Employee incentive schemes, often also referred to as employee share option plans (ESOP), can be tricky. Besides the company’s jurisdiction, which oftentimes brings an additional layer of complexity, there are numerous rules to be navigated that determine the amount, type and timing of any ultimate payout. In this post, we want to set out our thinking (and in a best case give some guidance) on the key commercial terms that determine the plan’s success*. One could think “what’s the problem, why not simply give the beneficiary some shares like any other shareholder?”. …
At Point Nine, when wrapping up the legal side of a seed round, we focus quite keenly on a small number of contractual terms while we’re much more flexible on others, even those that many other investors consider essential and negotiate passionately. For instance, you will generally not see us marking up the guarantee section of an investment agreement or pushing for personal founder guarantees.
Why this “selectiveness”? Well, it’s not because we are a charity or consider the beer after signing more important (although of course it is important :-)). Rather, we see the agreements concluded in a seed…
It probably happens to most founders at least once: His or her company needs money quickly and there is an interested investor, but there is not enough time to execute a full-stack seed financing including governance rules, exit provisions, etc. Or even when there is time, the committed investment amount may not yet be sufficient. Or there is confidence that a small bridge funding will be sufficient to raise a proper financing round at a (much) higher valuation shortly thereafter. Or you just want to keep it simple…
In these cases, a convertible loan can help because it’s comparatively easy…
It probably happens to most founders at least once: His or her company needs money quickly and there is an interested investor, but there is not enough time to execute a full-stack seed financing including governance rules, exit provisions, etc. Or even when there is time, the committed investment amount may not yet be sufficient. Or there is confidence that a small bridge funding will be sufficient to raise a proper financing round at a (much) higher valuation shortly thereafter. Or you just want to keep it simple…
In these cases, a convertible loan can help because it’s comparatively easy…
If you are thinking about selling your company you may think that agreeing on the basic terms with the purchaser (especially the price) is the hard part. You may think that once you have a term sheet you can hand it over to the lawyers for implementation. After all, it’s been done a million times, so there should be clear and tested standards which ensure that the transaction is implemented smoothly, efficiently and at reasonable cost.
Unfortunately, this is only the theory. Reality often looks different. Negotiations over the (share) sale and purchase agreement (“SPA”) and ancillary documentation often take…
This blog post will not win me friends at some law firms, and one or the other investor may also frown, but after years of legal practice in venture capital I feel the case is overwhelming: The (mostly European¹) mantra that founders need to be personally liable for the representations and warranties agreed in early-stage funding rounds is counterproductive.
To be clear: I am not saying that representations and warranties as such are useless. When an investor hands over a sizeable amount of money he can expect that “what he sees is what he gets”, even more since not every…
Vesting of founder shares is often one of the most sensitive topics in a financing round. Founders understandably wonder why they should agree to potentially losing shares in their own company, no matter how unlikely (at Point Nine, in well over 100 investments we at best had a handful of founder departures with vesting implications so far). After all, they have founded and built the business and therefore “earned” their holdings! …
Hi there, you are witnessing a premier, my first blog post… Not something lawyers normally do, but I will try hard to keep it readable and useful, even though it’s on the somewhat “dry” topic of due diligence. :-)
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Recently my colleague Christoph published a blog post on Making European Venture Capital a Little More Human. One of the reasons for the cumbersomeness of many VC investments, which Christoph addresses in his post, are the due diligence (“DD”) requirements of investors. With this we…
