A Securitization Service for Early Startup Financing (Seed and Pre-Seed)

Problem

You are an early-stage investor evaluating promising projects incorporated in jurisdictions rarely favored by major venture capital firms—places where standard, universally recognized early-stage financing instruments are not yet established. Often, the founding team cannot or will not relocate its operations or holding structure to the US or another familiar legal jurisdiction simply to accommodate your investment. Nevertheless, you want to invest early and fund their growth, even though the transaction falls outside standard legal rails.

• Simple Agreements for Future Equity (SAFEs) and Convertible Notes (CNs) are standard in the US, Canada, the Cayman Islands, and Singapore. Extending capital under a similar structure to a company in another jurisdiction requires navigating unfamiliar local corporate law, while leaving the tax and regulatory treatment of the resulting instrument uncertain in your home country.
• Even within major venture capital jurisdictions, the tax and regulatory classification of SAFEs and CNs can remain ambiguous (is it a security, debt, an option, or something else?).
• Most SAFEs and CNs are structured as non-transferable agreements, which severely limits liquidity and exit options for Angel investors.

Solution

(Note: This service is generally not intended for investors funding teams that raise capital in the US through domestic corporations.)

The solution pioneered by Khan Teniri Capital PLC uses its Hong Kong securitization platform to convert SAFE- and CN-style financings into negotiable securities. Under this structure, we will:

• Assist in negotiating the financing agreement with the startup across a wide range of supported jurisdictions;*
• Execute the financing agreement in the name of our Hong Kong securitization SPV (Special Purpose Vehicle);
• Issue negotiable securities (carrying a Hong Kong ISIN) to the investor, backed by—and mirroring the exact economic terms of—the underlying financing;
• Administer the underlying financing throughout its lifecycle, including monitoring corporate events (such as subsequent funding rounds or priced equity rounds) and managing the conversion of the instrument into preferred or common shares of the startup;
• Assist in negotiating post-financing matters, such as maturity extensions or amendments;
• Assist in enforcing the investor’s contractual rights, if required.

*Assisted by outside legal counsel; standard legal fees apply.

The investor may keep this structure in place until an IPO or strategic sale, or elect at any time to take direct possession of the newly issued shares in the startup and cancel the corresponding derivative securities.

Benefits

• Fast and cost-effective to implement
• Managed by an experienced team accustomed to working with emerging-market startups
• Saves time on ongoing investment administration and monitoring—we handle it for you
• Provides clear tax and regulatory treatment as a recognized security (Hong Kong ISIN) in most jurisdictions
• The resulting instrument is freely transferable
• Allows for fractional disposal (you may sell a portion of your position)
• Enables multiple deals to be executed and held through a single, standardized mechanism
• Accommodates collateral or security interests, if provided under the underlying financing deal
• Adds no counterparty risk: the Hong Kong SPV is bankruptcy-remote