Leapfunder’s purpose is to facilitate funding rounds for early-stage startups which have a scalable business proposition. We provide a two-sided platform where startups raise funding and investors directly invest in startups. For investors, we are a source of deal-flow and a trusted party for reliable deal structures. For startups, we take away all the hassle and the complexity of a funding round.
We achieved this by providing a platform that uses standardised documents, a complete data room, and a total transaction and execution solution. We have been steady from the start, and we have used a consistent philosophy. We are continually improving the platform so that it becomes easier for investors to get to know and understand startups’ propositions.
The standardised documents like the convertible contract and the articles of association of the special purpose vehicle have been updated and improved in very small steps since inception. We believe that an investor should only have to read this contract once in his life.
However, as we expand internationally, we want to bring our convertible product, the Leapfunder Note, a little more in line with the most common market practices internationally. That means we have updated it by altering the way the cap and the discount are applied. If you don’t know what the cap or the discount are, please read our blog on that.
Starting from 2019, this is the convertible structure:
When a qualifying event happens, a valuation for the startup is set. A discount is applied to this valuation for your conversion. If the pre-money valuation after the discount is higher than the cap, then we will use the cap instead. So the cap is the highest valuation that will actually be used. This also means that when we apply the cap we no longer apply the discount: as an investor you get the benefit of one of those, not both.
(This is the structure for the Leapfunder Note 5. For the historians: the Leapfunder Note 4 gave you a discount and a cap, the new one gives the discount or the cap. So for the Leapfunder Note 4, the explanation above would read: if the pre-money valuation is higher than the cap then we will use the cap instead, and we will also apply the discount to that. The two are equivalent! A Leapfunder Note 4 with Cap 10mio and Discount 20% is exactly the same thing as a Leapfunder Note 5 with a Cap 8mio and Discount 20%.)
The Leapfunder Note 5 is more consistent with the explanation websites that are drafted in the U.S. So international startups that are using Google to find information about convertibles will have an easier time.
If you have any questions, please send an email to info@leapfunder.com.
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