July Edition 2024

28 Matthew goes on: “Financing sources (i.e., VC funds) are under pressure to show outsized returns after a few years of pressure on their portfolios to perform- and the longer flat performance ensures, the pressure they get from their LPs. Those same LPs look at the handful of wildly successful public tech companies driving massive returns on the wings of AI, and need their high risk investments to exceed those. At the same time, early-stage companies face double digit interest rates for the first time in a long time, and the hope of a quick return to lower fades fading. That means debt isn’t the solution either.” Investors seek more assurances on meeting Series A Financings’ metrics and KPIs Danny Dilbary,partner in the International Corporate and Securities Department at Goldfarb Gross Seligman adds: “While we have noticed a decrease in valuations and investment amounts in early-stage financings, the metrics and KPIs for Series A financings, on the other hand, have significantly increased. As a result, while deciding whether to invest in an early-stage start-up, investors are looking for more assurances for the likelihood of meeting the Series A financings’ metrics and KPIs, even with limited financing resources.” He goes on: “In addition, we have noticed that early-stage investors are looking for more scrutiny (in terms of information and veto rights). That being said, early-stage financings are still based on a 1X, non-participating liquidation preference with a broad-based weighted average anti-dilution protection mechanism, which are attractive from start-up’s perspective.“ Approach potential customers and carry out co-pilots with partners before reaching out to early investors He adds: “In order to tackle these challenges, early-stage startups should strive to enhance their track record and market validation by approaching potential customers and carrying-out pilots with design-partners before approaching sophisticated early-stage investors, such as venture capital funds.” The SAFE instrument is the most popular and effective (Maya, HTA) Danny at Goldfarb, Gross, Seligman adds: “Early-stage startups should also consider pre-seed financings, in the form of Simple Agreements for Future

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