Legal Advice on fundraising rounds in Spain
Discover the best way to raise capital for business in Spain
Our corporate lawyers will guide you through the process step-by-step.
How can a lawyer help me?
A fundraising round implies the acceptance of many obligations for both parties and if it is poorly drafted, it can lead to a genuine source of trouble for the business while draining resources.
Having a lawyer support you when drafting or revising a Term Sheet will help identify risks that otherwise may go undetected. It can also help you define your negotiation strategy to reach the best deal possible.
When the time comes to execute your final agreement in the Share Purchase Agreement and other ancillary documents, having a good lawyer by your side will ensure that your will and ideas are correctly expressed. Therefore, they will be correctly defended by the law.
Our corporate lawyers at Lexidy LegalTech Boutique will make sure that your interests are meticulously expressed and fiercely defended, as we are seasoned legal experts with years of experience in fundraising rounds.
¨We will be with you each step of the journey.¨
What is a Fundraising Round?
Once the directors of a company decide that they need extra financial support to leap into the company’s next phase, they face a choice. Do they apply for a loan or embark on the journey of grabbing an investor’s attention and securing capital.
A fundraising round takes place when a company actively seeks an investor to help fund their business. In return, the investor receives a percentage in the Share capital.
New companies raise funds in a series of stages.
The funds raised in the pre-seed and seed phase are usually relatively small and less than €1 million. Generally this funding comes from close friends and/or relatives, but in some cases business angels invest. The goal of the financing at this stage of company’s life is to get to a break-even point that will allow the company to seek further investment for their growth phase.
Companies enter their growth phase when they have successfully created a minimum viable product, or MVP, and it’s here where the company usually attracts private equity or venture capital investors.
How can a Fundraising round help my startup?
The main advantage of having a private investor involved in your business rather than a traditional financial institution is simplicity. An investor usually works with fewer regulations and formalities and this very attractive in a young environment, like a startup.
Funding rounds are structured help the business leaders to remain focused and to not lose sight of the overall goals, as the amount of capital is often disbursed upon reaching certain pre-established milestones.
What is the process of a fundraising round?
The first step in any fundraising round is drafting the Term Sheet by the potential investor.
The Term Sheet is a non-binding document where the initial investment offer is presented. It is used as the basis of negotiation and is proof of genuine interest in making the investment, if both parties can agree on the conditions.
After the Term Sheet is shared, the proper negotiation commence with offers and counteroffers. These phase involves a great deal of sending and receiving documentation.
If an agreement is reached, the parties must execute it in the form of a Stock/Share Purchase Agreement. However, these agreements are often split into two different contracts because the complexity in the operation.
The first contract is the Investment Agreement, which fixes the price of the shares as well as the rights and obligations of each party. The next contract is a New Shareholder’s agreement and this regulates the relationship between the shareholders as well as with the company. It must accommodate the demands of the new investor.
What are the requirements?
There are no specific formal requirements in a fundraising round.
However, the larger the investment, the greater the investor’s demands will be. These demands cover matters like the target achievement, control over the company’s decision-making and other privileges.
We are a department formed by qualified legal experts who have been trained in the field of corporate law. We work on these requests every day and it’s our passion. For us, Lexidy is a way of life and what excites us the most is to be able to deliver the happiness and satisfaction of a successful process. We want to help you achieve your goals and dreams.