RNKGI makes investing in SMEs simple, giving Angel investors access to successful SMEs and a steady deal-flow. This is how we lower the barriers for you to make informed and uncomplicated investing decisions.
Your RNKGI Experience
Our SMEs are required to complete an Informative Statement. This document states what the investment is for and terms of the investment round. Such as specification of the minimum investment required and the prognoses on their return on investment.
If the SME chooses to offer a RNKGI Note as an investment then the Interest rate, Discount, and Cap need to be laid down. If instead the SME offers a RNKGI Priced Equity investment then the pre-money valuation needs to be laid down. SMEs usually choose to fund-raise with a convertible when they are unable to make an accurate assessment of the value of the shares. And that’s normally the case in the first few years of the life of the company. In the following explanation we will assume that the startup chooses to issue a convertible, and so it is offering RNKGI Notes.
When you choose to invest in a SME via RNKGI, your investment is deposited in an independent bank account. This is to prevent the company from using the money before they have achieved their minimum investment. Only if the minimum Investment has been achieved before the first closing date, will the money be transferred to the account of the company. If the minimum is not reached, the money will simply be refunded, with no cost to the investor.
Investments can start from €20.000, and on average investments fall between €20k-100k though amounts have exceeded €500k.
Example: An investor chooses to invest in an SME called MedicAll B.V. and invests €20.000 in RNKGI Notes. The investor receives a confirmation of payment. If this meets the minimum investment, the investment is finalized. The investor receives notice that the investment has been accepted and the cash amount is released to MedicAll B.V.
At the end of a successful round, any funds that haven’t been released yet are transferred to the SME who can now use the money for whatever they indicated in the Informative Statement. Each time cash is released to the SME, the corresponding investors get a convertible in the form of the RNKGI Note.
RNKGI Angel investors can contribute a lot by offering help and assistance. Look for valuable contacts in your network and bring in new contracts. An active group of investors have proven to make a difference.
Later, when the value of the shares is estimated more precisely the RNKGI Note will be converted to shares that are held by a Special Purpose Vehicle (SPV). You will get the shares at a Discount to reward you for getting in early. The RNKGI Note will also have increased in value with the pre-agreed Interest. In other words: you will get significantly more shares for your money than later investors.
Example: A RNKGI Angel investor that has invested €20,000 stays up to date by following the developments that are announced by the CEO. When the Angel investor sees that the company is trying to expand into a country where the Angel investor has contacts, the Angel investor offers assistance in building the business there.
There comes a time when the RNKGI Notes will be converted into shares. This usually happens when a large investor decides to invest. The value of the shares is than determined by the price offered by the large investor. After conversion, investors are pooled through a Special Purpose Vehicle (SPV) and act as a single investor in the SMEs shareholders meeting.
The Conversion will happen as soon as:
A large (€100,000) angel investor invests in fresh shares in the SME. The startup is acquired by another company. When the Final Conversion Date arrives. At this date a conversion will be triggered automatically.
After conversion you hold shares in the company via an SPV. By investing you took a considerable risk. To compensate for this risk, you receive both an Interest on the value of your RNKGI Note, and a Discount on the price of the shares. The share price is just taken from the investment round that triggers the conversion. If the convertible expires without an investment, because of the Final Conversion Date, then the SME will agree the correct market price of the shares with the investors, or else an external referee is asked to assess it. In each case the investor will benefit from the Interest and from a Discount. The Interest and the Discount are found in the Informative Statement. What is not fixed is what % of the company you will eventually get.
Example: An investor has invested €20,000. After one year this has risen by 10% interest to €22.000.- There is a conversion because a new investor decides to invest €100,000 in new shares in MedicAll B.V. at a valuation of €660 per share. At conversion there is an additional 20% Discount on the shares for the RNKGI Note holders, so they only pay €528,- per share. For this reason, the investor receives €22.000,- / €528 = 42 shares, with a total value of €27,720. The shares will be held in an SPV together with the shares of the other RNKGI Note investors.
Apart from the Interest and the Discount there is usually also a Cap. The Cap is also agreed in advance and is stated clearly in the Informative Statement. A Cap is a maximum share price that will be used for Conversion. Naturally, investors in a convertible often like to know roughly what share price they should expect during the conversion. Of course, it is difficult to say this in advance. But the Cap is a kind of guarantee: the pre-money valuation used for conversion will never be higher than the Cap. This means that after applying the Discount you can check whether the price is still higher than the Cap. If it is still higher, then the investor will get the lower ‘Capped’ price instead. Which means that the Cap is a price guarantee.
Although the use of convertibles is relatively new in Europe, this way of investing is normal in the U.S. Online you will find plenty of good material explaining the convertible in general.
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