Structuring a $3 Million Round A Investment from the Investor Side — Case Study

Overview:

Aurum represented a venture capital (VC) firm in a $3 million Series A investment, covering all stages from negotiation to execution. The case included crypto investment for equity, call option, structuring investor rights, and conducting a comprehensive due diligence on the fundraising company, leading to the discovery and rectification of issues with IP, assets, and corporate documents.

Challenges:

• Engaging in negotiations on behalf of the client to secure the desired investment and commercial terms.

• Conducting in-depth due diligence to uncover issues with the fundraising company's IP, assets, and corporate governance.

• Reviewing and entirely replacing investment instruments to ensure they fit the investment transaction and meet the client's requirements.

• Clearing existing shareholders' rights with respect to the anticipated investment transaction, including ROFR and other rights, and ensuring the transaction's legality.

Legal Strategy:

Aurum employed a rigorous legal strategy focused on protecting the client's investment and interests. This involved a comprehensive due diligence process to identify and address any legal and commercial risks. Our team negotiated with the fundraising company to secure the desired terms, ensuring the investment instruments were legally valid and aligned with the client's objectives.

Actions Taken:

• Represented the VC firm throughout the negotiation process, calculated the equity ownership due to the client, and formulated investment and commercial terms of the transaction.

• Conducted comprehensive due diligence, identifying several critical issues that were subsequently addressed, including IP issues and rights of existing shareholders with respect to new issuances of shares.

• Reviewed and revised the investment instruments to better protect the client's interests, ensures that the proper corporate actions are taken by the issuer in connection with the anticipated transaction.

• Cleared existing shareholders' rights with respect to the anticipated investment, ensuring that no third-party claims can be brought against the client or the issuer in connection with the transaction.

• Obtained a legal commitment from the issuer to rectify certain issues with its IP and rights in the developments, etc.

Outcomes:

The client successfully completed the $3 million Series A investment as a lead investor, with revised investment instruments that fully protected its interests. The due diligence process and subsequent rectifications significantly mitigated legal and commercial risks, strengthening the investment's foundation. The client praised Aurum's strategic guidance and legal expertise, which were instrumental in navigating the complexities of the investment process and achieving a successful outcome.

Lessons Learned:

This case highlights the essential role of thorough due diligence and proactive legal negotiation in securing successful venture capital investments. It demonstrates the value of expert legal advice in identifying potential risks and structuring investments to safeguard investor interests effectively. Through strategic legal planning and negotiation, investors can ensure their investments are built on a solid legal and commercial foundation.