Built as an alternative to CLA, there is also no current business valuation. However, this agreement has no aspect of debt. The investor simply postpones the valuation to the next round. This is usually useful for investments in the seed phase where the size of the check is small, and it is not wise to perform a full SPA. Here are the main features of a share purchase agreement: the advantage, from an entrepreneur`s point of view, is that a loan converted before its conversion is very similar to a standard loan: the investor usually does not have many of the rights of a preferred shareholder (seats on the board of directors, liquidation preferences, etc.). Since this is a fairly short and simple document, it is also executed faster (so investing in converted loans can be processed faster than an investment, usually a few weeks). Cla is more appropriate for an entrepreneur, as sites do not have to be involved in the valuation of the business. However, the company takes the risk of incurring a significant financial burden if the investor chooses not to convert the loan into equity. What distinguishes venture capital firms from more conservative investors is that the former tend to convert their loans into equity, while the latter generally prefer to collect their debts at maturity.
Use our VC Shareholders` Agreement to agree on business that is of interest to founders and investors or our seller-friendly SPA to facilitate subsequent exit transactions. Second, the converted loan is used at times when investors and entrepreneurs are unable to agree on valuation, especially when setting a discount, but not necessarily the valuation cap (see below). I`m not a big fan of this application case: instead of immediately facing a major problem, both sides decide to postpone the solution to a later date. . . .