Prospect Identification and Discovery

The central principle: Qualify the business need before proposing the investment structure.

What Is Prospect Identification?

Prospect identification is the process of finding companies that may have a business need your organization can help address.

Discovery is the conversation used to understand that need, the company’s circumstances, and the people involved in evaluating a solution.

Qualification means deciding whether enough evidence exists to justify a next step. For this manual, qualification means commercial qualification for further review. An SDR does not determine legal eligibility, approve collateral, certify valuation, or conclude that investors will buy an offering.

A well-qualified prospect is a company worth evaluating-not a company already approved to proceed.

Define the Ideal Customer Profile

An ideal customer profile, or ICP, describes the characteristics of companies most likely to benefit from the service.

For a capital-formation and tokenization platform, an initial ICP might include:

advisers

Helps move the process forward

Financial reporting capability Supports disclosures and ongoing administration

Realistic timing and budget Makes execution more practical

Clear decision process Identifies who can authorize further work Interest in a broader investor audience or digital administration

Establishes a possible reason to explore the platform

These are commercial screening factors. They do not replace the legal requirements for Regulation A. Regulation A has issuer eligibility requirements and exclusions. Tier 2 permits offerings of up to $75 million in a 12-month period, subject to applicable limits and conditions. Counsel must assess the actual issuer and transaction. [R01] SDR wording: “Your company appears to have characteristics that may justify an initial evaluation. The next step is to determine whether the proposed issuer, instrument, and offering route fit your objectives.”

Identify the Business Trigger

A business trigger is an event or circumstance that creates a reason to explore a transaction. Useful triggers may include: Funding a new product or commercialization program; Expanding manufacturing capacity; Financing an acquisition; Refinancing an existing obligation; Developing an IP licensing business; Raising capital for a defined subsidiary; Evaluating alternatives to issuing additional parent-company common shares; Improving administration of an existing securities program.

The trigger should connect to a specific use of funds. Use of proceeds means how the issuer plans to spend the money raised.

Compare these two statements:

“The company wants to unlock value.”

“The company is evaluating $12 million of financing to expand production and commercialize two patented products.” The second statement gives the transaction team something to evaluate: amount, purpose, assets, and operating plan.

Discovery question: “What would the additional capital allow the company to accomplish, and what happens if you do not raise it?”

Research Before Making Contact

Research should help the SDR form a relevant question. It should not produce an unsupported conclusion. For a public company, begin with its SEC filings and official investor-relations materials. The SEC’s EDGAR database allows searches by company name, ticker, and other identifiers. [R45] EDGAR is the SEC’s public database of company filings.

Source What to examine

Form 10-K Annual business description, financial statements, risks, debt, and major assets

Form 10-Q Quarterly financial developments and updates

Form 8-K Reported events such as financing arrangements, acquisitions, or executive changes Proxy statement Leadership, governance, ownership, and matters submitted to shareholders Official investor-relations website Recent announcements, presentations, and executive information Relevant IP records Recorded patents, trademarks, assignments, and related information A proxy statement provides information connected with shareholder voting, including many governance and compensation matters.

Read the date of each source. A recent filing may update information in an older presentation. When using a contact database, treat it as a lead-generation aid. Verify important executive information against current company sources.

Record facts and hypotheses separately

Verified fact: The latest annual filing describes a patent portfolio and an existing secured credit facility. Discovery hypothesis: Existing collateral commitments may affect the availability of a new secured-note structure.

The hypothesis becomes a question: “Are the assets you would consider using already pledged under an existing financing arrangement?”

Field What to record

Use explicit labels such as unknown, management-stated, and verified from filing. Do not fill a blank with an assumption simply to make the record appear complete.

Find the Decision Group

Capital decisions often involve several people. A decision group is the set of executives, directors, advisers, and other participants who influence or authorize the proposed transaction.

Role Common area of involvement

Chief executive officer Business strategy and management sponsorship

Chief financial officer Financing needs, financial reporting, and economics General counsel or outside counsel Legal structure, disclosures, and restrictions Treasurer or finance team Cash planning, debt, and funds administration Business-unit leader Operating plan and relevant assets or revenue

Board of directors Approvals and oversight where required

Investor-relations team Public-company communications

Existing financing advisers Current arrangements and alternative financing options The first contact may be able to introduce the right people without having authority to approve the transaction.

Useful questions: “Who would lead the financial evaluation?”

“Who should participate in a discussion about the proposed issuer and structure?” “What internal approvals would be needed before engaging advisers?” Do not assume that a CEO’s interest means the company has approved a financing plan.

Avoid beginning with a long explanation of blockchain technology. Technical details become useful after the business problem is understood.

Discover the Capital Requirement

Start with these questions:

• Purpose: “What would the proceeds fund?”
• Amount: “What financing range are you evaluating?”
• Timing: “When would the funds need to be available?”
• Alternatives: “What other financing options are you considering?”
• Constraints: “What terms or outcomes would be unacceptable?”
• Prior experience: “What has worked or been difficult in previous raises?” Distinguish the desired offering amount from the money the business needs after expenses.

Gross proceeds are the total funds raised before offering expenses. Net proceeds are the funds remaining after those expenses.

Hypothetical example: If a company raises $10 million and incurs $800,000 in offering expenses, net proceeds would be $9.2 million. These figures illustrate the distinction; they are not a fee estimate.

Follow-up question: “Does your target amount refer to the total raise or the net funds needed for the project?”

Discover the Assets and Revenue

Asset discovery should establish what exists, who controls it, and what evidence is available. An encumbrance is a claim or restriction affecting an asset, such as a lien.

A company may own a patent, license a patent from someone else, or hold only limited rights within a particular territory or market.

SDR wording: “We would need to understand the rights held by the proposed issuer and any existing restrictions before evaluating an asset-linked structure.” Do not infer that a patent’s existence establishes its commercial value.

Tokenized preferred shares “Would the company consider equity with negotiated preferences?” Dividend, liquidation, voting, conversion, and dilution terms Tokenized IP-subsidiary shares “Does a subsidiary hold-or could it appropriately hold-the relevant IP business?” Ownership, transfers, licenses, taxes, governance, and parent relationships Tokenized parent-company shares “Would issuing equity in the parent align with the financing plan?” Dilution, approvals, investor rights, and listed-company requirements These questions help locate the relevant discussion. They do not establish suitability.

Useful wording: “That objective may justify evaluating a royalty-linked structure alongside other financing options. The transaction team would need to review the revenue definition, economics, and documentation.”

A debt instrument may preserve current equity percentages while creating repayment obligations. Subsidiary equity may preserve the parent’s outstanding share count while reducing its ownership percentage in that subsidiary.

Discovery question: “Which ownership, voting, or economic interests are you trying to preserve?” That answer is more useful than a general preference for “non-dilutive capital.”

Evaluate Organizational Readiness

A company can have a strong financing need but lack the resources to execute an offering. A data room is a controlled collection of documents used for transaction review.

Ask about: Financial statements and audit readiness; Ownership and corporate records; Asset and contract documentation; Existing debt and financing agreements; Available legal and accounting advisers; Staff responsible for investor administration; Budget for transaction preparation and ongoing obligations.

Do not request an entire data room during an introductory call. A practical sequence is: Gather a high-level description; Confirm whether further evaluation is justified; Arrange the appropriate confidentiality and document-access process; Let the transaction team specify the required documents.

For listed companies, keep initial discussions focused on public information and approved high-level objectives. If the conversation moves toward confidential financing plans or other potentially material nonpublic information, involve the designated legal or compliance contact before continuing that discussion.

Explore Investor Reach and Distribution Expectations

A company’s financing need and its ability to attract investors are separate questions. Ask:

• “What investor relationships does the company currently have?”
• “Does the company have an established shareholder or customer audience?”
• “Who would lead offering communications?”
• “What distribution support are you expecting?”
• “What resources are available for an approved offering campaign?” An audience can be relevant, but followers, customers, and shareholders should not automatically be counted as likely purchasers.

SDR wording: “Your existing audience may be relevant to the distribution discussion. We would still need to evaluate investor interest, offering economics, and the approved distribution plan.”

Assign the Right Next Step

Use three practical outcomes:

A useful nurture milestone might be completion of an audit, renewal of a license, or a board discussion. “Follow up sometime” is not a meaningful next step.

An internal priority score can help organize work, but it is not a legal eligibility determination, credit assessment, or investment rating.

Prepare the Specialist Handoff

A good handoff explains what the SDR learned and what remains unresolved. Handoff template: Company and potential issuer:Exact names; identify whether the parent or subsidiary issuer remains undecided.

Participants:Names, roles, and decision-making responsibilities. Business objective:What the financing would accomplish.

Capital requirement:Target gross or net proceeds and desired timing. Relevant assets or revenue:Description, ownership information, and available documentation.

Management preferences:Dilution, control, repayment, and investor-rights considerations. Existing advisers and agreements:Counsel, auditor, financing providers, and relevant commitments.

Evidence status:Separate public-source facts from management statements. Open questions:Items needing legal, financial, operational, or distribution review.

Agreed next step:Meeting purpose, participants, and information to prepare. Avoid recording “approved for Reg A” or “assets worth $50 million” unless an authorized review supports that exact conclusion and its scope is clear.

Worked Discovery Example

Hypothetical company: A listed manufacturer is considering financing a new product line based on its patented technology.

Management says it needs approximately $15 million and wants to limit additional parent-company common-share issuance.

During discovery, the SDR learns: The parent owns the patents; An existing lender may have claims over company assets; Product revenue is projected rather than established; The CFO is leading the financing review; Outside securities counsel is already engaged; Management is considering several financing routes.

Appropriate discovery conclusion

“The company has a defined financing objective and wants to explore alternatives to additional parent common equity. Existing lender rights, projected revenue, and the location of IP ownership require review. A meeting with the CFO, counsel, and transaction specialists is appropriate.”

Useful specialist agenda

Identify the proposed issuer; Review existing financing restrictions; Compare repayment capacity with equity alternatives; Evaluate whether a revenue-linked structure is workable; Consider the implications of placing rights in a subsidiary; Assess offering-route eligibility, costs, and execution timing.

The SDR has produced a useful opportunity by defining the questions-not by selecting a structure prematurely.