Services | Investing & Fundraising
Adam Yohanan handles high stakes investment and fundraising transactions.Key Agreements for Investing & fundraising
Equity Financing
Pre-Seed Angel Investment Agreement
This agreement outlines the terms under which individual investors (angel investors) provide early-stage capital to new businesses. Key terms often include the amount of investment, equity offered, and future funding rights. It's crucial for establishing initial funding and setting the stage for future growth.
Series Venture Capital (VC) Financing Agreement
This document governs the terms of venture capital investment in a company, typically in multiple rounds (Series A, B, C, etc.). Key terms include the amount of capital, equity stake, and investor rights. It's crucial for growing startups to secure significant funding and expertise from venture capitalists.
Small Business Investment Agreement
This agreement outlines the terms under which investors provide capital to small businesses. Key terms include investment amount, equity stake, and management rights. It's crucial for small businesses to secure funding while ensuring both parties' rights and expectations are clear.
Hybrid Financing
Convertible Note Contract
A convertible note is a short-term debt instrument that converts into equity, typically in the context of a future financing round. Key terms include the interest rate, maturity date, and conversion mechanics. It's important for startups seeking initial funding without immediately valuing the company.
Simple Agreement for Future Equity (SAFE) Note
A SAFE note is an innovative financial instrument allowing startups to receive early-stage funding without determining a valuation. Key terms include valuation cap, discount rate, and conversion events. It's essential for simplifying early-stage investments and aligning investor-startup interests.
Preferred Equity Agreement
A Preferred Equity Agreement outlines the terms under which investors receive preferred equity in a company. This type of equity typically provides investors with advantages like dividend preferences, liquidation preferences, and sometimes convertible options into common stock. It's important for investors seeking priority over common shareholders in profit distribution and risk mitigation, and for companies looking to attract investment without relinquishing too much control over business decisions.
Mezzanine Financing
Mezzanine Financing is a hybrid form of capital, often structured as subordinated debt or preferred equity, used typically in expansions, buyouts, or acquisitions. It bridges the gap between debt and equity financing, offering lenders higher returns and the option to convert debt into equity. Companies benefit from this as a means to raise capital without significant equity dilution, while investors use it as a tool for potentially higher returns and increased leverage in the company's capital structure.
Debt Financing
Promissory Note for Business Loans
This legal document outlines a borrower's promise to repay a specified sum to a lender. Key terms include the principal amount, interest rate, and repayment schedule. It's essential for clearly defining the terms of a loan and ensuring legal enforcement.
Bank Lending Agreement for Businesses
This agreement sets the terms under which a bank provides a loan to a business. Key terms include loan amount, interest rate, repayment terms, and covenants. It's important for businesses to secure traditional financing while understanding their obligations.
Direct Lending Agreement
This document governs the terms of a loan made directly to a business, bypassing traditional financial intermediaries. Key terms include the loan amount, interest rate, and repayment schedule. It's important for businesses seeking alternative financing sources outside of traditional bank loans.
Security Agreement for Business Financing
A security agreement outlines the terms under which a lender takes a security interest in a borrower's assets as collateral for a loan. Key terms include the collateral description, conditions of default, and rights upon default. It's crucial for protecting lenders' interests while providing businesses with access to capital.
Key Clients
Investors
• A UK-based investor in connection with a stock purchase agreements to invest in a US biotech life sciences company
• A Manhattan-based angel investor in connection with a convertible note purchase agreement
• A Brooklyn-based angel investor in connection with a convertible note purchase agreement
• A Los-Angeles-based investor in connection with fund investments
• A Brooklyn-based angel investor in connection with a small business LLC investment agreement in a Brooklyn restaurant
• A Switzerland-based investor in connection with a convertible note purchase agreement for a technology company
• A Los Angeles-based investor in connection with a promissory note
• An Israel-based investor in connection with a fund investment
• A Westchester-based shareholder group in connection with a middle market LLC investment in a national waste management company
• Prior to starting Yohanan Law, Adam Yohanan represented most of the top banks and direct lenders on Wall Street in connection with complex loan agreements, security agreements, and other financing documents
Companies
• A New York-based dating app in connection with sweat equity issuance to key staff
• A New York-based mental health technology company in connection with sweat equity issuance to key staff
• A Chicago-based technology company in connection with sweat equity issuance to key staff
FREQUENTLY ASKED QUESTIONS
Equity Financing
What are the primary concerns of investors and startups in negotiating Pre-Seed Angel Investment Agreements?
Investors typically focus on securing favorable terms regarding valuation and exit strategies, while startups prioritize maintaining control and minimizing equity dilution. Successful negotiations require balancing the investor's need for potential high returns against the startup's need for growth capital without losing significant ownership or control.
How do Series VC Financing Agreements align the interests of investors and startups?
In Series VC Financing Agreements, investors look for protective provisions and significant equity stakes, reflecting their substantial capital risk. Startups, meanwhile, seek to obtain not just funding but also strategic partnerships and mentorship. Aligning these interests involves clear terms on valuation, governance, and future funding rights, ensuring both parties benefit from the startup's growth.
Hybrid Financing
How do Convertible Notes balance the interests of startups and investors?
Convertible Notes offer startups deferred equity valuation, preserving ownership in the short term, while providing investors with an opportunity for equity at a potentially lower price. This balance is achieved through negotiation on interest rates, maturity dates, and conversion triggers, aligning short-term funding needs with long-term investment goals.
What are the benefits and challenges of SAFE Notes for both investors and startups?
SAFE Notes provide startups with quick, straightforward funding without immediate equity dilution, while investors gain the potential for future equity at a favorable rate. However, both parties must navigate challenges like valuation caps and discount rates, balancing the startup's need for fair valuation against the investor's desire for adequate compensation for risk.
How can Security Agreements be structured to benefit both lenders and borrowers?
Security Agreements provide lenders with collateral as security, reducing their risk, while borrowers can access larger loans or better terms due to this lowered risk. However, both parties must carefully consider the valuation and liquidity of the collateral, ensuring it is sufficient to cover the loan without overly restricting the borrower's operations.
Debt Financing
What factors should companies and investors consider in a Direct Lending Agreement?
Companies should assess the cost of capital, repayment terms, and potential impact on cash flow, while investors need to evaluate the credit risk, return on investment, and the company's financial health. Direct lending offers companies a more flexible financing option than traditional banks, but investors may require higher returns for the increased risk.
In Bank Lending Agreements, how do the needs of businesses and banks differ?
Businesses seek accessible, low-cost capital with manageable covenants, while banks focus on minimizing risk through strict loan terms and comprehensive due diligence. A successful agreement finds a middle ground, providing the necessary funds for business growth while protecting the bank's interests.
What are the implications of Promissory Notes for borrowers and lenders?
For borrowers, Promissory Notes represent a commitment to repay, often with specific terms favorable to their cash flow situation. Lenders use them to ensure a clear legal right to repayment. Both parties must consider the interest rate, repayment schedule, and potential consequences of default.