STEP 3: Conduct CDD & Prepare the Financial Model, Draft Terms and e-CIM

Standards:

● All management must attend all sessions or make up those they missed.

● 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.

● [INV./FUND MANAGER NAME] should seek to have gender-balance in the class.

STEP 1: CREATE ACTIVE PIPELINE PROJECT PLAN & SET UP FOLDERS

Outcomes:

● 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. ● To ensure the resources, activities, outputs/milestones, roles and timeline is clear to efficiently move the deal through the active pipeline process to closing. Processes: 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: 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. c. Copy and paste all notes from meetings with the prospect to date into the file. 2. RM builds and manages the Active Pipeline Project Plan for the company (see tools): 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]. 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.

v. Review the detailed project plan tab. vi. Assign the names of team members for each section. b. Hold kickoff meeting with team to review the Active Pipeline Project Plan: i. Important to make sure the team resources are available to implement the project activities in the timeframe assigned. ii. An IIC member should be assigned to the project plan to support the RM and SIM to make decisions in an efficient manner. c. Have the AM Director or SIM review and approve the project plan after the meeting. 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: 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. 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”.

Standards:

● 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.

● The project plan must be updated weekly.

● The RM owns the Active Pipeline Project Plan.

● The RM is accountable for updating the Active Pipeline Project Plan.

● 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.

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. 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.

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.

● To ensure both parties are clear about what is being sought in the relationship.

Process:

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. 2. The LL and Dir. AM review and approve the draft LOI. 3. The CIO signs on behalf of [INV./FUND MANAGER NAME]. 4. The RM sets up an in-person meeting to present the draft LOI to the promoter: a. Do not send it via email without a discussion. 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. c. Do not push the promoter to sign the LOI during the LOI meeting – encourage them to take it home and read it over.