6 reasons why a VC fund manager should use SPVs
When it comes to investing in early-stage startups, a venture capital fund manager (VCFM) typically pools their investor money into a single entity, known as a ‘fund’. However, there are times when a VCFM may opt to use a special purpose vehicle (SPV), either instead of or in addition to a fund. In this article, […]
What is a Special Purpose Vehicle (SPV)?
What is an SPV? An SPV, which is the initialism of ‘Special Purpose Vehicle’, is exactly what the name suggests: it is a vehicle created for a special purpose. An SPV is usually launched by one investor, or a limited number of investors, to hold a single asset for long-term investment. SPVs are sometimes called a special […]
Representations and Warranties under the CARE
What are representations and warranties? Many contracts include terms called representations, warranties and undertakings. The CARE is no exception. Each of those terms have a specific meaning in the eyes of the law but, to simplify things, you can read them all as being a promise. Therefore, under a CARE, the company and the investor […]
Most Favoured Nation and Information Rights under the CARE
Most of the other articles in this series focus on the CARE’s conversion mechanics and related economic terms, including how these are impacted by the CARE’s deal terms (i.e. Discount Rate, Minimum Equity Raise, Multiple, Maturity Date and Maturity Cap). There are, however, a few other important standard provisions that are not directly impacted by […]
Liquidation Priority under the CARE
Why worry about the Liquidation Priority? In either a Dissolution Event or a Liquidity Event, both a CARE investor and a founder may be owed some money under the terms of their CARE and their shares, respectively. The more important point, however, is whether they will actually receive what they are owed. A CARE investor’s […]
Maturity Conversion under the CARE
What is a Maturity Date? As its name suggests, the CARE’s primary purpose is to convert into equity (i.e. shares). If and when this happens depends on the event that triggers the CARE’s conversion: an Equity Financing, a Liquidity Event or a Dissolution Event. The timing of these events – or whether they happen at […]
Dissolution Events under the CARE
Why have a Dissolution Event? A CARE investment will not guarantee the path to a successful Equity Financing or Liquidity Event. It’s a tough world out there and a significant number of start-ups will fall on hard times, forcing them to shutter their doors. The CARE does, however, envisage such an unfortunate outcome. A ‘Dissolution […]
Liquidity Events under the CARE
Why have a Liquidity Event? The CARE is used where an investor makes a cash investment on the expectation of receiving shares at a later date. The aim may be for the investor to receive shares in the company (i.e. on an Equity Financing or, if applicable, a Maturity Conversion), but the CARE also covers […]
Equity Financing Conversion under the CARE
What is an Equity Financing? One of the key features of the CARE is its automatic conversion to shares on an ‘Equity Financing‘, i.e. when the company next raises capital by selling its shares. Simple, right? Well, not necessarily. How and when that conversion happens will depend on the specific terms of the CARE. What […]
Introduction to the Convertible Agreement Regarding Equity
What is the CARE? The Convertible Agreement Regarding Equity – or ‘CARE‘ – is a standard form contract designed by industry to help streamline early-stage venture investments in Asia. Our series of eight articles covers the CARE’s key provisions to help founders and investors understand their purpose and effect. The other articles in this series […]