AEGIS CAN HELP

A successful capital raise requires a lot of things to come together – a great business opportunity, capable managers, a complete description of the opportunity (narratively, financially, and legally) and the successful execution of a strategy to distribute the opportunity to potential investors.   

Often, we are asked to be heavily involved in each of the following items where an investment package needs to be assembled and distribution strategy developed.  At times, our clients have many of these items prepared and we are merely updating or slightly reworking.  Other times, we are helping to prepare original content.   Either way, our team can help bring your private investment offering package together.

$0
Estimated amount of venture funding completed with AEGIS support.

Convertible Note Offering


Standard

$5500one-time

  • Term Sheet
  • Statement of Risks
  • Diligence Support
  • Investor Advocacy
  •  

  • Convertible Note
  • Note Purchase Agreement
  • Operating Agreement

 

SAFE Offering


Standard

$5000one-time

  • Term Sheet
  • Statement of Risks
  • Diligence Support
  • Investor Advocacy
  •  

  • SAFE Agreement
  •  

  • Shareholder Agreement

Private Placement Memorandum


Standard

$10,000one-time

  • Term Sheet
  • Statement of Risks
  • Diligence Support
  • Investor Advocacy
  •  

  • Private Placement Memorandum
  • Subscription Agreement
  • Operating Agreement or Shareholder Agreement

Business Plan & Financial Modeling

Standard

$5000one-time
  • Business Plan
  • Investor Pitch Decks
  • Startup Funding Strategy
  • Financial Projections
  • Investor Advocacy

What’s Included?

What is a convertible note?

A convertible note is an investment vehicle often used by seed investors investing in startups who wish to delay establishing a valuation for that startup until a later round of funding or milestone. Convertible notes are structured as loans with the intention of converting to equity. The outstanding balance of the loan is automatically converted to equity at a specific milestone, often at the valuation of a later funding round. In order to compensate the angel investor for the additional risk of investing in the earlier round, convertible notes will sometimes have additional clauses, such as caps, and or discounts.

Why should early-stage companies use them?

Convertible notes (or “notes”) offer a simple, cheap, and fast method for startup funding as compared to traditional priced equity rounds. It also defers the more complex discussion of startup valuation to the next round of financing as convertible notes do not set the exact terms of the investment.

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What is a SAFE?

A safe is a Simple Agreement for Future Equity.  An investor makes a cash investment in a company, but gets company stock at a later date, in connection with a specific event.  A safe is not a debt instrument, but is intended to be an alternative to convertible notes that is beneficial for both companies and investors.

Why should early-stage companies use them?

Debt instruments have requirements – including regulations , interest accrual, maturity dates, the threat of insolvency and in some cases, security interests and subordination agreements.  These requirements can have unintended negative consequences.  A safe is intended to be simple for both companies and investors, with the usual path to agreement requiring the negotiation of only one item – the “valuation cap.”  

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What is a Private Placement Memorandum?

A private placement memorandum may also be called an offering memorandum (OM), confidential offering memorandum (COM) or confidential information memorandum (CIM). A PPM is similar to a business plan, although it focuses much more on legal issues.  The primary purpose of a PPM is to disclose to prospective investors the terms of a potential investment and primary risk factors involved in making the investment. A PPM also usually contains a considerable amount of information about the business opportunity, structure and management.  It is less sales-oriented than a traditional business plan, partly because business lawyers typically create them.

From the standpoint of a company raising money (called an “issuer” in SEC terminology), a PPM is a safety belt offering protection to a company selling unregistered, private securities. The securities may be stock or other equity interests (e.g., limited liability company membership interests) or they may be some type of debt instrument.  

Why should early-stage companies have one?

In a private offering under Rule 506(b) where you raise money from accredited investors, you don’t have an obligation to deliver any specific information to the prospective investors, provided you don’t violate the antifraud rules. Rule 506(b) allows companies to raise money from unaccredited investors, although you’d then be required to provide certain information, which is similar in scope and form as the information required in registered offerings with the SEC.

The SEC website defines an accredited investor as an individual who (a) has earned more than $200,000 ($300,000 with their spouse) in each of the prior two years with a reasonable expectation of earning at least that in the current year; or (b) has a net worth over $1 million, either alone or together with a spouse (excluding the value of the person’s primary residence and any loans secured by the residence (up to the value of the residence)). There are other meanings of accredited investors that apply in the case of entities (corporations and LLCs, as opposed to individuals).

The takeaway here is that if you use the 506(b) safe harbor (which is a great exemption to use, by the way – easy and SAFE) and only offer securities to accredited investors, you do not technically have to provide the disclosures contained in a PPM (for clarity, the disclosures and information in a PPM are much less than in a registered offering).

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Information about safe offering, including cost
Information about private placement offering, including cost

Schedule a Consultation

Consultations with AEGIS are always free. Give us a call at (314)-454-9100 or email us to schedule your appointment.