Capiche — A New Platform for Financings
This article was originally written by Gwen Preston and published in the April 4, 2018 Edition of The Maven Letter (www.resourcemaven.ca). It is reprinted by Capiche with permission.
A short note on a new business that I learned about recently — and that I think should become the standard new platform for financings.
Today when a public company needs to raise money, its first stops are with key investors, investment banks to see who is interested in managing the raise, and lawyers. Lawyers are part of the process from day one because they prepare all of the documentation.
That makes sense, but only to a point. Yes, the seemingly endless documents involved in a financing have to be legally sound, but they are also very similar from one raise to the next. Moreover, the documents are interrelated in many ways, which creates endless opportunities for mistakes.
And lawyers are expensive. For small exploration companies, this point really matters. The legal costs in completing a financing are very significant, even if the raise itself is pretty small.
James Atherton and Jonathan Longe looked at this setup and saw a better way: the entire process should be automated.
Except in unusual situations (private company raises or financings related to bigger deals that involve insiders and lock-ups, for instance), the documentation for every financing is almost the same, differing only in the description and details of the company and the terms of the raise. So they created a system with all the needed documents prepped.
The system is called Capiche. Atherton and Long spent three years getting it coded. It is now operational and has completed four financings for about $7 million.
But I think as companies learn about Capiche, they will soon see it as the obvious way to go.
To prepare financing documents, companies create a profile with their corporate information and the terms of the raise. They then check off all the
documents they want included, such as corporate placees, existing shareholder exemptions, and the like.
It literally takes ten minutes to enter all the information and make the selections. Immediately, the documents are ready.
That immediacy alone is a big advantage. Often companies need to raise money quickly — perhaps they hit a hot hole and want to capitalize on share price strength, perhaps investors have suddenly become interested in the metal or space and the financing window is open.
Using lawyers, it usually takes days to just prepare the documents. With Capiche, it literally takes minutes.
Then there’s the potential for errors. By generating the documents automatically, the potential is far less. An error can certainly occur, but once identified it is fixed — and then the document is improved and the error won’t occur again. By contrast when people put the documents together, often in a rush, the potential for error is there equally every time.
Capiche doesn’t only prepare the documents; it manages the entire process. The company can send and receive subscription forms electronically. The system tracks who is taking down what amount, who brought that investor into the raise, and whether the forms and money have arrived. Talk to any issuer who has raised money (as in, any issuer!) and they will all tell you about losing hair and sleep trying to track down forms and cheques and keep track of everything.
For all that, Capiche is less expensive, charging $7500 per financing. Lawyers still have to be involved, to check everything over, but their billable hours are far fewer.
Reading this over, it sounds like I’m being paid by Capiche to write an infomercial. I’m not! I just truly think this is a leap forward in how financings happen. There are, I should note, advantages for investors as well.
I well remember trying to fill out the forms for my first private placement. The company sent over a 40- something page document littered with legalese and pages that didn’t pertain to me, and I so struggled to figure out what I needed to do.
With Capiche, the investor only gets the forms that pertain to him or her. Any term that could be confusing can be clicked to access a definition, and one written so that it’s easy to understand. The whole process is just way more accessible.