Doors are now open for Amplify, our 6 module online prep program that features 6 step by step modules covering fundraising, product launch and scaling for early-stage startups.
Doors are now open for Amplify, our 6 module online prep program that features 6 step by step modules covering fundraising, product launch and scaling for early-stage startups.
You’ve got an offer and a term sheet with an investor, you’re about to sign the final document.
Then BOOM you’ll get the money in the bank and can go back to scaling your startup.
But actually, it’s not that simple. Often we see Founders underestimate the steps involved in preparing the documentation to receive capital from investors. That means the whole process of getting money becomes a lot longer than it should and more of a hassle for both startup and investor.
So what are the key stages once you have confirmation from investors?
Now there’s a lot of information out there about term sheets, investment documents like SAFEs, due diligence and most pre-Series A Founders know what is involved in both.
By the way - at Accelerating Asia you sign a term sheet with us when you receive an offer to join our portfolio and then the SAFE note once the valuation cap is determined. More on SAFE notes here.
But what about Conditions Precedent? We find this is a knowledge gap and most founders at the early stage don’t realise how important and what they need to organise for conditions precedent.
Do you really need to know about Conditions Precedent? YES!
Conditions Precedent are the common conditions and documents you need to submit and have approved by the investor’s lawyers in order to receive the investment, it’s often the final stage of the investment process.
Essentially startups must meet Conditions Precedent in order to get the money. The information required to get there shouldn’t be a surprise either - they’re laid out in the investment documents - in our case the SAFE note that you sign with our VC fund.
Here are some common conditions precedent requirements that VCs like Accelerating Asia and international angel investors require of startups:
Singapore HQ: most international investors who choose startups from Southeast Asia and South Asia require Founders to setup a Singapore company, this is really easy and cheap and can be done within a few days for around $300 - there’s also plenty of services like Lanturn to support it.
Why a Singapore HQ? Well it doesn’t have to be Singapore - it can be the UK, Australia or Delaware C-corp - basically startups must be incorporated in a country with solid regulatory frameworks and company requirements. Getting it done early can mean that closing investors and meeting conditions precedent is a breeze.
Employee Agreements: Yes you’re a Founder and you run the company and while it may seem a bit unnecessary, Founders still need to be employed by the company they are running!
Why? Well investors are investing in the entity not the founder directly, and they will want to see that the Founders are required to give a notice period, ensuring intellectual property belongs to the company, and any share vesting. At Accelerating Asia we require a three-year reverse vesting period and if you make it through to the program, we have a template for Employee Agreements.
Intellectual Property Assignment to the Singapore Holding Company. This is all about protecting your business and assets. At the end of the day, intellectual property will be owned by your company, so having the IP assigned to the Singapore holding company helps to protect you against, say, an disgruntled employee who claims that the IP actually belongs to them. For our Founders, Accelerating Asia provides a template for intellectual property assignment.
Consent and approvals from your board and shareholders (usually investors) for you to sign with the new investor and if you have an offer from Accelerating Asia, to join the program. For most startups, this requires organising two resolutions - one for the board and one of the shareholders, then getting approvals from all of the members. For startups joining the program, Accelerating Asia provides a template for the resolutions and pre-emption waivers for Founders.
At Accelerating Asia, we also have one more condition precedent which is specific to us as a VC accelerator and that is a share transfer for the program fee of ~3%. With the help of your corporate secretary, Founders transfer the required amount to Accelerating Asia. Now this is completely separate to the SAFE note and the investment amount but it is usually required to receive money in the bank from us.
Now we hope that helps clear up an area where we have seen startups fall down in. The benefit of getting on top of these common conditions precedent is that when an international angel investor or VC decides to invest in you, you will be ready to receive that money in the bank account quicker and overall it makes for a much smoother transaction for investor and Founder.
For startups accepted into the Accelerating Asia program, we aim to have this paperwork wrapped up quickly at the start of the accelerator so we get it out of the way and you can focus on closing other investors. It might seem like a lot but our Operations Manager helps to support you as you go through the process and provide templates to make it easier for you.
Accelerating Asia invests in startups with scalable technology solutions and revenue generating business models that combine purpose with profit.
In making an investment decision, investors must rely on their own examination of startups and the terms of the investment including the merits and risks involved. Prospective investors should not construe this content as legal, tax, investment, financial or accounting advice.
