Now you can start to attract investors from your personal network as well as RNKGI’s. RNKGI installed a payment gateway that is dedicated to your campaign: in this protected online environment your data room will be presented to investors who have used RNKGI before, and to investors from your own network.

When investors are convinced of the quality of your proposition, they can invest directly. Investors can invest remotely from anywhere on the planet in only a few minutes, although we exclude investors from U.S. soil for legal reasons.

As soon as you achieve the minimum investment the investment round will be considered successful. All the money is collected in an independent bank account. Now that you have the minimum you can request your cash. The final legal processing and the transfer are usually completed within one week. The minimum investment needs to be achieved before the first closing date, otherwise the round is not considered successful and the money has to go back to investors.

Example: MedicAll B.V. needs a minimum of €50,000 to develop a first prototype of their software. Together with RNKGI, the MedicAll B.V. team finds investors including friends, family and other stakeholders. They each invest a small amount. MedicAll B.V. finds 1 investor for €20.000, also 10 investors for €2,000 each and 10 investors for €1,000 each. The minimum investment is realized before the first closing date and the investment goes through.

The first investors will probably be people from your immediate environment who know you and can tell how serious you are. Investors who don’t know you, or don’t know your business area, will often get on board later.

During this phase RNKGI will supply all the necessary legal documents, the software that runs the investment button on your site, and access to the independent bank account needed for the campaign.

If the investment round has been successful, your company can go forward with your plans. You can now use the money for whatever you indicated in the Informative Statement, for example making a prototype or rolling out a go-to-market strategy. Now that the investment has been successful, the investors get a RNKGI Note for the amount they have invested.

Example: MedicAll B.V. has issued €50,000 in RNKGI Notes. With this investment MedicAll B.V. can now develop a prototype.

When your financing round has been successful, your company can go forward. You can use the investment for the goals you have stated in the Informative Statement. Once a month you will inform your investors about the company’s progress. At this point, your investors will likely be very enthusiastic about your plans. A good investor base can help your company a lot, for example by bringing you in contact with their network.

As stated above, investors will receive a convertible note. In exchange for this security, they will eventually receive SPV Shares. We call this conversion. The big advantage of using a convertible is that the value of the shares does not need to be established until later. Please be aware that with the RNKGI Note you never have to repay the convertible in cash, it always converts to shares sooner or later.

There comes a time when the convertible notes will be repaid with shares. This usually happens when a large investor decides to invest. The value of the shares will be determined by the price offered by the large investor. The convertible note holders also get the shares for that price, but with a fixed % Discount, and of course they get Interest on the note. This moment is called the Conversion.

The Conversion will happen as soon as:

• A large (€100,000) investor invests in fresh shares in your company.
• Your company is acquired.
• When the Final Conversion Date arrives. At this date a conversion will be triggered automatically.

Example: MedicAll B.V. gets an investment > €100,000 at a pre-money valuation of €330,000 for its 10,000 shares. This triggers a conversion of the convertible notes into shares. The €50,000 of investment has risen in value by 10% because of the Interest after one year to a total of €55,000. The investment has been done at a valuation of €330,000/ 10,000 = €33 per share. Apart from Interest, the RNKGI Note holders also get a discount on the share price, which was set to 20%. That means they get shares for a value of €33 reduced by 20% which is €26,40 per share. The total number of shares to the RNKGI Note holders is therefore €55,000/ €26,40 or 2083 shares.

There are good reasons to delay giving the shares to your investors until you have found a larger investor. By the time conversion is triggered your company should have a track record. That makes it a lot easier to determine the value of the shares. The risk that you will be asking too much, or too little, for your shares is reduced. The investors that come in via the RNKGI Note will be rewarded for getting in early: they get the shares at a Discount. This discount is their reward for the risk they have taken over time. Additionally, the value of their shares has increased with the Interest.

To repay the convertible notes with shares, the price of the shares needs to be established. If a large investor is investing, or if someone is buying your company, you will negotiate the share price with that investor. This share price will also be used for the conversion, as in the example above. If the conversion happens because the final conversion date has been reached the process is a little different. In this case there isn’t a large investor that you have negotiated a price with, and so the conversion share price needs to be set differently. Specifically, you negotiate the share price with your RNKGI Note investors, only if you cannot agree the price an independent expert will be asked to value the shares. Now this price will be used in the calculation, just as in the example above.

Normally, a Cap has also been agreed in advance. A Cap is a maximum share price that will be used for conversion. 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 more than the Cap. You can set the Cap yourself in the Informative Statement. In practice the Cap is often used during conversion, and so this condition one of the most important financial terms in your Informative Statement.

Upon conversion the startup issues new shares. Those shares will be held by a Special Purpose Vehicle (SPV). The Special Purpose Vehicle gives out special to the note holders. The SPV Shares are the equivalent of a share in your company. In any shareholder meeting, the SPV votes on behalf of RNKGI investors. In this way there is only a single representative for your group of RNKGI investors. If the RNKGI Angel investors wish, they can decide how the SPV will vote, or even one of them can go to the shareholders’ meeting as the spokesperson for the SPV. If the RNKGI investors are not interested in controlling their vote directly, then the SPV will be run by the SME itself and so it won’t vote. In principle the SPV Shares can be bought and sold, so if an investor wants to get out along the way, they can.