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Convertible Note Convertible loans occupy a hybrid position between equity capital and debt capital. After all negotiations have been concluded, a capital increase is decided by the shareholders of the company and the share capital is increased by the new proportionate amount, as in the case of financing with equity capital. The capital contribution is […]
Vesting Vesting clauses offer investors protection against a part of the founder or management team leaving the company at an early stage. However, from the point of view of the founding team, a commitment to the company can also make sense, as the team has to rely on each other accordingly. Founders or important employees/managers […]
Trade Sale The investment is sold to another company, usually to a strategic investor. The trade sale represents an alternative to an IPO as an exit channel for investors if the company is not ready for the stock exchange because the strict criteria are not met or the IPO takes too long. Strategic investors usually […]
Secondary Purchase In comparison to a trade sale, a secondary purchase is a sale of the company to another financial investor, who wants to generate a return himself through a certain holding period and a renewed exit. Usually an exit of all partners, including the founders, is not necessary. The agreed special provisions in the […]
Right of first Refusal If a shareholder wishes to sell his shares to a third party, he must offer them to the other shareholders on the terms offered by the third party. They are able to buy these shares in total or on a pro-rata basis. Only if they do not acquire the offered shares […]
Price per Share The price per share is the ultimate measure of what investors pay for the equity that is being bought. Is is calculated after all parties agreed on the valuation and the fully diluted calculation. A possible way how the price is represented within the term sheet is following: Price: [__] € per […]
Pre-Money Valuation / Post Money Valuation The valuation of young companies is defined by two different terms. On the one hand, the pre-money value of the company. This is the valuation of the company before an investment is made. The post-money valuation, on the other hand, describes the value of the company after the investment […]
Pay-to-Play A Pay-to-Play provision is often negotiated within the Anti-Dilution Protection. This is a provision that will encourage investors to fully participate to the full ratio rate that is outlined in the provision in the financing of a venture – if not they will loose additional rights like the Anti-Dilution Provision. Pay-to-Play: As far as individual […]
Milestones Depending on the phase, the participation of investors takes place under more or less great uncertainty and usually covers a medium to long term. In the case of longer maturities, not all contingencies can be taken into account when the contract is concluded. Macro- or microeconomic risks are usually not foreseeable at this point […]