Capital providers
For Capital Providers
How does the Note work and what are the relevant terms? The Structure → Economics → Lifecycle → Investor communications
Who speaks to investors
The program is in preparation and no securities are being offered through this site.
No one on this page solicits investors, discusses the terms of an investment, negotiates with investors, or accepts investor funds. Their work is with entrepreneurs and their companies. Today there is one channel: a Project offers and sells its own Note through its own officers, and an investor may come on its own or through an adviser of its own choosing.
One member of the Structuring Company intends to become a representative of an independent RIA. He is not one today, and no investor comes through him. He holds a non-voting economic interest in the Structuring Company; if he registers, that is a conflict disclosed in the term sheet and at subscription, and he could advise no ERISA plan or IRA into the Note. Whether he registers at all turns on a firm accepting the arrangement. He solicits no investor for any Project and no lead passes to him from the Structuring Company.
Nothing is paid to any adviser out of the raise, and no fee anywhere in the structure is a percentage of face. Where instead a Project requires a placement agent, an unaffiliated registered broker-dealer is engaged and its fee is paid at closing out of the proceeds — set as a multiple of the growth capital rather than a percentage of what is raised, with no retainer, no work fee and no expense advance. Whether one has been engaged for a Project is stated before subscription.
Two currencies, one collateral
Both are claims on the same U.S. Treasury credit. Only one of them also owns a piece of a company.
$100
U.S. Federal Reserve Note
a claim on the U.S. Treasury, and nothing else
$100
Leading Edge Note · one unit
the same Treasury claim, plus a warrant
By destination — where the money goes
79.00 into Treasuries that mature to the full 100.00 · 14.16 into the company · 6.84 prefunding the coupon reserve and the flat fees
By allocation — what the appraisal says you bought
80.19 the note, at its issue price · 19.81 the warrant. What the independent appraisal records you as having bought. In the tax-exempt class the same split is 73.56 / 26.44.
Both bars are the same $100. The top one says where it went; the bottom says what you acquired. Read together: you parked 79.00 in Treasuries and still came away with 19.81 of warrant.
What you actually spend
16.40
of present value, per $100 of face
The 79.00 in Treasuries comes back to you as 100.00, and the coupons come back too. Only the rest is consumed. In the tax-exempt class it is 21.00.
What that money buys
20%
against 13.7–14.19% in a priced round
Take the same present value to the company directly, at $35mm pre-money, and it buys about a seventh. The warrant is a fifth.
Cash, Treasuries and the collateral floor
- Cash, held as currency
- 100.00
- U.S. Treasuries
- 126.58
- The unit — company fails
- 105.27
If the company fails, the pledged Treasury STRIPS mature to par. The investor takes the collateral, keeps the coupons and retains the warrant. This is the collateral floor, not a forecast of company growth.
The Treasury accretion you forgo is 26.58 per $100. What you give up is known and capped; the warrant has no ceiling.
How the program is reached
No Note is offered through this site and no subscription is taken here.
Today there is one channel: a Project offers and sells its own Note through its own officers, and an investor may come on its own or through an adviser of its own choosing. Where a Project needs demand found, an unaffiliated registered broker-dealer is engaged for that Project, and the fact is stated before subscription. The Structuring Company does not approach investors, does not take subscriptions and is paid nothing for finding one.
An investor may hold the unit directly, or through an adviser of its own choosing. The program does not select an adviser or refer investors to one, and nothing is paid to any adviser out of the raise. One member of the Structuring Company intends to become a representative of an independent RIA and is not one today; the conflict that would create is disclosed in the terms, and he could advise no ERISA plan or IRA into the Note.
Allocating from an endowment, pension or foundation? The duration case is set out separately.