive training SGS Team Day 30 Position agreements created* ❏ Position agreements (PA) developed for all managers (gender-smart) ❏ PAs developed for all managers’ direct reports ❏ PA meetings held ❏ PA signed SGS Team Day 90 Gender-smart workplace enhancements made ❏ Gender-smart signage developed ❏ Gender-smart signage placed in the workplace ❏ Surveys conducted to baseline gender-smart scores SGS Team *Starts during Stage 3: Due Diligence as part of the work done to complete the First 180-Days Statement of Work and First 180-Days Project Plan Standards: ● Managers should receive 2 hours of training per week for the first-year, post-investment. ● Training hours, attendees should be tracked for all management.
1.f: Implement Marketing and Sales Checklist Objectives: ●
(collateral,
a
● SGS should report on the % of management team that are women and men, employees who are women and men. SGS should run gender-smart employee surveys on a regular basis.
Step The management commits to “creating gender-smart products and services for gendersmart consumers.” The Company has clear roles and responsibilities defined for its sales and marketing teams, marketing plan, a sales management system, marketing and sales tools website, brochures, pipeline) needed to increase top-line growth. A marketing and sales weekly operating checklist has been created and the executives in training have been trained on how to use them.
and
the
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124 SG2X PLAYBOOK FUND MANAGEMENT SOP |
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Tools and SOPs: ● Sales pipeline ● Branding guide ● Marketing strategy ● Marketing plans Process / DEADLINEChecklist:CHECKLISTS RESPONSIBLE Marketing strategy and plan developed ❏ Five gender-balanced customer interviews held* ❏ Five competitors assessed* ❏ Marketing and sales strategy developed with a gender lens* ❏ Marketing strategy enhanced with gender-smart best practices ❏ Marketing OKRs and plans developed for the year ❏ Marketing OKRs set SGS Team Marketing collateral created/updated ❏ Marketing collateral and logo assessed including for SGS Team
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❏ Weekly
125 SG2X PLAYBOOK FUND MANAGEMENT SOP | DEADLINE CHECKLISTS RESPONSIBLE
Marketing
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gender-balance* Marketing firm selected (assessed for expertise or openness to being gender-smart), if needed and in the approved budget, to develop a marketing plan, brand strategy, to accomplish the sales targets outlined in the budget Enhanced branding guidelines; updated the logo, website, packaging, marketing collateral; promotional strategies developed; pricing strategy developed Sales SOP created Company’s gender-smart sales process documented Company’s sales pipeline and tools reviewed and updated SGS Team Distribution system enhanced Gender-smart distribution plan and sales channels, or preparing a sales pipeline with a lead generation system to find, track, and move leads from prospects to closing SGS Team and sales battle rhythm commenced marketing and sales meetings established marketing and sales KPIs gathered and reported SGS Team during Stage 3: Due Diligence as part of the work done to complete the First 180-Days Statement of Work and First 180-Days Project Plan
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❏ Weekly
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Standards: Marketing and sales KPIs must be tracked weekly and reported to the SGS team. To be customized based on the type of company.
*Starts
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Process:
From the sixth month to the end of the second year, the SGS team will operate the key management functions of the company while training a cadre of local gender balanced managers. Regular training programs will be run in-person and/or virtually before or after working hours (like an executive MBA program). The SGS team will spend an average of one full day per company per week at a company. Heavy emphasis will be placed on monitoring the implementation of SOPs and checklists and driving the accuracy and timeliness of reporting from the portfolio companies.
During this time, the SGS team will step in to make decisions, and in some cases do the work of the executive in training. By the end of the operate period, the executive in training should be doing all of the work, and the SGS team member will be reviewing and coaching the executive in training.
a. SGS COO will set the monthly targets and work plan for the month and each week for the SGS team; all three may work at a company for a full day or rotate for half day working sessions between companies. No more than two companies should be supported per day.
Outcomes: ● To develop a high-performing gender-balanced local executive team that knows what good management looks like.
1. Run bi-weekly group executive training sessions:
2. Work at the business no less than one day per week:
a. The local managers – executives in training – will all be required to attend a rigorous training program every week that will cover a number of topics that they were trained on in The Gender-Smart Exec’s program (i.e., a refresher “bootcamp” and deep dives). b. Managers will be tested. c. Readings will be assigned.
d. Case studies from the fund’s portfolio companies will be presented and the team will collectively work through solutions.
● To show the executive team what good looks like through apprenticeship and coaching.
● For a team of three SGS executives to comfortably manage a portfolio of between five companies at a time.
b. Each department (i.e., HR/Administration, Finance, Sales) should have a checklist that is to be completed by the executive in training. The first thing the SGS team member does when coming to a company is to review their checklists. This discipline will send a message to the executives in training that their work will be routinely monitored and evaluated.
126 SG2X PLAYBOOK FUND MANAGEMENT SOP | STEP 2: OPERATE
● SGS COO manages the SGS team and organizes the monthly and weekly work plans.
From the 24th month to the end of the third year, the SGS team will move from weekly trainings, managing work on site and weekly site visits, to spot-checks, coaching and mentoring. Local managers will have assumed most of the responsibilities for their executive position. They will begin grooming and training their teams. Here, the SGS team plays a coaching role – one-onone meetings with the executive, attending meetings they are leading as an observer, and reviewing their operational and financial performance. The goal is to build up the executive in training to a point where they become fully accountable for their executive position.
● Violations or non-compliance with the checklists will be documented.
a. Quarterly one-on-one coaching sessions held with the exec – following the CFR model.
a. Every month the SGS team will present the status of each portfolio company to the IIC via a performance dashboard. The dashboard will have impact, financial and operations KPIs, as outlined from the CIM – which provides the baseline and target values. Actuals will be presented against targets and a variance analysis will be presented with corrective action plans.
● The training / technical assistance team must support trainings held in-person or virtually; cover logistics, AV, content, etc.
3. Monthly company performance reviews:
a. All executives will be evaluated by the SGS team against their ability to work with other team members / executives, to implement their systems to the standards outlined in the SOPs, and to achieve their OKRs.
Outcome: ● To fully transition executive duties from SGS to a gender-balanced executive team at the operating company level.
3. Transition executive in training:
● All SGS team members must run training programs and apprentice and coach management.
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Standards: ● All checklists will be reviewed every time an SGS team member goes to a company.
Process: 1. Evaluate the executive in training:
● Three violations result in immediate termination.
2. Coach executives in training:
STEP 3: TRANSFER
128 SG2X PLAYBOOK FUND MANAGEMENT SOP |
a. Hold management team meeting to announce the promotion.
Standards:
5. Move SGS to advisory Board function.
4. Run refresher trainings.
Violations
● or non-compliance with the checklists will be documented. violations result in immediate termination.
● Three
● All checklists will be reviewed every time an SGS team member goes to a company.
b. Hold all hands meeting to announce the promotion.
QUICK REFERENCE GUIDE: M&E
M&E function of a Fund Manager’s overall investment process also helps increase transparency and accountability in the use of resources.
Objective: Monitor and evaluate the overall financial and impact performance of the [INV./FUND MANAGER NAME] portfolio; resulting in value-added, timely and accurate reporting Targets: Quarterly reports sent within 40-days of quarter-end; Annual reports sent within 60-days of yearend Indicators of Success: Number of days it takes to send out quarterly/annual reports; Number of copyediting rounds; Number of Style & Formatting Guideline violations per copyediting round Scope: Cyclical reporting occurs for each investment from the time of investment close to exit (and sometimes beyond)
129 SG2X PLAYBOOK FUND MANAGEMENT SOP | STAGE 6: MONITOR & EVALUATE READ FIRST [INV./FUND MANAGER NAME] provides investment services to limited partners seeking to generate positive financial returns and social impact from their investments in [FUND NAME]. These limited partners, be they high-networth individuals, development finance institutions, family offices or foundations, make up the audience of [INV./FUND MANAGER NAME]’s financial and impact Atreporting.itscore, the purpose of the monitoring and evaluation (M&E) process is to ensure that any investment activity performed by the investment firm and/or fund attains its financial and impact objectives, and that the portfolio company is deploying the capital in a manner that is responsible, efficient and in line with the agreed upon investment terms. M&E activities support a factual appraisal of the past and current performance of an investment and provide this information to the relevant stakeholders so that they can make informed decisions going forward. Investment firms and fund managers, alongside the portfolio companies’ leadership team, routinely set objectives, identify financial metrics and key performance indicators (KPIs) and track performance of the supporting activities in order to determine if the investment is generating financial and social impact returns in line with investors’ expectations. M&E processes and systems allow for this evaluation to occur and facilitate strategic decisionmaking and corrective action plans to be developed and used, thanks to the evidence gathered. As such, M&E systems are an essential portfolio management tool, driving towards continuous improvement and outcome Inachievement.addition,the
Responsible: PM Best Practice: Read prior quarter IRs to reorient yourself; Use the Style & Formatting Guide Checklist; Put yourself in the shoes of the investor
As part of the investment closing legal documents, all investments closed and managed by [INV./FUND MANAGER NAME] require the portfolio company to furnish accurate and timely financial and impact information, which, in turn, are analyzed and communicated to external stakeholders.
Time commitment: Average 10 hours per week per team member Main Activities: 1) Collecting financial and impact data; 2) Analyzing financial and impact data; 3) Compiling findings and information into the IR template; 4) Finalizing IRs and distributing them to stakeholders Accountable: Head of Asset Management
Tools: IR Process Tracker; IR Template; [INV./FUND MANAGER NAME] Style & Formatting Guidelines; etc. (see Tools table below)
130 SG2X PLAYBOOK FUND MANAGEMENT SOP |
Note to Reader: To assess how well an investment is doing, RENEW recommends investment firms / fund managers consider several performance metrics. The measurement method a firm / fund chooses depends on the information they are looking for and the types of investment structures deployed (i.e., debt financing, equity financing, etc.)
At RENEW, we use a standard set of financial metrics, KPIs and calculations to evaluate the overall performance and health of our portfolio, including the following outline in the below table. These are simply recommendations to consider including in your quarterly/annual investor reporting.
● Evaluation is the systematic and objective assessment of an ongoing or completed investment including deployment activities and results. The aim is to determine the relevance and fulfilment of financial and/or impact objectives, efficiency, effectiveness, and sustainability. An evaluation should provide information that is credible and useful, enabling the incorporation of lessons learned into the decision-making process.”
● “Monitoring is a continuous function that uses systematic collection of data on specified indicators to provide management and the main stakeholders of an ongoing investment and/or development intervention with indications of the extent of progress and achievement of financial and/or impact objectives and progress in the use of the invested funds.
PERFORMANCE RATIOS
GrowthSalesQuarterly (Current Quarter Sales Prior Quarter Sales) ( Prior Quarter Sales) Measures the increase/decrease in a company's sales in the current quarter compared to sales in the prior quarter
MarginGross (Total Sales Cost of Sales ) (Total Sales) Shows the amount of money a company retains after incurring the direct costs associated with 1 https://www.oecd.org/investment/Monitoring-and-evaluation-a-brief-guide-for-investment-promotion-agencies.pdf
It is important to note that there is a difference between monitoring investments, which is the act of observing the portfolio companies’ financial and impact current state, and evaluating the performance investments, which involves the analysis and interpretation of the story that the companies’ financial and impact metrics and KPIs are telling. According to the OECD1:
GrowthYearYear-on-Sales (Current Quarter Sales Same Quarter , Last Year Sales) ( Same Quarter Last Year Sales ) Measures the increase/decrease in a company's sales in the current quarter compared to sales in the same quarter from the prior year
LIQUIDITY RATIOS RatioCurrent ( Net Income) (Total Sales)
A liquidity ratio that measures a company’s ability to pay short-
producing the goods it sells and the services it provides
131 SG2X PLAYBOOK FUND MANAGEMENT SOP |
Used to determine how easily a company can pay interest on its outstanding debt
Net MarginProfit ( Net Income) (Total Sales)
Measures how much net income or profit is generated as a percentage of revenue; demonstrates how much of each dollar in revenue collected by a company translates into profit
Measures how much profit a company makes on a dollar of sales after paying for variable costs of production but before paying interest or tax
PROFITABILITY RATIOS Return on (ROA)Assets ( Net Income) (Total Assets )
A measure of financial performance; ROE is considered a gauge of a company’s profitability and how efficient it is in generating profits
RatioCoverageInterest ( EBIT ) ( Interest Expense)
An indicator of how profitable a company is relative to its total assets; ROA tells you how efficient a company is at using its assets to generate profits Return on (ROE)Equity ( Net Income) ( Shareholders ' Equity )
MarginOperating (Gross Profit Operating Expenses) ( Total Sales )
SOLVENCY RATIOS
**Note: Where Payables Turnover = (Cost of Sales / Average Payables)
Days (Days)OutstandingSales
132 SG2X PLAYBOOK FUND MANAGEMENT SOP | term obligations or those due within one year EFFICIENCY RATIOS (Days)OutstandingInventoryDays (365 ) ( Inventory Turnover )∗¿ ¿
(
A measure of the degree to which a company is financing its operations through debt versus wholly owned funds; it reflects the ability of shareholder equity to cover all outstanding debts in the event of a business downturn
***Note: Where Receivables Turnover = (Sales / Average Accounts Receivable)
A working capital management ratio that measures the average number of days that a company holds inventory for before turning it into sales (365 ) ( Payables Turnover )∗¿ working capital management ratio that measures the average number of days that a company takes to pay its creditors ( 365) Receivables Turnover )∗¿∗¿ working capital management ratio that measures the average number of days that a company take to collect payment on a sale Debt to Equity (Total Liabilities) Shareholders ' Equity )
*Note: Where Inventory Turnover = (Cost of Sales / Average Inventory)
Note to Reader: RENEW uses two industry standards to estimate the profitability of an investment - the Return on Capital and the Internal Rate of Return:
(
¿ A
A
(Days)OutstandingPayableDays
133 SG2X PLAYBOOK FUND MANAGEMENT SOP |
○ Calculation: (Current ∨ Expected Value Original Value) (Original Value) x 100
It is important to remember that the M&E activities require portfolio companies to work in partnership with the fund/investment manager to track and report on agreed upon financial and impact indicators, thereby allowing both parties to monitor whether financial, operational, and/or impact milestones are being met; and to determine whether the outcomes agreed upon preinvestment have been achieved. This is notably important since the accomplishment of certain milestones/outcomes may determine if additional financing is deployed depending on the agreed upon terms and/or investment closing legal agreements. It has been RENEW’s experience that unless the investment/fund manager is able to work with the target company either prior to closing the investment (if they will let you, and you want to risk the sunk costs), or immediately after the investment close to build the portfolio company’s internal M&E systems (i.e., accounting and finance systems, other operational KPI tracking, impact tracking, collection systems via frameworks and/or dashboards, etc.), the investment/fund manager will spend a considerable amount of time waiting and/or training to obtain accurate information from their portfolio - or worse, trying to figure out why the numbers look wrong and fixing holes in the faulty systems that are causing major reporting issues in the first place. The lesson here is to invest a sizable amount of upfront work to build the M&E systems at the portfolio company-level, which directly feeds into your M&E system, and therefore reducing time and costs in the future and may even allow you to flag issues well before they become uncorrectable problems.
SCOPE OF STAGE
There are a number of third-party tools, templates and instructional videos on how to calculate an investment’s IRR that we recommend investment firms / fund managers use to evaluate the performance of an investment (e.g., Investopedia’s article on Calculating the Internal Rate of Return with Excel or the Journal of Accountancy’s article on Microsoft Excel: 3 Ways to Calculate Internal Rate of Return in Excel).
● Internal Rate or Return (IRR) is a discount rate that makes the net present value (NPV) of all cash flows equal to zero in a discounted cash flow analysis
○ Calculation: 0 = NPV =∑ t = 1 T (¿ C t (1 + IRR)t ) C 0 ¿ ○ Where C t = Net cash inflow during the period t; C 0= Total initial investment costs; IRR = The internal rate of return; t = The number of time periods
Note to Reader: the pages below, you will find both a high-level overview and detailed instructions, deliverables and deadlines of sample internal M&E processes that an investment firm’s / fund manager’s IM Division team could follow for its portfolio, in general, and when compiling quarterly and annual financial and impact reports - also known as investor reports (IRs). This is simply a recommended process, one that can and should be tailored to the investment firm’s / fund manager’s PPM and obligations to external stakeholders.
● Return on Capital (ROC) is the net gain or loss of an investment over a specified time period, expressed as a percentage of the investment’s initial cost
The key deadlines that the IM Division must achieve are: 1) quarterly investor reports are emailed out to the relevant parties within 40 days of quarter-end; and 2) annual investor reports are emailed out to the relevant parties within 60 days of year-end. In order to meet these deadlines, we generally recommend portfolio companies stick to the following schedule:
The scope of this stage covers all activities needed to be completed starting from T-15 days to the delivery of high-quality IRs (where T=0 is quarter-end) – from gathering financial statements and management commentary from the companies, storing documents in the relevant data room, to sending the final reports to the relevant stakeholders.
PRINCIPLES
134 SG2X PLAYBOOK FUND MANAGEMENT SOP |
M&E takes place over the life of an investment, starting the day the investment closes and going until the investment is exited. In some cases (e.g., if the investment term is short or development partners require long-term reporting), it may be necessary to continue M&E activities beyond the investment exit to determine the long-term breadth and scope of impact generated. In the case of [INV./FUND MANAGER NAME], we continue to gather certain impact metrics (i.e., jobs supported and jobs created disaggregated by gender, smallholder farmers supported, etc.) from our exited portfolio companies through surveys and feedback forms.
A key outcome of the M&E Stage at [INV./FUND MANAGER NAME] is to generate timely, compelling and accurate financial and impact reports on a quarterly and annual basis that captures the results of our investment work, outcomes and impact achieved.
The Investment Management (IM) Division of the Asset Management Unit is responsible for working directly with our portfolio companies to establish reporting best practices and ensure accountability is maintained. This includes working closely with the portfolio companies’ CEOs and CFOs (or the “Financial Manager” equivalent) to collect company financials, company commentary and company impact data, as well as working with the [INV./FUND MANAGER NAME] Relationship Managers and corresponding Internal Investment Committee (IIC) member to collect Board commentary and high-level financial and impact data analysis.
T+15
Portfolio companies are to generate financial statements (i.e., Balance Sheet, Income Statement, Statement of Cash Flows) no later than the 10th of the following month after quarter-end.
The generated investor reports must be informative and add value to the stakeholder reading the information; reports should answer the question of:
Portfolio companies close their general ledgers for the quarter no later than the 5th of the following month after quarter-end.
T+10
Portfolio companies are to deliver reviewed and finalized financial statements that tie out and are free of errors no later than the 15th of the following month after quarter-end.
135 SG2X PLAYBOOK FUND MANAGEMENT SOP |
What does the company strategically plan to achieve in the coming quarter in order to drive growth and scalability? How does this compare against the investment plan and/or business plan?
Is the deployed capital being used in accordance with the investment closing legal agreements and SGS post-investment plan?
Portfolio companies are to deliver their commentary per the ToolPortfolio Company Commentary Template (or equivalent, standardized template) no later than the 30th of the following month after quarterend.
TIME*
The M&E Stage requires continuous reflection and improvement to ensure that the IM Division is delivering upon its expected roles and responsibilities. At the end of every quarterly reporting
Is the company meeting financial, operational and/or impact targets in accordance with the investment closing legal agreements and SGS post-investment plan?
What is the macroeconomic outlook of the company’s sector? What risks have arisen that must be mitigated and/or addressed? How does the company plan to address said risks?
*Note: Where T = 0 is the end of a fiscal quarter.
T+5
T+30
T+15
Portfolio companies are to deliver impact data for the agreed upon impact indicators (e.g., number of jobs supported disaggregated by gender) no later than the 15th of the following month after quarter-end.
RECOMMENDED STEP
TOOLS TOOL NAME LINK USE Investor Reporting Tool - IR Process An internal project management tool that the
FILES AND FOLDERS RELEVANT FILE PATHWAYS]
TARGET
RECOMMENDED TRAININGS
Was the information presented in the reports value-added? Were the financial statements relatively accurate and free of errors? If not, what errors remain and what is the corrective action to take to ensure they are resolved by the next cycle?
Portfolio MaintenanceDashboardCompany
Use: 1 hour training on the Portfolio Company Dashboard tool and how to update and maintain the dashboard on a quarterly basis, resulting in Sales & Profit TvA Charts, a Financial Ratios Table, an Impact Metrics Table, and Financial Statements for the quarter that are in line with [INV./FUND MANAGER NAME]’s Formatting & Style Guidelines.
[INSERT
To meet stakeholder reporting deadlines per the investment terms and/or development project requirements. Industry standards for investor reporting range anywhere from 30 to 60 days post quarter-end. [INV./FUND MANAGER NAME] strives to provide quarterly financial and impact reports within 45 days of quarter-end, and annual financial and impact reports within 60 days of year-end
Use: 1 hour training on [INV./FUND MANAGER NAME]’s Formatting & Style Guidelines for external reporting to stakeholders, including financial and impact reports and/or investor reports.
Were the reports accurate and complete; did they follow [INV./FUND MANAGER NAME]’s Style & Formatting Guidelines?
Were the reports delivered on time? If not, why was the deadline missed and what improvements can we make to the process to ensure deadlines are met next cycle?
Style & GuidelinesFormatting
TRAINING NAME USE Financial Statement Review 101 Use: 1 hour training on the firm’s approach for reviewing and evaluating portfolio company-generated financial statements for completeness and accuracy; how to deliver feedback and corrections.
136 SG2X PLAYBOOK FUND MANAGEMENT SOP |
period, the IM Division should schedule and host a “Hotwash” to discuss the following questions:
An external email template to be sent to portfolio companies that requests the information the IM Division team will need in order to generate investor reports.
Process Tracker Tracker PM uses to track assigned and timeconstrained (i.e., deadlines) activities and corresponding steps required to generate quarterly investor reports.
137 SG2X PLAYBOOK FUND MANAGEMENT SOP |
PRM 0 POA & Running Meeting Notes Tool - PRM 0 POA & Running Meeting Notes
TOOL NAME LINK USE
Quarterly Financial Reporting Kick Off Email Template Tool - Quarterly Financial Reporting Kick Off Email Template Email template used by the PM to internally kick-off the IM Division team’s work to generate timely and accurate investor reports over the coming 55 days; Sent at T-15, the email template includes all the relevant internal tools that the team will need in order to meet the T+40 deadline of sending investor reports to stakeholders.
An external tool attached to the Portfolio Company Financial Statement & Commentary Request email; a standardized
Portfolio Company Financial Statement &
TemplateRequestCommentaryEmail
An internal document that has a standardized Purpose, Outcome and Agenda (POA) for the Portfolio Review Meeting 0, and a section wherein a verbatim note taker can take meeting notes/minutes, capturing key decisions regarding the reporting cycle.
Tool - Portfolio Company Financial Statement & RequestCommentary Email Template
Investor Reporting Template Tool - IR Template [INV./FUND MANAGER NAME]’s Investor Report template that is in line with [INV./FUND MANAGER NAME]’s Style & Formatting Guidelines and presents the value-added “Evaluation” of a particular company’s financial and impact performance from the perspective of the company and [INV./FUND MANAGER NAME] as an investment/fund manager.
Portfolio TemplateCommentaryCompany Tool - Portfolio CommentaryCompany
An external tool attached to the Portfolio Company Financial Statement & Commentary Request email; a standardized template that collects the GIIN IRIS+ Metrics (harmonized with the 2X Criteria) that [INV./FUND MANAGER NAME] gathers and analyzes on a quarterly basis to determine how a company is doing in comparison to its impact goals; The metrics are included in a table in the IR Template.
Impact Data
Note to Reader: This is just one example of how an inv./fund manager can collect the agreed upon impact metrics. This template also serves as a starting point for both the investment/fund manager and portfolio company to customize and build upon. For example, adding additional tabs for more detailed IRIS+ metric collection and/or qualitative information. It will be for each inv./fund manager and portfolio company to determine these additional KPIs, which can grow and change depending on the company’s business strategy and/or GenderSmart First 180-Days Project Pan.
Portfolio DashboardCompany Tool - Portfolio Company Dashboard
Use: The Portfolio Company Dashboard is a financial management, Excel-based tool created and used by [INV./FUND MANAGER NAME] to capture, record, analyze portfolio companies’ quarterly financial statements on a regular basis. It is used as the single point of truth to look at historical and current financial data of portfolio companies that we know to be accurate and standardized across companies. Each portfolio company has its own Dashboard that is maintained by the FAC. This is only one example of a dashboard that can be maintained by an
SummaryCollection Tool - Portfolio Company Impact Metrics Collection Template
138 SG2X PLAYBOOK FUND MANAGEMENT SOP | TOOL NAME LINK USE Template template for commentary that portfolio companies are expected to follow; the written commentary is included in the IR Template.
Financial Statement Review Cheat Sheet
Tool - Financial Statement Quality Checklist
KEY ROLES & RESPONSIBILITIES
● Director of Asset Management - the individual who provides oversight for the Investment Management (IM) Division [which is part of the broader Asset Management (AM) Unit], processes and functions; responsible for communicating [INV./FUND MANAGER NAME]’s expectations surrounding the IR process to portfolio companies before, during and after each reporting cycle. Serves as the last stop within the IR process to ensure everything is in order before sending the final product (IRs) to the Stakeholder Engagement & Innovation Unit (i.e., via the Investor Relations Manager)
An internal document that has a standardized Purpose, Outcome and Agenda (POA) for the Portfolio Review Meeting 1, and a section wherein a verbatim note taker can take meeting notes/minutes, capturing key decisions regarding the dashboard results and draft commentary.
● Copyeditor - the assigned copyeditor helps review the final product for accuracy and completeness against the firm’s Style & Formatting Guidelines. The assigned copyeditor should have native-level English proficiency.
139 SG2X PLAYBOOK FUND MANAGEMENT SOP | TOOL NAME LINK USE investment/fund manager. If an Excel-based solution does not work for your needs, there are several ERP software systems available to investment/fund managers.
PRM 1 POA & Running Meeting Notes Tool - PRM 1 POA & Running Meeting Notes
A tool that should be shared with the portfolio company’s CFO/Finance Manager for their own use; and is used by the FAC to quickly check the integrity and accuracy of the portfolio company-generated financial statements. Any violations of the checklist will require the portfolio company to revise their financial statements. Depending on the severity and/or number of errors, a corrective action meeting may need to be scheduled to update the financials to the point where they are ready to be entered into the Portfolio Company Dashboard and included in the IR Template.
● Portfolio Manager (PM) – Leads portfolio M&E and is in charge of driving the IR process, ensuring the timeliness, completeness and accuracy of the end-product. Leads the Portfolio Review Meeting(s).
● Financial Accountant & Controller (FAC) - serves as the QA QC check for the draft and final versions of the financial statements; once approved, the individual enters the financials into the internal portfolio company dashboards (and/or financial statement template). They are responsible for updating and maintaining the internal portfolio company dashboards with support from R/PMs and SGS CFO; accountant for shell and SPV companies.
● Relationship Managers (RMs) - Responsible for securing their assigned portfolio company’s quarterly financials and commentary; writing [INV./FUND MANAGER NAME]’s commentary and financial analysis; and delivering the information to the PM; serve as a representative of their assigned portfolio company at the Portfolio Review Meeting(s).
140 SG2X PLAYBOOK FUND MANAGEMENT SOP |
● Subsidiary and/or Portfolio Company - Financial Manager(s) - responsible for updating and closing out the subsidiary / portfolio company’s general ledger on a monthly basis; producing accurate quarterly and annual financial statements; drafting financial and operational commentary per the provided commentary template (and if not capable of doing so, then elevates it to the correct individual).
● SGS Group COO (SGS COO) - external from the IR process; if deemed appropriate or required, can serve as an external check and provide QA/QC for the IRs.
ACTIVITIES
STEP 1: KICK OFF FINANCIAL REPORTING PROCESS WITH THE IM TEAM
Process: 1. The PM initiates the quarterly financial reporting process at T-15 (i.e., 15 days PRIOR to the end of the quarter) by sending an email to the Investment Management Division team using the Tool - Quarterly Financial Reporting Kick Off Email Template. This email ensures that all of the relevant supporting team members are included on the email
Objective: To kick off the internal financial reporting process with the IM team to review the standards as outlined in this SOP, to reiterate and assign roles and responsibilities, and to ensure the team is using all of the tools and resources available to them. (Note: In discussing deadlines of activities, T=0 is the end of the quarter, so March 31, June 30, September 30 and December 31.)
● SGS Group CFO (SGS CFO) - responsible for delivering accurate financial statements to the PM for companies working in partnership with SGS; provides mentorship, advice and coaching to [FUND NAME] subsidiary companies and/or [INVESTOR NETWORK NAME/ ACRONYM] portfolio companies’ Financial Managers (as willing/needed); participates in corrective action meetings.
a. Tool - PRM 0 POA & Running Meeting Notes
141 SG2X PLAYBOOK FUND MANAGEMENT SOP | chain. The email template not only provides the required tools and resources but establishes deadlines and jumpstarts the external process with the portfolio companies.
d. Training - [INV./FUND MANAGER NAME] Internal Style & Formatting Guide
3. The PM will also schedule for and host the first Portfolio Review Meeting (i.e., PRM0) at T+1 (i.e., the first day after quarter-end), during which the PM, RMs, SGS COO, SGS CFO and Director of Asset Management will meet to determine the high-level content and outlook of the commentary for each portfolio company.
b. Tool - IR Process Tracker
STEP 2: COLLECT DATA & MANAGEMENT COMMENTARY FROM PORTFOLIO COMPANIES
The email template should include the following tools / resources:
a. SOP - Asset Management (see M&E Sub-Section)
● If tools are not being used as the team has been trained to do, then re-training and/or disciplinary action may need to be taken.
c. Tool - [INV./FUND MANAGER NAME] Internal Style & Formatting Guide
2. If deemed necessary (e.g., new team members are being onboarded to the IR process), the PM can schedule a formal “Kick-Off Meeting” to review and discuss the items covered in the Kick-Off Email Template.
● The Kick-Off Email should be sent at T-15 (i.e., 15 days PRIOR to the end of the quarter) to ensure we provide ourselves with enough time to gather information, generate external financials, draft value-added commentary and compile the aforementioned into a polished investor report for external stakeholders (i.e., investors).
● The PM and the Head of Investment Management must spot check the use of the tools to ensure compliance.
f. Training - Portfolio Company Dashboard Maintenance
Objective: To obtain accurate and complete financial information and/or financial statements, as well as written commentary from portfolio companies in a timely manner. The information should be informative, descriptive and answer questions that [INV./FUND MANAGER NAME] and our investors will have about the financial and operational performance of the portfolio company, as well as provide a clear picture about the financial and operational performance projections for the coming quarters.
Standards:
● All team members must-use the tools included as links/attachments in the Kick-Off Email.
e. Training - Financial Statement & Dashboard Review
Standards: ● The deadlines established in the Request Email cannot be moved and/or missed if [INV./FUND MANAGER NAME] is to hit the 45-day reporting deadline of sending out completed IRs to investors. RMs, with the assistance of the SGS team when welcomed, must work with their assigned portfolio companies to make these expected activities habitual and the deadlines second nature.
● While events do occur that are outside the portfolio companies’ control (e.g., the Financial Manager quits immediately before quarter-end), [INV./FUND MANAGER NAME] must strive to enforce financial reporting and accounting disciplines (e.g., documenting the portfolio company’s financial reporting and accounting processes within a manual and/or SOP) within the companies so that unexpected events do not completely derail [INV./FUND MANAGER NAME]’s M&E process.
2. RMs are to follow up with their assigned portfolio companies to ensure they are following the deadlines as communicated in the Request Email; as we approach deadlines, daily emails and/or phone calls might be warranted.
Note to Reader: There are several existing, noteworthy frameworks, guides and manuals on impact data collection and analysis for impact investments in portfolio companies, irrespective of country or sector in which they operate. RENEW employs the 2X Criteria harmonized GIIN
STEP 3: COLLECT IRIS+ IMPACT DATA FROM PORTFOLIO COMPANIES
142 SG2X PLAYBOOK FUND MANAGEMENT SOP | Process:
a. Portfolio companies are to close their general ledgers for the quarter no later than the 5th of the following month (Note: An activity that all portfolio companies are expected to do each month; this helps catch errors sooner than after quarterend).
c. Portfolio companies are to deliver reviewed and finalized financial statements that tie out and are free of errors no later than the 15th of the following month.
1. Right after quarter-end and the PRM0 has been hosted (i.e., T+2) RMs are to coordinate with their assigned portfolio companies to communicate expectations on immediate next steps and deadlines using the Tool - Portfolio Company Financial Statement & Commentary Request Email Template. These immediate next steps and associated deadlines include:
b. Portfolio companies are to generate financial statements (i.e., Balance Sheet, Income Statement, Statement of Cash Flows) no later than the 10th of the following month. (Note: An activity that all portfolio companies are expected to do each month; this helps catch errors sooner than after quarter-end).
d. Portfolio companies are to deliver agreed upon impact indicators no later than the 15th of the following month (SEE STEP 3 BELOW).
e. Portfolio companies are to delivery their commentary per the Tool - Portfolio Company Commentary Template no later than the 30th of the following month.
● The 2X Challenge Criteria and the harmonized Global Impact Investing Network (GIIN) IRIS+ Metrics are just two examples of standardized, impact investing industry criteria/metrics that you, as an investment/fund manager, can adopt and track for your portfolio company investments that, when measured regularly and against benchmarks, can tell you whether or not impact is being generated at the company-level.
IRIS+ metrics are designed to measure the social, environmental and financial performance of an investment. To use IRIS+ metrics - and the resulting data - as part of the investment management process, IRIS+ metrics should be used and analyzed in generally accepted sets and according to well-defined objectives.
● The MEDA Gender Equality Mainstreaming (GEM) Framework, which provides instructions on how to set up an implementation, monitoring and learning loop with the intended portfolio company (Pages 100 to 115), as well as their recommended approach for impact measurement (Pages 117 to 123).
143 SG2X PLAYBOOK FUND MANAGEMENT SOP | IRIS+ metric system, as you will read in the sample M&E process below. Some of the more recent publications that we also encourage you to consider include:
In addition to gathering and analyzing impact data, it is equally important that investment/fund managers collect qualitative narratives of impact that provide stakeholders with an inspiring update on the positive gender, environmental, social, etc. change that the portfolio company has achieved given their investment. In essence, it provides portfolio companies the opportunity to showcase the stories of impact it has created with its employees, consumers and the communities in which they operate. These stories can take shape in many forms – videos, blogs, case studies, tables or call-out boxes in quarterly investor reports, a separate impact report, etc. – and can be shared across a variety of platforms to promote the brand of both the portfolio company as well as the investment/fund manager.
● The CDC Gender Toolkit section on Portfolio Measurement with an impact/gender lens (Pages 74 to 76); as well as their guide/framework on Gender Impact Measurement, which is measured against their Gender Action Plan tool/resource and seeks to weave gender outcomes throughout the investment process. Furthermore, the CDC ESG Toolkit, which provides recommendations and tools on how to weave ESG outcomes through the investment process, and their recommended approaches for monitoring ESG outcomes.
Objectives: [INV./FUND MANAGER NAME] employs IRIS+ metrics to measure the impact generated and outcomes achieved for our portfolio companies. IRIS+ is the generally accepted impact accounting system that leading impact investors use to measure, manage, and optimize their impact. Proper use of the IRIS+ system ensures a minimum level of consistency in a user’s impact claims and performance, which makes it easier for investors to analyze and extract useful information for decision making. Use of IRIS+ also facilitates the comparison of impact information across and within an investment portfolio.
2X CRITERIA HARMONIZED IRIS+ METRICS2
4. Copies of the Tool - Impact Data Collection Summary will be saved in the Quarterly Impact Metrics folder.
a. If the portfolio company is confused about the definitions or how to collect the impact information from HR records and/or the financial statements, then the RM should schedule a call/meeting to sit down with the company and go over them.
In terms of data collection methods, [INV./FUND MANAGER NAME] uses a standardized template (Tool - Impact Data Collection Summary) that the portfolio companies complete (i.e., the portfolio company self-reports) on a quarterly basis; each template is electronically signed and dated by the portfolio company. Other methods that can be employed include feedback forms and/or surveys or company visits; these methods are typically used on an annual basis to verify and/or audit the self-reported impact metrics provided by the company.
Individual IRIS+ metrics are numerical measures used in calculations or qualitative values to account for the social, environmental and financial performance of an investment. The full catalog is offered in both a searchable and downloadable format to enable search and discovery of individual metrics. The GIIN offers the IRIS+ Catalog of Metrics as a public good.
Process:
1. As indicated in STEP 2 above, RMs are to collect the IRIS+ impact metrics from the portfolio companies no later than 15 days after the quarter ends.
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b. Historically, there have been times when the RM and/or the PM has set up a phone call with the portfolio company representative, gone through the tool and completed the Impact Data Collection Summary on behalf of the company while on the phone.
3. Once the Impact Data Collection Summary has been completed for each company no later than T+25, the documents must be sent to the FAC, who in turn will enter the IRIS+ impact metrics into the Tool - [INV./FUND MANAGER NAME] Portfolio Company Dashboard that is maintained for each portfolio company (see STEP 4 below).
2. RMs are to send the Tool - Impact Data Collection Summary to the companies as part of the Kick-Off email that is sent at T+2 with definitions for each metric and instructions on how to complete (i.e., the portfolio company self-reports on the impact metrics achieved over the course of the quarter):
Standard: [INV./FUND MANAGER NAME] uses the following IRIS+ metrics as part of our ongoing M&E of portfolio companies impact performance and outcome achievement. All metrics collected must be disaggregated by gender
2. Leadership 2A. Share of women in managementsenior 2A. Percent of whomanagementseniorarefemale Full-time Employees: Female Managers (OI1571) Full-time ManagersEmployees:(OI8251)
1B.foundedBusinessby a woman 1B. Percent of founder(s)company who are female Founders: Female (OI8197) Founders: Total (OI2209)
3B. Quality indicator compliancebeyond 3B. Investee has initiative in place to (Y/N)inadvancespecificallywomentheworkforce Women’s Career Advancement Initiative (OD4232) + one or more from the list below (disaggregated where needed by using the Target Stakeholder Demographic (PD5752) metric): Gender Wage Equity (OI855) Diverse Representation Policy 2 This table is adopted from Table 2. IRIS Equivalent Metrics published by the CDC, 2X Challenge and GIIN, publicly available here: LINK
1A. Share of ownershipwomen 1A. Percent of female ownership Percent Female Ownership (OI2840)
145 SG2X PLAYBOOK FUND MANAGEMENT SOP | 2X CriterionDirection 2X Direct SubCriterion 2X IndicatorChallenge IRIS+ Aligned Metrics pEntrepreneurshi1.
2B(i). Share womenofon the Board 2B(i). Percent of Board who are female Board of Directors: Female Board(OI8118)ofDirectors: Total (OI1075)
3. Employment 3A. Share of women in the workforce 3A. Percent of employees (FTE) who are female Permanent Employees: Female Permanent(OI2444)Employees: Total Temporary(OI8869) Employees: Female Temporary(OI6978)Employees: Total (OI9028)
146 SG2X PLAYBOOK FUND MANAGEMENT SOP | Flexible(OI9485)Work Arrangements Sexual(OI7983)Harassment Policy Employment(OI9088) Benefits (OI2742) Fair Compensation Policy Fair(OI3819)Career Advancement Policy Anti-Discrimination(OI4884) Policy Employees(OI9331) Trained (OI4229) 4. Consumption 4. Product or specificallyservice benefitsdisproportionatelyorwomen 4A. (Y/N)benefitsdisproportionatelyspecificallyserviceproductInvestee’sororwomen Product Targeted to Women (PD5677) + one or more from the list below (disaggregated where needed by using the Target metric):DemographicStakeholder(PD5752) Stakeholder Engagement Client(OI7914)Savings Premium Client(PI1748)Individuals: Provided New Access (PI2822) Client Feedback System (OI5049) 4B. Percent of customers who are female Client Individuals: Female Client(PI8330)Individuals: Total (PI4060) OTHER RELEVANT IRIS+ METRICS Category Indicator Name Description IRIS+ Metric Employment & Employee Wages Value of wages Permanent Employee Wages:
Benefits paid to all employeesperm. Total (OI9677)
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ESG Reporting Indicates whether the performancereportscompanyitsESG Social and (OI4732)PerformanceEnvironmentalReporting
Payments Governmentto Value of transfersallto the gov’t made by the company during reporting period; at minimum Payments to Government (FP5261)
ESG Targets Describes companytargetsquantifiabletheESGsetbythe Social and Environmental Targets (OD4091)
HealthcareEmployee No. of employeesFT who benefitshealthcarereceived Healthcare ParticipantsBenefits(OI4061)
Governance & ESG Board FrequencyMeeting No. of times Board Directorsof met Meeting Frequency of Board of Directors (OI3630)
PromotionsEmployee No. of companyfromwereemployeesperm.whopromotedwithinthe Employees Promoted: Total (OI6995)
Financial Metrics Total Revenue Value of all revenue received during reporting period Total Revenue (FP6510)
Net Income Value company’sof net profit reportingduringperiod Net Income (FP1301)
3. RMs will continue to coordinate with the companies to secure correct and finalized financial statements as soon as they are available. Once the revised financial RECOMMENDED BEST PRACTICE: From RENEW’s experience, obtaining timely and accurate financial statements is one of the most challenging parts of SME portfolio management. Poorly developed or managed accounting and finance departments at portfolio companies typically result in subpar financial controls and statements, which in turn can consume your team's time and creates distrust between the RM and the portfolio company. We highly recommend proper postinvestment accounting and financial systems are installed by the investment/fund manager and regularly managed in order to avoid major issues with M&E and Governance processes. Please refer to the STAGE 5 for more
Process:
a) If simple, easy to correct errors are present, then the then the respective RM, with support from the PM, will communicate the corrections to the portfolio companies’ Financial Manager via email (e.g., booking a loan interest payment).
Objective: To review the financial data and/or statements and commentary provided to [INV./FUND MANAGER NAME] for accuracy and completeness, provide feedback and finalize for external reporting purposes, and provide our own value-added commentary on how we, as an investment/fund manager, believe the portfolio companies are performing in relation to targets versus actuals (budget, sales, profit, operations, etc.), if financial and/or impact outcomes or milestones have been achieved (and if said achievement triggers/warrants additional financing being deployed), and/or if corrective actions need to take place at the company and/or board-level in the coming quarter to rectify shortcomings.
b) If a significant number of errors are present, then the respective RM, with support from the PM, will schedule a corrective action meeting with the portfolio companies’ Financial Manager, during which the FAC and/or the SGS CFO will walk through the general ledger and financial statements with the portfolio company Financial Manager and make adjusting entries real time.
148 SG2X PLAYBOOK FUND MANAGEMENT SOP | corporate income or profit taxes STEP 4: UPDATE PORTFOLIO COMPANY DASHBOARD & CONDUCT FINANCIAL DATA AND COMMENTARY ANALYSIS
1. RMs are to send the collected financial information and statements to the PM no later than T+15, who in turn will coordinate with the FAC to review the financial for accuracy and completeness. The Training - Financial Statement & Dashboard Review and the Tool - Financial Statement Quality Checklist should both be referenced and used during the review process.
2. More likely than not, accounting errors will be present that will need to be corrected before we can generate external financial statements for the IRs (read the Standards section below):
a) Please refer to the Training - [INV./FUND MANAGER NAME] Portfolio Company Dashboard to gain a clear understanding on how the Dashboard should be updated and maintained on a monthly and/or quarterly basis.
4. By T+25, FAC should be entering the financial data and statements into the Tool[INV./FUND MANAGER NAME] Portfolio Company Dashboard that is maintained for each portfolio company. The Portfolio Company Dashboard is a financial management tool used by [INV./FUND MANAGER NAME] to capture, record, analyze portfolio companies’ quarterly reporting on a regular basis. It is the single point of truth to look at historical and current financial data of portfolio companies that we know to be accurate. Each portfolio company has its own Dashboard that is maintained by the FAC.
ii. Income Statement: Tab in which the portfolio company’s generated income statement is entered; includes foreign currency exchange rates so that the financials generated in the Summary Tab are in USD and not the local currency.
iii. Balance Sheet: Tab in which the portfolio company’s generated balance sheet is entered; includes foreign currency exchange rates so that the
i. Summary Tab: Used to generate external financial statements that are in line with [INV./FUND MANAGER NAME]’s Style & Formatting Guidelines, which ensure uniformity across the IRs (which is important to maintain, as we have investors who have invested across multiple companies); financial metrics/ratios and Targets vs. Actuals (TvA) charts that are included in the Tool - Investor Report Template. The financials and ratios table are purely formula driven and pull directly from the other tabs.
149 SG2X PLAYBOOK FUND MANAGEMENT SOP | statements have been received, the PM will, again, coordinate with the FAC to review the revised financial for accuracy and completeness, based on the feedback provided either via email or the corrective action meeting. This entire process should take no longer than 5 days to complete.
b) Each Dashboard contains six standardized tabs:
Figure: An example of how an investment firm / fund manager could present sales and profit TvA for a portfolio company and/or fund in an investor report.
6. The result of this meeting is the drafting of the Financial Commentary and the [INV./FUND MANAGER NAME] Commentary by T+30. [INV./FUND MANAGER NAME] Commentary is different from the Portfolio Company Commentary that is also to be provided and reviewed no later than T+30:
v. Impact: SEE ACTIVITY 2 BELOW. This Impact Table organizes and summarizes the impact indicators that are collected from the company, as agreed upon during the investment closing process and/or required by our development community funding partners. Common indicators GIIN IRIS metrics, such as jobs supported, jobs created, smallholder farmers supported, employees promoted, etc. - all disaggregated by gender.
d) Once the Portfolio Company Dashboards have been updated, the PM should review the Dashboards for accuracy and completeness; paying close attention to the Summary Tab in particular, as this is the tab from which the external IRs pull.
c) The result of entering in the revised, correct portfolio companies’ financial data and statements into the Tool - Portfolio Company Dashboard are fourfold: i. Sales & Profit TvA Charts ii. Financial Ratios Table iii. Impact Metrics Table iv. Financial Statements for the Quarter - Balance Sheet, Income Statement and Cash Flow Statement v. Please see the Tool - Investor Report Template for how the information should be displayed.
150 SG2X PLAYBOOK FUND MANAGEMENT SOP | financials generated in the Summary Tab are in USD and not the local currency.
iv. Cash Flow: Tab in which the portfolio company’s generated cash flow statement is entered; includes foreign currency exchange rates so that the financials generated in the Summary Tab are in USD and not the local currency.
vi. Notes: This tab serves as a running notes tab, wherein the FAC can keep track of errors, corrections and general observations about the financial data and statements.
5. Once the Portfolio Company Dashboards have been finalized, the IM team will host the Portfolio Review Meeting 1 (PRM1), no later than T+25. During the PRM1, PM, RMs, SGS COO, SGS CFO and the Director of Asset Management will review the completed Subsidiary and/or Portfolio Company Dashboards (i.e., TvA Charts, ratios, financials, etc.) and analyze the results (i.e., the Evaluation portion of the M&E Stage). Please use the Tool - PRM 1 POA & Running Meeting Notes during which notes on [INV./FUND MANAGER NAME]’s commentary for each company are captured.
a. If yes, were the results captured?
● Note to Reader: Historically, RENEW has seen portfolio companies struggle with the timing of revenue recognition, accounting for depreciation and/or amortization, accounting for loan interest expense and accounting for taxes. Pay particular attention to these accounting line items.
a) [INV./FUND MANAGER NAME]-authored financial and management commentary is written by the assigned RM or SGS COO and provides [INV./FUND MANAGER NAME]’s external perspective on the overall performance of the company, our perceived risks and opportunities, as well as the work we plan to accomplish in partnership with the company in the coming quarter. [INV./FUND MANAGER NAME] commentary answers the question of whether or not the company is achieving its financial and/or impact outcomes and/or milestones and, ultimately, if impact is being generated.
b) Portfolio company commentary is written from the perspective of the Founder/CEO of the portfolio company and covers the most important things that happened or were accomplished over the quarter; the company’s high-level sales and profit performance; budget performance; the main risks the company faces; the main opportunities it is seeking to pursue; and what the Founder/CEO plans to accomplish in the coming quarter.
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● A major question that [INV./FUND MANAGER NAME]’s commentary should answer isdid the portfolio company achieve the activities and outcomes and/or milestones it or [INV./FUND MANAGER NAME] set out for the company to accomplish in the prior quarter’s IR during the current quarter?
Standards:
● Note to Reader: RMs should be available to answer any questions the portfolio companies may have regarding the aforementioned financial reporting process and deadlines. It has been RENEW’s experience that portfolio companies’ Financial Managers tend to struggle with accounting and generating accurate financial statements in line with IFRS standards. RMs and/or other members of the team (e.g., the SGS CFO and/or the FAC) should be prepared to host corrective action meetings with portfolio companies’ Financial Managers to ensure the statements are tying out properly and are reflective of the activities that took place during the preceding quarter.
● [INV./FUND MANAGER NAME] commentary must add value to the overall IR. It is a recommended best practice that RMs and the IIC read the prior quarter’s IRs to ensure that the current quarter’s IRs are linear and logical and providing updates on activities, milestones that the company said it would set out to accomplish in the current quarter.
Objective:
d. The reviewed and finalized portfolio company commentary from the ToolPortfolio Company Commentary Template. e. The drafted [INV./FUND MANAGER NAME] commentary.
Process: 1. The PM will generate the external investor reports for each portfolio company using the Tool - Investor Report Template, which in turn pulls from the following source documents:a.TheTool - PRM 0 Quarterly Running Meeting Notes.
STEP 5: DRAFT EXTERNAL INVESTOR REPORTS
STEP 6: FINALIZE & SEND EXTERNAL INVESTOR REPORTS
b. If not, were the barriers to accomplishment captured and explained? And what is the risk mitigation / plan of action in place for the upcoming quarter so that the company can achieve it going forward?
Standard:
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c. The Portfolio Company Dashboards: i. Sales & Profit TvA Charts ii. Financial Statements iii. Financial Ratio Table iv. Impact Table
Objective:
2. By T+35, the PM will schedule and host the Portfolio Review Meeting 2 (PRM 2), during which the IM team will directly review the Draft IR Templates, sign off on the content, and assign next steps required for finalization.
The PM will require all RMs and/or IIC members to utilize the Tool - [INV./FUND MANAGER NAME] Style & Formatting Guide to ensure that all grammatical, syntax and spelling errors have been caught and corrected, and that the IR follows [INV./FUND MANAGER NAME]’s internal style and formatting guidelines.
To draft the external version of the quarterly investor reports that are consistent in style, formatting, content, delivers accurate financial data and statements, and value-added commentary from the portfolio companies and [INV./FUND MANAGER NAME] as an investment/fund manager.
b. The Tool - PRM 1 Quarterly Running Meeting Notes.
To finalize and send the external version of the quarterly investor reports that are consistent in style, formatting, content, delivers accurate financial data and statements,
1. Once the IRs have been deemed “final” by the PM, they will email the reports to a designated copyeditor no later than T+37, someone who is external/outside of the generation process and therefore will more easily spot violations of the Tool[INV./FUND MANAGER NAME] Internal Style & Formatting Guide, as well as assess the financials and commentary for accurateness and completeness. When copyediting an IR, the copyeditor should keep in the following in mind:
c. Does the IR commentary follow the standardized template and all sections have been completed and ideas presented in a logical and thoughtful manner?
Process:
2. If “NO” is the response to any of the questions above, then a rewrite of the corresponding IR section(s) must be completed and re-copyedited.
a. Does the IR use/follow the standardized template?
b. Does the IR commentary abide by all [INV./FUND MANAGER NAME] Internal Style & Formatting Guidelines? The copyeditor should check to make sure that the Tool - [INV./FUND MANAGER NAME] Internal Style & Formatting Checklist was completed by the PM and RMs. The copyeditor should use the Checklist / Guidelines as well during their review.
d. Did the portfolio company achieve the activities and goals it set out for itself in the prior quarter’s IR during the current quarter? If yes, were the results captured? If not, were the barriers to accomplishment captured and explained?
e. Does the [INV./FUND MANAGER NAME] commentary provide value-added analysis on the financial, operational and/or impact performance of the portfolio company? f. Generally, are you coming away with more answers than questions?
a. NOTE: The KPIs that the M&E Stage tries to achieve for the financial reporting process are: i. No more than three rounds of copyediting ii. Fewer than five errors per copyedit round per portfolio company IR
3. By T+41 the IRs are deemed final by the designated copyeditor and sent to the General Counsel for a legal review. Any comments that need to be addressed are given immediate priority and should take no more than two days to resolve.
153 SG2X PLAYBOOK FUND MANAGEMENT SOP | and value-added commentary from the portfolio companies and [INV./FUND MANAGER NAME] as an investment/fund manager.
4. By T+45 the legally reviewed and approved IRs are sent to the Investor Relations Manager for distribution to the investors. Please see the Stakeholder Engagement & Innovation Unit SOP for more details on how the IRs are distributed to investors.
Standard:
If [INV./FUND MANAGER NAME] is acting as the advisor, the Legal team must approve the process and fees associated with this support. [INV./FUND MANAGER NAME]’s role and fees must also be approved by the [FUND NAME] MAC.
Starting in Year 4, the Board of Directors, SGS team and [FUND NAME] IC have been monitoring the performance of the company for a number of years and should have a view to whether the business case and assumptions of equity value growth have materialized.
Process:
Outcome: To determine the best course of action for the company – hold or sell – and keeping the interests of the shareholders and other stakeholders in mind.
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● Review prior quarter IRs to be up to date on the company’s overall performance going into the current quarter and to ensure outstanding activities and/or outlined objectives for the current quarter were achieved and/or met.
2. Starting in Year 4, the SGS and IM teams will develop their plan to either sell or hold the company.a)Asimilar procedure to the Final CIM creation should be followed here.
b) The team should use the original Final CIM as the starting point for their recommendation and update the Final CIM based on their experience running and monitoring the business.
1. Each quarter the company’s performance is reviewed against its growth plan and annual targets.
3. The Final CIM either in PPT or Word format should be presented to the Board of Directors, IIC, and [FUND NAME] IC and MAC for their review of the SGS and IM teams’ recommendations (either hold or sell).
4. The [FUND NAME] IC and MAC ultimately vote on the recommendation.
STEP 7: MAKE DECISION TO HOLD OR EXIT INVESTMENT
5. Once the vote is secured, the SGS and IM teams will begin to implement the exit recommendation.a)Iftherecommendation is to sell, the IM team may conduct the advisory work inhouse or contract with an outside advisor.
Standards: [FUND NAME] IC and MAC must vote on the exit recommendation from the IM and SGS team.
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