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The Process

From the initial evaluation stage to completion of documentation, usually takes a minimum of three months. Founders are encourage to submit early in June and not near October as we may not be able to complete the full evaluation process.

Initial Evaluation
Executive summary, CVs, business plan (for companies already in operations) and audited financial statements submitted will determine the merits of the proposal. During this process, many applications will be turned down, as they do not fit into Abacus's criteria.

Initial Negotiation
Where Abacus is interested in the startup, we will discuss and negotiate the general terms and structure of the investment with the founder before submitting recommendation to Abacus Investment Committee for initial approval.

Due Diligence
When the initial investment proposal is approved, a Memorandum of Understanding on the broad terms and structure will be agreed upon. It will be necessary at this stage for Abacus to verify the facts and assumptions presented in the proposal. We will conduct further independent investigation on the product and its technology; the market and its competitors; and, the distribution network. Often the help of outside consultants and market research are sought. The financials plans are reviewed rigorously. During this process, full disclosure by the startup is important, and staff, suppliers, customers, banks, accountants and lawyers may be interviewed.

Final Negotiation and Completion
Many issues will be covered, but the key points may be:

Price - Using the data and insight obtained during the due diligence process, Abacus will undertake a "valuation" of the company by application of price to earnings multiples, asset valuation and other required return calculations.

Structure - The decision will be made on the amount of investment and whether it should take the form of equity, quasi-equity or other hybrid instruments (common shares, preferred shares, convertible loans, warrants, options). Debt financing if available will be simultaneously injected into the transaction at completion.

Role - The extent of the Abacus's role in the affairs of the startup will be determined. This could involve representation at the board level, the appointment of a financial controller or other key management personnel, disclosure requirements, minority shareholders' protection and rights.

Upon formal approval of the investment by Abacus's investment committee, legal documents will be prepared and signed. The shareholders' agreement will spell out the rights and obligations of both parties covering the terms of the investment, voting rights, sale arrangements, dividend policy, and Abacus's approval on matters that may affect the business plan.

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