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In the current world of startups and angel funds, it is important that your company find the right financing. Proper financing is important to catapult your company to the group of unicorns. But, what is more important, the legality of the issues related to financing is imperative for the success of your newborn baby. The following steps should be taken into account:
1) The first step in the search for adequate legal funding is the search for an investor and the discussion of the general terms of the investments. These conversations are often conducted face to face and a sheet of terms is signed. Before placing the pen on paper, you must consider the key clauses. The term sheet would include what will be the previous and subsequent monetary valuation and the amount of shares that would be granted to the investors. More importantly, it is necessary to understand the type of securities offered to investors. In general, these are called CCPS (Compulsive Convertibility Preference Fee). These are preferable to other values because they give you opportunities with which other types of values are not associated.
2) In the case of acquiring funds from a national investor, the important thing is to sign the Convertible Note, where the important thing is that its start is in its initial stages and that it does not have enough numbers and business to show and, therefore, , the investor can invest the money in his company that, in the next round of financing will become capital with a certain discount. But this does not apply to foreign investors.
3) There are some other clauses that an early start can examine, although the beginning can not negotiate in these lines to its full advantage. An important point is the Liquidation Preference Clauses. In the event that a liquidation event is triggered, the investor will seek to safeguard his investment, which means that if the investor has invested 10 million in his company and the value of his company is 25 million, then if an event of settlement will receive its $ 10 million back. Sometimes, if the investor also has 50% shares, then, in addition to the 10 million dollars, you will also get 50% of the remaining 15 million dollars.
Defender Dhruv Suri can be consulted for more information at or by calling 09599-000-555.
Video credits to LawRato.com YouTube channel