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Next, we will examine each step in detail.
The overall process can be broken down into 8 steps:
Angel Talks & Partners. Investor's Guide to Pre-IPO Investments
How does a deal process work?
This guide is designed to provide detailed information on how our deals are conducted. We have made an effort to make it simple and easy to understand.
Step-by-step guide
Step 1. Reviewing the memorandum and indicating the investment amount
Any potential transaction begins with an "investment memorandum" where we outline our objective, strategy, volumes, terms, and risks. Investors make a decision whether they want to participate in the transaction based on this memorandum.
The memorandum is sent to syndicate members via a Telegram bot. After reviewing it, investors may ask clarifying questions, if any.
The memorandum is sent to syndicate members via a Telegram bot. After reviewing it, investors may ask clarifying questions, if any.
Depending on the deal, there are different minimum and maximum check sizes. The lower limit is determined by the complexity and cost of structuring the deal.
The upper limit depends on the available token lots and the number of participants interested in the syndicate.
We also recommend that you determine your check size based on the principle that it should not exceed 10% of your capital. This is a common practice when investing in risky assets.
Additionally, it is important to consider diversification. Ideally, you should participate in 4-5 deals to reduce risk.
The upper limit depends on the available token lots and the number of participants interested in the syndicate.
We also recommend that you determine your check size based on the principle that it should not exceed 10% of your capital. This is a common practice when investing in risky assets.
Additionally, it is important to consider diversification. Ideally, you should participate in 4-5 deals to reduce risk.
Preliminary confirmation of the investment amount
Step 2. Completing the KYC/AML process
KYC (Know Your Customer or Know Your Client) – an industry-standard in the investment industry that ensures the investment management company knows its clients, their risk expectations, investment knowledge, and sources of capital. KYC protects not only the managers but also the investors, as the manager's awareness prevents them from evading responsibility in case of failure to fulfill their promises to the client or meet expectations.
We rely on the requirements of the US Securities and Exchange Commission (SEC), formulated as Rule 501 of Regulation D. "Accredited investors" have the right to participate in the transactions.
The concept of an "accredited" or "qualified" investor exists in various jurisdictions. An accredited investor is eligible to invest in unregistered securities (they become registered, for example, after an IPO, when anyone can buy shares through a brokerage account). Investors obtain this right when they meet certain requirements regarding income, net worth, status in their country, and professional experience. It is believed that individuals with sufficient funds for investment are capable of independently assessing the risks involved. No additional exams need to be taken.
For a citizen of Russia, Ukraine, Kazakhstan, and other CIS countries to become an accredited investor in the United States, they must meet any of the following conditions:
The concept of an "accredited" or "qualified" investor exists in various jurisdictions. An accredited investor is eligible to invest in unregistered securities (they become registered, for example, after an IPO, when anyone can buy shares through a brokerage account). Investors obtain this right when they meet certain requirements regarding income, net worth, status in their country, and professional experience. It is believed that individuals with sufficient funds for investment are capable of independently assessing the risks involved. No additional exams need to be taken.
For a citizen of Russia, Ukraine, Kazakhstan, and other CIS countries to become an accredited investor in the United States, they must meet any of the following conditions:
- An income of at least $200,000 per year for the past 2 years (or $300,000 for a family), or
- A net worth of at least $1,000,000 individually or as a family, or
- The person is a general partner, director, or executive officer of a company issuing unregistered securities. In addition, they need to undergo the KYC procedure, which takes 1 day.
It's a quick and painless process that takes less than 1 day. To complete the KYC, a resident needs to provide the following documents in a simple form prior to the first transaction:
- Color copy of the international passport or resident's passport.
- Proof of address, which can be a registered address in the passport, bank statement, a letter from the bank, utility bill, or any other official document indicating the investor's name and home address.
Accreditation is issued by the management company Angel Talks & Partners LLC during the KYC process. In practice, accreditation involves the investor signing a corresponding declaration (statement) in a free form. The declaration template is included in the standard set of documents for the investor.
What is KYC/AML?
Who is eligible to participate in the transactions?
KYC/AML process for citizens of Russia and the CIS countries
Who conducts the accreditation?
Proof of identity of the future asset owner. Color scan of the Russian passport:
First page with a photo
Place of residence confirmation
We have the right to refuse an investor's participation in syndicates if the provided information is incomplete or raises doubts. We also need to comply with U.S. legislation regarding the control of money laundering. This means that we are not allowed to accept funds from individuals who are under sanctions or connected to sanctioned companies or territories. We also do not accept investments from politically exposed persons (PEPs).
To complete the KYC process, the following documents need to be provided:
Who do we not work with?
Additional information on the topic:
Step 3. Signing the documents for the purchase of a share in the SPV
Delaware is an optimal jurisdiction for transactions as it offers a zero percent tax rate on the sale of securities for foreign investors. The state also has a well-developed venture investment practice, with 99% of all US startups registered in Delaware, making legal enforcement easier and more cost-effective than anywhere else in the US or the world.
We facilitate our transactions through a "Series LLC" SPV (Special Purpose Vehicle). It is a legal entity organizational structure in the jurisdiction of the United States that allows foreign investors to directly acquire stakes from shareholders of private companies.
We facilitate our transactions through a "Series LLC" SPV (Special Purpose Vehicle). It is a legal entity organizational structure in the jurisdiction of the United States that allows foreign investors to directly acquire stakes from shareholders of private companies.
Each transaction takes place in the jurisdiction of the United States, specifically in the state of Delaware.
The main management company
The company responsible for creating SPVs - specialized entities.
Special purpose entities are created specifically for a transaction. They function as fully independent legal entities while being subordinate to the parent management company.
Angel Talks & Partners Management LLC
SPV 1
Angel Talks & Partners Master LLC
SPV 2
Special Purpose Vehicle (SPV) — a legal entity established for the sole purpose of investing in a specific asset. It is a company registered in the state of Delaware, where 100% of its capital consists of the acquired shares of the investment target. SPV is not permitted to engage in commercial activities as its primary function is to hold the asset.
Because the Series LLC acts as a "wholesale" buyer and helps organizations separate their assets and protect them from subsidiary liability, often with lower costs and greater flexibility than any other structures, including holding companies or parent-subsidiary structures.
For each new transaction, we establish a new SPV.
For each new transaction, we establish a new SPV.
The relationships between the investor, SPV, and the manager are governed by an operating agreement. The operating agreement outlines the company's operating rules, the manager's authority, investment limitations, and other relevant provisions. The percentage of ownership, the details for capital contributions, and the cost of the acquired shares are specified in the subscription agreement.
After receiving the KYC documents and indicating the desired investment amount, we will send you the signed documents, the Operating Agreement, and the Subscription Agreement via email. You will print out the documents, sign them on the designated pages using capital letters in Latin, and then scan and return them to us via email.
Why this ownership structure?
How are the relationships between the investor and the SPV regulated?
SPV's Articles of Association. It outlines how the company operates, what it can and cannot do.
OPERATING AGREEMENT
Share Purchase Agreement for SPV.
SUBSCRIPTION BOOKLET
Step 4. Receipt of the capital call and transfer of funds to the fund's wallet
In addition to the Operating Agreement and Subscription Agreement, you will receive a Capital Call Letter (equivalent to an invoice) specifying the total payment amount, including the principal investment and a separate line item for transaction expenses (Setup Fee).
Investment Invoice
CAPITAL CALL
The Capital Call will include the cryptocurrency wallet address and the currency in which the syndicate is collecting funds (typically USDT on the ERC-20 network). You make the transfer considering the Setup Fee. For example, if you are investing $50,000 and the Setup Fee is 10%, you will need to transfer $55,000 to the wallet. Also, don't forget about the network transaction fee.
Setup Fee — a commission for organizing the transaction. These funds cover all expenses related to the transaction. The fee is determined based on the project's expenses, financing horizon, investor contribution, and external commissions. Typically, it ranges from 5-10% and depends on various factors such as the complexity of structuring the transaction, the lawyer's qualifications, and others.
Step 5. Investor becomes the owner of a share in the SPV
The investor's share in the SPV is proportional to their participation in the syndicate. If the total syndicate amount is $600,000 and the investor has invested $60,000, their share in the SPV would be 10%.
Step 6. Purchase of the asset
In this scenario, after the funds are collected, we make a request to the asset seller in the US and provide them with a package of documents. The current shareholder is obligated to notify all other existing shareholders of their intention to sell a portion of their shares. We sign a "Stock Purchase Agreement" (SPA) or a "Binding Letter of Intent" (BLOI), depending on the deal with the US-based seller.
Next, we submit the SPA/BLOI to the seller's Company. If none of the existing shareholders exercise their Right of First Refusal (ROFR), the transaction is accepted.
In other words, we receive confirmation from the Company that they are not exercising the ROFR, and we sign the final "Stock Transfer Agreement" (STA) determined by the Company. We transfer the funds to the seller, the seller confirms the receipt of funds with the Company, and the shares are transferred to the name of the SPV, making the investor a shareholder.
In the event of a refusal through the ROFR within 10 business days, we offer investors a choice - to receive a refund or reinvest the funds into other shares.
Next, we submit the SPA/BLOI to the seller's Company. If none of the existing shareholders exercise their Right of First Refusal (ROFR), the transaction is accepted.
In other words, we receive confirmation from the Company that they are not exercising the ROFR, and we sign the final "Stock Transfer Agreement" (STA) determined by the Company. We transfer the funds to the seller, the seller confirms the receipt of funds with the Company, and the shares are transferred to the name of the SPV, making the investor a shareholder.
In the event of a refusal through the ROFR within 10 business days, we offer investors a choice - to receive a refund or reinvest the funds into other shares.
In this scenario, everything is straightforward. After the funds are collected, we participate in the SPV of the fund. This means we go through the same procedure that you go through with us. We also sign the Operating Agreement, Subscription Agreement, and receive a Capital Call, through which we transfer the funds to the SPV account of the fund. Afterward, we become holders of a stake in the SPV of the fund.
Once all investors have contributed their shares and the required amount of funds is accumulated in the accounts, the process of acquiring the asset takes place. Depending on the type of transaction, the subsequent steps may vary.
Option 1: We purchase shares directly from the holder (employee, advisor, early investor, etc.)
Option 2: We participate in the deal through a partner fund
Step 7. Receipt of certificates for ownership of shares in the SPV
After the required investment amount is collected and the transfer of funds is completed, the managing company issues participation certificates in the capital of the SPV. Within 14 days, we send scanned copies of these certificates to you via email or messenger.
The closing of the deal, taking into account all the transactions, can take up to 6 weeks. This timeframe is necessary for us to gather all the funds in the account, make the payment for the asset, and go through the necessary verification and approval procedures.
The closing of the deal, taking into account all the transactions, can take up to 6 weeks. This timeframe is necessary for us to gather all the funds in the account, make the payment for the asset, and go through the necessary verification and approval procedures.
Ownership Certificate Units
Step 8. Exit from the investment
The investment period ranges from 1 to 3 years. During this time, the fund manager actively seeks optimal opportunities to sell the shares. Potential exit points include an IPO, subsequent funding rounds, or significant growth milestones. Buyers typically consist of large investment or hedge funds, major corporations, or other venture capital firms.
Once the shares are sold, the proceeds are deposited into the SPV's account. After deducting the success fee, which is 20% of the investor's profit, the remaining funds are distributed proportionally based on each investor's share.
The success fee, also known as carried interest, is only applicable to the sale of the asset and is contingent upon the investor realizing a profit after accounting for their capital contribution and the setup fee. This compensation structure encourages the fund manager to promptly sell the asset and distribute the funds to the investors.
Once the shares are sold, the proceeds are deposited into the SPV's account. After deducting the success fee, which is 20% of the investor's profit, the remaining funds are distributed proportionally based on each investor's share.
The success fee, also known as carried interest, is only applicable to the sale of the asset and is contingent upon the investor realizing a profit after accounting for their capital contribution and the setup fee. This compensation structure encourages the fund manager to promptly sell the asset and distribute the funds to the investors.
The information and material presented in this document is provided for your informational purposes only and does not constitute an offer by Angel Talks & Partners LLC or any of their affiliates (collectively, "Angel Talks & Partners") to sell, or a solicitation of an offer to buy any securities, and may not be used or relied upon in connection with any offer or sale of securities. An offer or solicitation can be made only through the delivery of final offering document(s) and purchase agreement, and will be subject to the terms and conditions and risks delivered in such documents.
Any information regarding the valuation of portfolio companies is an estimate based on analysis of data that is publicly disclosed and is based upon information reasonably available to Angel Talks & Partners as of the date noted herein. The public information incorporated into Angel Talks & Partners analysis has been obtained from sources that Angel Talks & Partners believes to be reliable; however, these sources cannot be guaranteed as to their accuracy or completeness and have not been independently corroborated by Angel Talks & Partners or confirmed by the portfolio companies. There may exist material non-public information that impacts valuation. Valuations are intended to be illustrative rather than definitive and are subject to change. Therefore, you should conduct your own research and analysis on portfolio companies or fund interests and should not rely on Angel Talks & Partners analysis.
The investment examples set forth in this document have been included to provide you with thematic detail pertaining to the types of investable opportunities that Angel Talks & Partners aspires to make available for investment. Investments in portfolio companies offered through Angel Talks & Partners may ultimately generate positive returns, and other investments made in portfolio companies offered through Angel Talks & Partners may generate negative returns. It should not be assumed that investments in portfolio companies offered through Angel Talks & Partners will match the performance or character of the investment examples discussed throughout this document
Angel Talks & Partners does not make any representation or warranty or guarantee as to the completeness, accuracy, timeliness or suitability of any information contained within any part of this document nor that it is free from error. Angel Talks & Partners does not accept any liability (whether in contract, tort or otherwise howsoever and whether or not they have been negligent) for any loss or damage (including, without limitation, loss of profit), which may arise directly or indirectly from the use of or reliance on such information. Whilst the information provided has been obtained from sources believed to be reliable, Angel Talks & Partners does not attest to its accuracy or completeness. Angel Talks & Partners reserves the right to change any source without restriction or notice.
This document is intended for the exclusive use of the person or entity to which it is addressed and may contain confidential or privileged information. This document may not be reproduced, distributed to any third party or otherwise published (in the case of the information contained herein, insofar as reference is made to the fact that Angel Talks & Partners has provided the information) without the prior written consent of Angel Talks & Partners. If the reader of this document is not the intended recipient or his authorized agent, the reader is hereby notified that any dissemination, distribution or copying of this document is prohibited. If you believe that you have received this document in error, please advise the sender by reply email of the error and delete this email immediately.
Any information regarding the valuation of portfolio companies is an estimate based on analysis of data that is publicly disclosed and is based upon information reasonably available to Angel Talks & Partners as of the date noted herein. The public information incorporated into Angel Talks & Partners analysis has been obtained from sources that Angel Talks & Partners believes to be reliable; however, these sources cannot be guaranteed as to their accuracy or completeness and have not been independently corroborated by Angel Talks & Partners or confirmed by the portfolio companies. There may exist material non-public information that impacts valuation. Valuations are intended to be illustrative rather than definitive and are subject to change. Therefore, you should conduct your own research and analysis on portfolio companies or fund interests and should not rely on Angel Talks & Partners analysis.
The investment examples set forth in this document have been included to provide you with thematic detail pertaining to the types of investable opportunities that Angel Talks & Partners aspires to make available for investment. Investments in portfolio companies offered through Angel Talks & Partners may ultimately generate positive returns, and other investments made in portfolio companies offered through Angel Talks & Partners may generate negative returns. It should not be assumed that investments in portfolio companies offered through Angel Talks & Partners will match the performance or character of the investment examples discussed throughout this document
Angel Talks & Partners does not make any representation or warranty or guarantee as to the completeness, accuracy, timeliness or suitability of any information contained within any part of this document nor that it is free from error. Angel Talks & Partners does not accept any liability (whether in contract, tort or otherwise howsoever and whether or not they have been negligent) for any loss or damage (including, without limitation, loss of profit), which may arise directly or indirectly from the use of or reliance on such information. Whilst the information provided has been obtained from sources believed to be reliable, Angel Talks & Partners does not attest to its accuracy or completeness. Angel Talks & Partners reserves the right to change any source without restriction or notice.
This document is intended for the exclusive use of the person or entity to which it is addressed and may contain confidential or privileged information. This document may not be reproduced, distributed to any third party or otherwise published (in the case of the information contained herein, insofar as reference is made to the fact that Angel Talks & Partners has provided the information) without the prior written consent of Angel Talks & Partners. If the reader of this document is not the intended recipient or his authorized agent, the reader is hereby notified that any dissemination, distribution or copying of this document is prohibited. If you believe that you have received this document in error, please advise the sender by reply email of the error and delete this email immediately.
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Angel Talks & Partners Management LLC