The term sheet is a critical document that gives a ‘snapshot’ of the key terms and conditions of  the proposed funding by an investor. It also serves as a ‘blueprint’ that will be used by the startup lawyer  engaged to prepare the fundraising documents and shareholders agreement that will govern the relationship between the startup, its present shareholders and the investors.  The question of who should issue a term sheet in a startup funding round is an important one, as it can have a significant impact on the negotiation process and the overall success of the funding round.In ..read more

“Should you accept an investment offer from a non-accredited angel investor in Malaysia?” “Do you need to get accredited as an angel investor?” “What if the angel who invested in my startup wasn’t an accredited investor? Will I get into trouble?” No, there is no law requiring an investor to get accredited before he or she can invest as an angel in Malaysia. But receiving capital from an accredited angel as opposed to a non-accredited angel is generally a better decision from an ESG (especially on the “G” side) corporate governance standpoint. Here’s a simple reason why. An accredited angel is ..read more

Capital Markets Malaysia (CM), a capital market promotional entity under the Securities Commission Malaysia (SC) has launched  a corporate venture capital (CVC) programme to get more companies, especially local public listed companies, to invest in startups and small and medium enterprises. Legal framework for CVC It is unclear if the SC is going to come up with any guidelines including tax incentives similar to the present tax incentives for CVC set ups. Management fees and carried interest received by the registered fund managers are tax exempt whereas investors investing in a venture f ..read more

Any sensible investor would want to minimise their downside risks when making an investment especially in a risky asset class portfolio such as when investing in an early stage startup. The common way on how this may be achieved is by inclusion of veto rights over certain major company actions. With the exceptions to angels, families and friends, most financial investors (i.e. people that spend their full time daily as an investor) such as corporates and venture capitals will want to dictate the investment terms before sending the cash over to your business. They will expect some degree of con ..read more

Starting a new company can be stressful and confusing especially for a first time founder. So I’m excited to hear recently that the Founder Institute Malaysia 2023 programme is finally going live again this year. Founder Institute prefaces itself as the ‘world’s largest pre-seed startup accelerator’ with presence in over 180 countries (also known as chapters). Our law firm Izwan & Partners has been involved as a legal partner since 2020 where we cover on legal and compliance topics during the progrmame. Starting this year, the chapter will be led by Kevin Brockland venture partner after a ..read more

There are several things that founders should know before raising funds for their startup. 1. Understand the different types of funding available. Selling your company’s shares in exchange for money is just one usual way of raising funds. There are various ways to raise capital, including debt financing, equity financing, or even crowdfunding (see Oxwhite’s pre-order model as a case study). Each option has its own pros and cons so you need to decide which one is best for your business. 2. Know your company’s valuation. Even though it may be hard to come up with the exact value especially when ..read more

Whether your startup skips an accelerator or joins one or more, the real milestone investment is in the seed round. But in a fast-moving high paced startup world, the clear line between the seed round and a Series A round has blurred. We may have heard about a large VC that invested around RM100,000 just to get an option (so to speak) to invest in the next round (during a series A). The first round in the past tends to be called the seed round led by angel investors that came together to invest anywhere between RM50,000 to RM1,000,000. But let’s see how things have changed in the past compared ..read more

No, you don’t have to give a board seat to your new investor if you don’t want to.  In practice, there are a lot of investors out there that do not even care whether they get a board seat or not. In our work as a startup lawyer, we’ve come across early-stage pre-seed venture capitals that do not even bother appointing a board member to their portfolio companies (despite having such a right in the first place spelt out in their shareholders agreement). If you’re a first time founder, this can be confusing when you ask around and discover that there are also investors out there that would w ..read more

After months of searching for a CTO for your startup, you’ve finally found your luck when you found a CTO candidate that has agreed to join your startup. He loves what you’re trying to solve and agreed to build the MVP needed and help you fundraise too. After back and forth of meetups, you agreed to offer him a ‘co-founder’ title and also accept 25% equity in the company while you own the rest 75% of the equity pie. You contacted the company secretary and told them to help prepare the shares transfer form so that everyone can sign off the paperwork to transfer the 25% of the business over to t ..read more

As a startup and venture lawyer, it is common for a startup founder in Malaysia to ask me whether it is legal to issue a Simple Agreement for Future Equity (SAFE) round for his Malaysian company. The answer is yes. You can raise funds using a SAFE round in Malaysia. But the usual standard template SAFE that you can get on Y Combinator’s website may not be suitable for the Malaysian format. Coming back to Y Combinator’s SAFE earlier, unfortunately, the SAFE agreement needs a lot of customisations and localisations as it was prepared based on United States laws (usually a startup is formed in th ..read more