An anti-dilution fee is used to protect an investor`s ownership shares if the value of the start-up decreases after the date of the investment. Therefore, if the shares are issued later at a price per share below the price paid by the investor during his financing cycle (which is commonly referred to as the “low round”), the anti-dilution duty would come into effect. The law is incorporated into what is known as a “conversion price,” which is the benchmark for a per share price to which preferred shares would be converted into common shares. On the other hand, an investment contract is specifically focused on a specific investment for which the investor can obtain equity in the company or if leverage agreements can be entered into (in fact, a loan to the company). The investor may already be a shareholder or a new third-party investor. The investment guarantee can cover aspects related to the company`s financial situation, the product, the company`s capital, the company`s liabilities, litigation, taxes, etc. If an investor had subscribed 50% of the total shares at a price of AED 10 per share with a total investment of AED 1 million in a Series A financing cycle, that investor would receive 100,000 shares. If, during a Series B financing cycle, the startup`s valuation fell and new shares were offered to Series B investors at the price of AED 5 per share, the Series A investor`s anti-dilutant would come into play and the Series A investor would initially be invested at a price per share below AED 10. A lower conversion price means more shares, since the value of the investor`s subscription (AED 1 million) is divided by a lower price per share (for example. B a price of AED 5 per share).
It is CC`s responsibility to certify that the closing conditions for a particular booking are met. After confirmation by CC, the escrow agent transfers the funds held into the pre-closing account to a lawyer appointed by the company or directly to the company`s bank account as payment of the shares to be subscribed by the nominee; and (ii) the custodian executes the investment agreement in accordance with the conditions approved by the investors. 15. Completion. The detachment sets the conditions for the completion and execution of the investment. The preconditions for concluding a specific booking may be: the investor will determine that certain conditions must be met before the investment can be completed. These conditions may include: The relationship between the founder and investors is essential to the growth and success of the company and must always be treated with care. Since founders will trade against their investors in each financing cycle, it is useful for founders and investors alike to memorize some of the basic market practices and venture capital terminology. This will help their mutual expectations and hopefully minimize areas of disagreement.
The lack of this knowledge in the market can lead to lengthy negotiations that can completely destroy a venture capital agreement or damage the life relationship between founder and investor.