Retroactive SPVs: roll-up a number of prior investors in a single vehicle

Over the last few years, CLAs (Convertible Loan Agreements) and SAFEs (Simple Agreement for Future Equity) have been a popular tool for fundraising companies to be able to quickly bring in new capital from interested parties as investors in their round.

Both CLAs and SAFEs follow a similar structure, wherein the investor loans you money today, in exchange for future equity in your company at a later date and a yet undermined price. A valuable tool for companies that need to raise money fast in an uncomplicated way.

The exact terms of the loan agreements will vary from company to company - but in all cases these loan agreements will have a maturity date for when they convert into equity - typically upon the action of a priced round, or at a certain date from signing the agreement (e.g. 12 months).

But a looming issue comes upon conversion, depending on how you've structured your CLAs and SAFEs, you'll now have a number of investors converting directly as shareholders of your company - resulting in a messy cap table, and complicated governance moving ahead.

In some cases, founders might have hundreds of CLAs / SAFEs from prior fundraising - meaning hundreds of new shareholders. All of which will need to sign new documentation for the conversion of their investment into equity.

Depending on the country you’re in (like Germany) - your investors might now also be required to get these  documents signed, notarised, apostilled and sent to you over mail - as well as completing KYC (Know Your Customer) directly on the company bank level.

A paperwork nightmare that could cost you tens of thousands in legal and fiscal fees, and take months to complete.

Step in, KAPITAL's retroactive roll-ups.

We provide companies with a digital vehicle (SPV) to roll-up an unlimited number of early investors as a single line on the cap table - before they convert as shareholders.

All investors will be taken through the process of signing a new agreement between the SPV and themselves wherein they agree to be pooled throgh this vehicle and have their vote proxied to the SPV representative.

This process with Kapital is fully digitised, saving your investors a trip to the post office and unnecessary fees for notary, apostille and mailing - as well as saving the company tens of thousands of dollars in legal and fiscal fees and months in time - that could be put to better use elsewhere.

We've tested our Retroactive roll-up over the last year with a number of founders across Europe and the US, and are now excited to officially roll this out as a standalone product on KAPITAL.

You can book a demo to learn more - or discover a recent case study with a company here.