Fundraising Instruments for Startup Projects

Below is a list of financial tools enabling the raising of funds by early-stage startup projects where a key requirement is low fixed costs, fast deployment and few or no regulatory complications.

Convertible Notes

Typically require no regulatory approval or notification. The main challenge for the investor is whether the issuing company’s jurisdiction is easy to litigate and enforce the debt-to-equity conversion in case of debt default. The US (Delaware in particular) is considered the most investor-friendly venue for convertible note investors. Others may require a third-party escrow-type mechanism to give the investor peace of mind. Our company provides this when requested.

Microbonds

This is what we call smaller size bond issues below 10 million USD, often as low as 1 million USD. Depending on the issuance country and distribution market such fundraise may be subject to few or no regulatory complications (The EU allows certain small issues even to be publicly placed without a Prospectus). We arrange the issuance of bonds and other simple debt instruments on very competitive terms.

Equity-linked Instruments

If the founders do not want to part with their shares, but the investors want to have some equity upside if the project is successful, it is possible to engineer on demand a bespoke security which will balance the interests of the funders and the funded. It may embody an option or a synthetic share in the upside without giving the investor a straight voting share. We structure such instruments in several jurisdictions.

Islamic Securities (Sukuk)

Those are handy if the startup company wishes to raise funds from Shariah-compliant funds, family offices or individuals. Goes without saying, the startup project itself must be Shariah-compliant. Islamic securities (known as sukuk) are uniquely flexible in structuring, allowing to fine tune the benefits for the investor from the project’s growth or strategic sale. Typically, such securities do not provide a direct equity interest in the project company for the investor. We create several types of sukuk in Islamic finance hubs and general offshore financial centers.

Equity

Projects at a more advanced development stage, having a reasonably high valuation may be tempted to offer a part of their equity to investors. Strictly, this is not an IPO but a private placement to longer term strategic investors excluding retail. We help arrange equity issues in several global holding jurisdictions and specific startup locations.