Why Breakup Fee clauses needed in M&A transactions?

Mergers and Acquisitions transactions

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?

Protective Provisions

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

smart investing and startups

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

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

safe agreement

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

Essential Features of SAFE

Y Combinator

Raising funds during the early stage can be challenging and time-consuming for startups, but that’s when SAFE comes to the rescue. SAFE provides a way to raise capital in a relatively fast fashion, providing efficient and practical solution in funding phases that usually lack certainty. Y Combinator introduced SAFE as an alternative for convertible notes. … Read more Essential Features of SAFE

Pro-Rata Participation Rights – What does it mean and what should you pay attention to?

grant existing shareholders or investors in convertible instruments such as SAFE

Meaning of Pro-Rata Participation Rights Pro-rata participation rights, also known as pro-rata investing rights, or preemptive rights, grant existing shareholders or investors in convertible instruments such as SAFE, the right to participate in subsequent fundraising rounds. The right allows them to maintain, and sometimes to increase, their percentage ownership in the entity. The right is … Read more Pro-Rata Participation Rights – What does it mean and what should you pay attention to?

Management Rights Letter: An Overview

venture capital

Various documents are involved in the process of venture capital investment, one of them is a management rights letter also known as an MRL, which is sometimes requested by venture investors. An MRL ensures that the investors have access to the essential information regarding the working of a company, and grants various other necessary rights … Read more Management Rights Letter: An Overview

Important Notes on Non-Disclosure Agreement (NDA)

Non-Disclosure Agreement

What is an NDA? A non-disclosure agreement or NDA is an agreement used by parties to create a legal obligation not to disclose or use confidential information. Such confidential information mainly includes trade secrets, innovative ideas, etc., that are of utmost importance for the company’s business. There are various instances when companies need to share … Read more Important Notes on Non-Disclosure Agreement (NDA)

SAFE v. Convertible Notes/CLAs: The Key Differences

INVESTMENT GUIDE SAFE v. Convertible Notes - The Key Differences

SAFE and Convertible Notes are the two most preferred investment options popular among startup founders and investors during seed funding rounds. SAFE is basically an agreement that startups use to raise seed funding which in turn allows investors to buy equity at a later stage. On the other hand, convertible notes are considered short-term debt … Read more SAFE v. Convertible Notes/CLAs: The Key Differences