To onboard investors we put the SPV entity in a position to aggregate investors and deploy the shareholders’ collective capital to obtain equity in deals with the potential to create value.
Once you have set up your entity, finalized the core documents and opened a designated bank account, you are ready to formally invite the investors to participate in the venture investment deal process. This step is requires mostly Administrative expertise, with Compliance and Legal considerations. In order to subscribe to your capital-raising SPV, your investors perform two specific sets of actions:
- First, they will sign the operating agreement and the subscription agreement documents
In order to complete this step, they need to sign the operating agreement, fill out all required forms and sign the signature pages in the subscription agreement
- Second, they deliver their funds to the bank account
They may do this by wiring the funds, depositing a certified check or physically delivering cash to the account
By signing the operating agreement, the investors are formally agreeing to the direction, rights, rules and restrictions of the SPV, as documented in the agreement. By completing and signing the subscription agreement, each investor provides the SPV with the following information:
- Who or what entity is subscribing
- How much money they are committing to invest
- Other relevant detailed information, including address, phone number, tax ID numbers, entity type, etc.
When investors have signed all of the documents and wired their funds, they are considered onboarded. The legal aspects of this step include such tasks as reviewing subscription documents for completeness and answering investors’ questions regarding the documents. Compliance encompasses KYC/AML (know your customer/anti-money laundering) checks, accreditation verification, conforming with investor limits, and following a variety of other rules and processes. The administrative aspects of this on-boarding includes working with investors and answering their questions, which generally include variants of the following:
- “Okay, I signed up, so now what happens?”
- “Did you receive my wire?”
- “When will the deal close?”
- “Has the deal closed yet? Why not?”
- “Now has the deal closed...finally?”
- “Why haven’t the documents been countersigned and sent back to me yet?”
- “When will I get the documents?”
- “Can I PLEASE get those documents?”
- “Etcetera etcetera”
When you have answered the concerns of each of your investors to their relative satisfaction, you are ready to proceed to the real action of your capital-raising SPV, SIGNING THE PURCHASE AGREEMENT.