Chapter 7

Establishing an Investment-Grade Organization

A successful conclusion to funding negotiations has been achieved. Now you have the funds to execute at least your immediate operational and strategic objectives. However, the situation is different now. You are spending other people’s money. The responsibilities associated with doing so create a new set of obligations that affect the way the business is to be managed and conducted. Professional management, particularly in a number of areas of the business, is now an important requirement in preparation for a successful exit. With a successful exit you will either be acquired or merged into a professionally operated company or become publicly tradable via an initial public offering, assuming the obligations and disclosure requirements commensurate with a publicly traded company.

The particular areas of the business that may require a professional upgrade include the enactment of responsible corporate governance policies and the institution of a program of investor and public relations to execute and convey these policies. You should establish such responsible corporate policies as soon as possible to facilitate implementation and enjoy the benefits, such as giving you the edge in your remaining fundraising efforts, earlier. Sound corporate governance is certainly required before you accept any investment funds from nonfounding sources. The chapter is organized into two sections: corporate governance and corporate governance ...

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