Financing, Options and Taxes | Yair Udi

Anti-Dilution – The Good, the Bad and the Ugly

July 16, 2023September 15, 2022 by Yair Udi, Adv.

Shares that are sold by a company, usually in the case of issuance, result in existing investor-holding dilution, unless they participate, of course. To protect their investments, sophisticated investors have introduced a variety of mechanisms to the venture capital world. One of these important mechanisms is anti-dilution. Anti-dilution protection is exercised by holders of preferred … Read more Anti-Dilution – The Good, the Bad and the Ugly

Liquidation Preference: Meaning and difference between “participating” and “non-participating” liquidation preference

July 16, 2023July 13, 2022 by Yair Udi

Investors purchasing preferred stock, usually demand to have a liquidity preference mechanism, whereby their purchased stock is being cashed out on preferred terms, in the event of an M&A, or liquidation of the Company. Preference provisions serve as a hybrid mechanism, combining equity and debt concepts. Although preferred shares are, at the end of the … Read more Liquidation Preference: Meaning and difference between “participating” and “non-participating” liquidation preference

Right of Co-Sale

July 16, 2023July 5, 2022 by Yair Udi

Right of First Refusal and Co-Sale Agreement is one of the standard transaction agreements executed in the framework of a US based startup’s financing round, based on the NVCA templates. This agreement envisages different rights, the two key being a right of first refusal, and a co-sale right. We discussed the right of first refusal … Read more Right of Co-Sale

Purpose of Valuation Cap in SAFE

July 16, 2023June 27, 2022 by Yair Udi

SAFE is an agreement used by startups mainly to raise funds during their seed financing rounds. By using a SAFE, investors invest capital in the company, which converts into equity upon certain trigger events, most commonly a subsequent financing round. A SAFE could contain investor-“friendly” economic mechanisms, such as discount and valuation cap, the first … Read more Purpose of Valuation Cap in SAFE

No Shop Provision in Term Sheet and its Implications

July 16, 2023June 19, 2022 by Yair Udi

A term sheet outlines the rights and obligations of parties involved in private equity transactions. Generally speaking, most term sheets being provided by venture capital firms or potential acquirers are non-binding, with only two provisions considered to be binding upon the transacting parties – confidentiality and no-shop (also referred to as “exclusivity”). There are important … Read more No Shop Provision in Term Sheet and its Implications

Why Breakup Fee clauses needed in M&A transactions?

July 16, 2023June 8, 2022 by Yair Udi

Breakup fee clause, also known as “termination fee” clause, is often included in the Letter of Intent, a Memorandum of Understanding, a Term Sheet or other preliminary documents involved in Mergers and Acquisitions transactions (M&A). Although, as a general rule, M&A’s letters of intent tend to be non-binding in nature, the breakup fee clause is … Read more Why Breakup Fee clauses needed in M&A transactions?

What are Protective Provisions (or veto rights), why do investors insist on having them and how founders should negotiate them?

July 16, 2023June 1, 2022 by Yair Udi

Protective provisions or veto rights are usually granted to the preferred stockholders (stockholders’ purchasing preferred stock) and they allow them to exert power to approve or disapprove specific decisions or actions taken by the company that could have an adverse impact on their investment, or any matter considered to be material. These rights usually serve … Read more What are Protective Provisions (or veto rights), why do investors insist on having them and how founders should negotiate them?

Benefits of SAFE for Startup Founders

July 16, 2023May 26, 2022 by Yair Udi

Simple Agreement for Future Equity, also known as SAFEs, is an agreement mainly (but not only) used by founders to raise capital during the early stages of the startup. SAFEs are considered as an alternative to the established convertible note structure. It provides the advantages of convertible debt minus its disadvantage, in order to simplify … Read more Benefits of SAFE for Startup Founders

Right of First Refusal

July 16, 2023May 11, 2022 by Yair Udi

Different transaction agreements are executed between the parties for the purpose of purchase and sale of startups’ stock. One such important document is the Right of First Refusal and Co-sale agreement, usually executed in the framework of an NVCA document-based financing transaction. A Right of First Refusal and Co-sale agreement is a multi-party agreement, and … Read more Right of First Refusal

Main Difference between Pre-Money and Post-Money SAFE

July 16, 2023April 26, 2022 by Yair Udi

Simple Agreement for Future Equity (SAFE) is a legal agreement between startup and investor. Startups use SAFEs to raise capital mostly (but not only) during their seed financing rounds. There are different types of SAFEs, and in this article, we will discuss Pre-Money and Post-Money SAFEs and how they differ from each other. To understand … Read more Main Difference between Pre-Money and Post-Money SAFE

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