Shieldpay's Chief Legal and Compliance Officer Willem Wellinghoff shares his tips for successful due diligence for each stage of the fundraising journey.
As companies begin fundraising activities in a post-lockdown world, the fight against fraudulent investment activity and exploit will be more integral than ever when closing day comes.
Learn why researching your investor profiles is not only key to closing day success but also the long term execution of your business.
Willem will help you answer the following fundraising challenges:
Listen to this fundraising edition of Shieldcast to find out!
Geoff: Willem is Shieldpay’s chief legal and compliance officer and MLRO. Willem is responsible for the legal and compliance strategy for the group, including risk management, regulatory compliance, and anti-money laundering, terrorist financing obligations. Pre-Shieldpay – if that's even a thing! – Willem has lived and breathed compliance and FinTech as the Head of Legal Compliance for a major European credit institution and compliance director for some leading fintech companies.
Willem is also an advisor and mentor to UK FinTech and innovative businesses and has been a Techstars mentor since 2015, which is where we met. Other than a lovely conversation that I'm sure we're going to have, I'm looking to get your best advice on how to conduct know your investor checks or KYI. To warm things up then Willem, can you tell us a bit about your role at Shieldpay, and the make-up of your team.
Willem: First of all Geoff, thanks for having me on, part of the inaugural Shieldcast podcast series focusing on primarily the topic of fundraising activities. It's a great start, so well done. It's particularly topical with lockdown coming to an end. Most companies will be looking at fundraising activities again but may not always know how to collect funds in a secure way, and this is what we're focusing on at Shieldpay.
I'm not sure my role is as exciting as the topic of the podcast, but in essence my role is to look after the legal and compliance strategy for Shieldpay, which means ensuring not only legal and regulatory compliance, as you've kind of alluded to. We have many regulations, but also ensuring a very forward thinking of how we facilitate the commercial strategy. And my team is in a very important part and ingrained as part of the business strategy and as well as the operations. We’ve built a great relationship with every stakeholder within the business, it’s great.
Geoff: Indeed, and Shieldpay is a regulated entity and, so as you say, regulation and compliance should really be our friend and part of DNA. It's very true that your team works very closely with our product team and our operations team and a real central pivot important to what we can do as a business as we look at different types of solutions and products we can offer to our clients.
In your time, you've been involved in a number of different activities and fundraising at Cabot, and now at Shieldpay servicing our clients. How does knowing your investor change in these different types of fundraising and circumstances?
Willem: It's a great question, Geoff, and actually very much depends on the type of fundraising round you're in, from seed all the way to IPO. Investor profiles change dramatically depending on which stage you're at, whether you're dealing with individuals who are sophisticated angel investors that really know the kind of ins and outs of investing to people that are maybe not even as experienced in that. You've got major venture capital to private equity and investment banks, the profiles of each investor very much change but with that, it's also the duties of each of what comes with that investment, whether it's how the fund operates to what part of the part of the investment banker you're sitting in, to the roles and responsibilities you're having to discharge to sophisticated, or maybe even not so sophisticated investors, those profiles can vary dramatically.
But as a business, it's really important on the journey that you're on, to actually really understand the type of profile that you are trying to attract first of all. Equally, an investor that you're trying to attract as part of your business and that culture is shared. In order to gain the best out of all the worlds that surround you, knowing what really makes an investor tick, but equally what part of, if you're dealing with a venture capital fund, for example. If they've got many different funds that they're operating, you want to know which fund that you're going to be sitting in and how that fund operations work. So whether they've got any particular restrictions, for example, how the funds can be utilised, whether they can actually resell part or whole of the entire fund to someone else. And if they do, what restrictions does that bring on you as a business in when you are wanting to raise additional funds.
That whole piece is actually really critical to any growth of the business, but it can also bring some reputational element to it as well. If you end up being resold by one fund to a different fund that actually has quite a lot of toxicity within it and restrictions, it really harms you as a business because b) the reputation element, but also b) what you can and cannot do from a business growth perspective, whether it's raising funds or even selling your business. So, it's really important when you're starting on that journey as a business in getting funds. What are you seeking to achieve and who are you seeking to achieve it from? Really understanding the nuts and bolts of that particular fund operation and the restrictions that sit within the investment documentation is really fundamental. Having a good advisor who can really help you with that is fundamental for any business.
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