Seeding: is it vital to sign an anti-dilution clause?

by bold-lichterman

2015 was the year for new seed funds in France. The bottom Partech endowed itself with 60 million in April, and 35 million on the side of 360 Capital Partners. And for good reason. The need for seed funding in Europe, this stage which follows “love money” and which allows a start-up to amortize its expenses, remains key. Between 2010 and 2014,
Frenchweb proposes a series of points of view to shed light on this stage of funding.

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Frenchweb: Should I give my seed investors anti-dilution protection?

ISAI Management is a Parisian fund dedicated to Internet entrepreneurs. In 2015, it set up a specific seed fund.

Mounia-Rkha-A-credit-Olivier-EzrattyMounia Rkha, Seed Club Manager at ISAI Gestion: At ISAI, we are supporters of a minimal anti-dilutive clause, that is to say actions with “non participating” protection without any “ratchet” type mechanism in the event of a “downround”. The rest are not very entrepreneur-friendly and are forgetting the word “risk” of venture capital. When the founders of ISAI, who are entrepreneurs, created the fund, it was important for them to put clauses that they would have liked to find in their investors.

Based in San Francisco, Paris and Berlin, Partech Ventures is a venture capital fund that specializes in information and communication technologies.

Romain-Lavault- <a href=https://www.frenchweb.fr/partech> <a href=https://www.frenchweb.fr/partech> <a href = https: //www.frenchweb.fr/ partech> Partech </a> </a> </a> -Ventures “class =” alignnone size-full wp-image-222388 ″ src = “http://www.frenchweb.fr/wp-content/uploads/ 2016/01 / Romain-Lavault- <a href=https://www.frenchweb.fr/partech> <a href=https://www.frenchweb.fr/partech> <a href = https: // www. frenchweb.fr/partech>Partech </a> </a> </a> -Ventures.png »style =» width: 200px;  height: 132px;  float: left;  »/> <strong> Romain Lavault, General Partner of <a href=https://www.frenchweb.fr/partech> <a href=https://www.frenchweb.fr/partech> <a href = https: //www.frenchweb.fr/partech>Partech </a> </a> </a> Ventures: </strong> It all depends on the initial valuation.  If this valuation is low, the chances of a downward turn are almost zero (either the valuation will go up, or the box will not have worked and will close), making the clause almost useless (in other words harmless even if it remains) .  On the other hand, if the valuation is already very high, or even out of step with the actual level of progress, the chances of a subsequent round to a more “normal” valuation exist if the execution is not at the rendezvous. .  And it is normal to protect the initial investor who will have taken all the risks before the others but will have paid a higher price.  There are also at least three different types of anti-dilution protection, more or less in favor of the investor and which allow adjustment to all starting situations.  </p>
<p> <strong> <a href= 360 Capital < / a> Partners is an early-stage venture capital fund that invests in Europe, and more particularly in France and Italy.

Paul Degueuse, Partner , and Emanuele Levi, General Partner of 360 Capital Partners: We want to position ourselves with simple terms and aligned with the needs of entrepreneurs.

Too many entrepreneurs fail to find their second round ofRomain Dehaussy, Chausson Finance: There it’s done. Entrepreneur, you have just received a seed investment proposal. The valuation and the financial conditions are right for you, the amount corresponds to your needs and the “fit” is excellent with business angels. Wait a bit before signing. Several points remain to be framed, and not least: the anti-dilution mechanisms.

The two main anti-dilution mechanisms that may be requested by investors entering the capital are the preferential subscription right (DPS) and the ratchet….