A few years ago, Assure had a client that was utilizing capital-raising SPVs to invest in startup companies. This client had a global network of both startup companies and investors. One particular deal needed to move quickly – a common occurrence for Assure. In the coming few days, this SPV needed to be set up, funds collected and then wired.
There are four common types of convertible debt that founders will often issue: Convertible Notes, Simple Agreements for Future Equity (SAFE), Keep It Simple Security (KISS), and Simple Agreements for Future Tokens (SAFT). Each of these are distinctive and may include standard terms that make them preferable over each other in certain circumstances. Below are descriptions of the instruments and the terms that would typically come with each.
Limited Liability Corporations (LLCs) and Limited Partnerships (LPs) share many of the same beneficial characteristics in that they are both flexible in how they are used, and both provide pass-through tax treatment.
Reaching your Company's Ultimate Success: In venture capital, the Initial Public Offering (IPO) of a company is regarded as the ultimate success. For the company, an IPO reflects a coming of age, having successfully navigated the volatile waters of start-up life to become an industry leader, and often a household name. For investors, it is often the highest payout they will see, and often a time where they will let go of some of their previously held responsibilities. However, more so than any other type of exit, the IPO comes fraught with any number of complexities, be it regulatory, interpersonal, or strategic. With all of the positive attention on the company, there comes an enormous amount of scrutiny. The company suddenly has a responsibility to disclose a large amount of information they previously were able to keep private. For fund managers, general partners, and angel investors, the IPO process can lead to significant wealth, however, it is important they understand the process both before and after the stock is publicly listed.
One of the largest factors that makes investing in private companies high risk is the general lack of liquidity. An investor can invest $50,000 in the seed round and not be able to move or derive any benefit from that investment for the next decade, if at all. Luckily, there are ways an investor can move in, cash out, or just reorganize their investments. If the investor uses a Special Purpose Vehicle (SPV), there are ways to leave the investment in a way that still complies with federal securities regulations. In this article we will focus on the mechanics, common scenarios, and common pitfalls of fund transfers. Fund transfers discussed here refer only to an investor (or manager) moving in or out of an SPV that is the legal possessor of the asset purchased, rather than the transfer of the asset itself from one holder to another. Some of these transactions are voluntary, while others are mandatory,