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VENTURE CAPITAL INVESTMENT MODEL AGREEMENTS
By Singapore Academy of Law and Singapore Venture Capital and Private Equity Association


Venture capital investments are becoming increasingly popular and prevalent in Singapore[1] and Southeast Asia, and this trend is expected to continue. Each investment may be unique, but there is no need for founders and investors (and their respective advisors) to spend time and incur costs by preparing and negotiating each investment from scratch, especially for early stage financing. To cut down on transaction costs and reduce friction during the negotiating process, the Venture Capital Investment Model Agreements (VIMA) provide a set of model agreements for use in seed rounds and early stage financing.

VIMA offer the following advantages to both founders and investors:

  • The terms take into account the interests of founders and investors in a balanced and pragmatic fashion. Many clauses reflect industry norms. This helps to reduce the number of issues that needs to be resolved, and frees up time for founders and investors to focus on negotiating high-level issues and key deal-specific terms.
  • VIMA provide general information regarding funding rounds, which would be especially useful to founders and investors who are entering into such funding rounds for the first time to bridge any information asymmetry.

 

What VIMA comprise

VIMA comprise the following documents:


Venture Capital Lexicon

Non-Disclosure Agreement*
(the "NDA")
 

Convertible Agreement Regarding Equity*
(the "CARE")

Term sheet**
 

Short Form Term Sheet**
 

Subscription Agreement**
 

Shareholders’ Agreement**
   

 

*See Notes on CARE and NDA
**See Notes on Term Sheet, Subscription Agreement and Shareholders’ Agreement

 

How to use VIMA

Each document includes drafting or explanatory notes on various clauses in the documents. The documents have been drafted based on Singapore law, and therefore incorporate Singapore law as the chosen governing law and Singapore as the chosen dispute resolution forum.

The Venture Capital Lexicon sets out the terms which are commonly used in an early stage financing round, to provide founders and seed investors with general information and explanations on the terminology used in funding rounds.

Founders and investors may use VIMA to commence investment discussions and focus on key commercial points, tailoring any terms (or inserting any additional terms) as they may require into the documents.

Please note that VIMA do not provide the entire range of potential options available or appropriate for early stage financing rounds, since these are often dependent on the specific transaction or parties involved. Thus, depending on the circumstances, parties may need to tailor specific terms in the documents to suit their needs. Additional documents may also be required for an early stage funding round (e.g., the constitution of the company, consent of other investors, founder employment agreement, etc). However, we believe that the Venture Capital Investment Model Agreements would remain relevant by providing a useful guide as to how funding rounds are typically structured.

 

Note on the CARE and NDA

The CARE is drafted based on the following assumption:

  • An investor is making a cash investment in a Singapore incorporated private company, in exchange for receiving either shares in such company or cash upon occurrence of certain events.

The NDA is drafted based on the following assumption:

  • A company is providing confidential information about itself to a potential investor looking to invest in such company.

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Note on Term Sheet, Subscription Agreement and Shareholders' Agreement

The Term Sheet, the Subscription Agreement and the Shareholders' Agreement include options and rights that are more suitable for a Series A funding round (as opposed to a seed funding round), and are drafted on the following assumptions:

  • An investor (or a group of investors) is (are) making a significant minority investment in a growth stage company incorporated in Singapore. 
  • The investment instrument is Series A preference shares. 
  • The documents are governed by Singapore law with Singapore being the forum for any dispute resolution.

Significant amendments may be required to the Term Sheet, the Subscription Agreement and the Shareholders' Agreement included in VIMA to the extent they are to be used for a seed funding round. 

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Form update and feedback

VIMA will be updated periodically to remain relevant to users. More standard documents may also be added from time to time depending on the need and user adoption.  We therefore welcome feedback and if you have any comments to share regarding the VIMA, please let us know  at singaporelaw@sal.org.sg.

 

Working Group

The Singapore Academy of Law’s Promotion of Singapore Law Committee and the Singapore Venture Capital and Private Equity Association wish to record their appreciation to the members of the Working Group and contributors who participated in preparing VIMA:

 

                                                                

 

                     

 

What professionals are saying about VIMA

Temasek is pleased to have played a role as part of the working group for this initiative, and to have closely collaborated with law firms, VC firms, associations and other industry stakeholders in launching this project.  We believe the VIMA kit will help both start-ups and investors more easily navigate the financing process, reducing transaction time, costs and sometimes, friction. We hope the model agreements will gain widespread adoption, as investors transact across the region, and help to sustain an active and vibrant VC industry in Singapore.

Gregory Tan, Temasek, MD of Legal & Regulatory, Chair and member of the Working Group (Oct 2018)

 

We are glad to see the introduction of such standard form contracts as it means that we no longer need to draft such contracts from scratch. This will definitely make the process simpler, faster and more cost efficient. The availability of the VC Investment Model Agreements, and especially the lexicon, will be helpful for new founders raising their initial round of financing.

Jeffrey Tiong, Founder & CEO, PatSnap Pte Ltd (2018)

 

We believe that the VC Investment Model Agreements is a great initiative that will help to bring clarity and consistency to VC documentation. Over time, people’s confidence in the VC investment process will also grow. I’m glad to see that the model agreements seek to provide a balance between the interests of the VCs and the founders. We are definitely supportive of this initiative and hope to see more standard form contracts covering more advanced financing rounds in the future.

Chua Kee Lock, Managing Partner, Vertex Ventures SE Asia & India (2018)

 

With ever-increasing interest in VC financings in the region, the model agreements are a very welcome initiative from the SAL and SVCA to enhance the VC investment process. Investors and entrepreneurs will now have access to a set of standard legal documentation which would allow parties to focus on deal-specific matters, and reduce transaction costs and time in achieving a satisfactory closing.

Ho Ying Ming, Partner, Shook Lin & Bok LLP (2018)

 

An incredibly helpful initiative by SAL and SVCA. By creating these open source documents that provide fair terms, deals can be closed with less time spent on negotiations and costs. This is especially critical for entrepreneurs as they can secure funding quickly and get back into building what matters most - the company.

Angela Toy , Head of Operations & Finance, Golden Gate Ventures (Oct 2018)

 

In developing the Venture Capital Investment Model Agreements (VIMA), we focused on the essential requirements of start-ups and investors in Singapore for early stage financing. We are confident that VIMA will find relevance and gain adoption in start-up and venture financing transactions, and hopefully reduce the time, efforts, and occasional frictions encountered in investment discussions.

Ms Satbir Walia, Partner, Clifford Chance; a member of the Working Group (Oct 2018)

 

The Venture Capital Investment Model Agreements are a big step in the right direction towards enhancing Singapore’s position as a VC investment hub. In a growing VC environment, dozens, if not hundreds of financing rounds will be completed each year involving companies and/or investors from Singapore. Like other developed VC jurisdictions around the world, the use of the model agreements seeks to create a neutral “mid-market” position from which businesses and companies are able to negotiate the terms of the agreement. Over time, we hope that these model agreements will adopt industry-wide usage, thereby promoting consistency across similar transactions and also help to save time and costs for the parties involved.

Joel Seow, Counsel, Sidley Austin LLP, Singapore (Oct 2018)

 

I am delighted to have played a very small role in this great project. Standardization has played an important role in facilitating the vibrant venture capital and technology startup ecosystem in the U.S., and this project highlights Singapore’s continuing leadership in and commitment to the Asian ecosystem.

Peter Werner, Partner, Cooley LLP (Oct 2018)

 

As the leading U.S. law firm representing venture-backed companies, WSGR is pleased to participate in the Venture Capital Investment Model Agreements project to provide model agreements that can be valuable resources for exciting and innovative start-ups and early-stage companies in Singapore. We applaud the Singapore Academy of Law and the Singapore Venture Capital and Private Equity Association for driving business growth and supporting the emerging company ecosystem.

Barry Taylor, Partner, Wilson Sonsini Goodrich & Rosati, PC (Oct 2018)

 

Shearman & Sterling is honoured to have participated in the development of Singapore’s venture capital forms. Singapore has emerged as South East Asia’s hub for venture capital activity. It is therefore vital that investors and entrepreneurs have access standardised investment and governance documentation. SAL and SVCA have brought together a wide spectrum of VC participants to advise on this project. The documents will benefit from the pooling of collective opinions and perspectives.

James Clayton-Payne, Counsel, Shearman & Sterling LLP (Oct 2018)

 

We at WongPartnership LLP are glad to partner SAL and SVCA on this initiative. This is in line with our firm’s growing venture capital/startup practice and increasing focus on providing the players in this space with holistic, practical and effective solutions to help them navigate the legalities of the investment process. Our aim and broader goal is to develop long-term partnerships and foster the growth and vibrancy of the venture capital/startup eco-system in Singapore.

Ng Wai King, Partner, WongPartnership LLP, a member of the Working Group (Oct 2018)

 

SVCA is pleased to see the VC Investment Model Agreements finally come to fruition. VIMA fosters a greater understanding of investment terms by   entrepreneurs facilitating smoother and more nuanced negotiations between the VCs and entrepreneurs of Southeast Asia. This will strengthen the investment ecosystem for the benefit of both investor and investee alike.

Thomas Lanyi, Chairman, Singapore Venture Capital & Private Equity Association (Oct 2018)

 

The Model Agreements is the culmination of legal professionals active in the venture capital industry to make quality legal advice and documentation accessible by the youngest companies. We hope that the standardisation of these documents make it easier for entrepreneurs to focus on what they do best – building their company. 

Kelvin Goh, General Counsel and Executive Director, OpenSpace Ventures (Oct 2018)

 

The SAL Venture Capital Investment Model Agreements can help to expedite early-stage financing by standardising and simplifying the administrative process. It will also serve as a common starting point for startups and VCs during negotiations. We also hope to encourage startups and VCs in the region to adopt the model agreements. This will help to facilitate more early-stage financing deals in the region.

Jonathan Lim, Director, Startup and Global Innovation Alliance, Enterprise Singapore (Oct 2018)

 

We are excited and honoured to be able to be part of SAL and SVCA’s efforts to strengthen the tech ecocsystem in Singapore. We believe this effort will contribute towards the growth of the VC sector in Singapore and benefit the local VC community too.

GIC

 

This initiative and the model agreements will be able to shorten parties’ learning curve on the essential documents required and focus their minds on the important issues that should be tackled during any financing exercise. The model agreements are also user friendly and will be of great help to investors and investees. Importantly, parties will be able to utilise these model agreements directly and save both time and costs.

Howard Cheam, Partner, Capital Markets, Rajah & Tann Singapore LLP (Oct 2018)

 

VIMA could be a game-changer in facilitating VC deals. It enhances the critical relationships between founders and investors by providing transparency and objectivity.

Yeo Wico, Partner, Allen & Gledhill LLP (Oct 2018)

 

We are privileged to have been part of this important initiative in the development of the Singapore venture capital and start-up scene.  Both as a choice of governing law and a location in which to establish, Singapore has become increasingly important both to venture investors and entrepreneurs seeking to raise funds. Providing both with a means of executing early stage investments with a minimum of fuss should help greatly in consolidating Singapore’s position in this respect. We look forward to working with clients to adopt the documents and bringing them to market.

Damian Adams, Partner, Corporate, Simmons & Simmons JWS (Oct 2018)

 

This is a timely and useful initiative to help standardize fair legal terms and lower the overall legal cost for early stage investing. AngelCentral is happy to have participated in this project and will definitely recommend the VIMA to suitable investors and startups within our community.

Huang Shao Ning, Managing Director, AngelCentral Pte Ltd (Oct 2018)

 

We are honoured to contribute to the VC Investment Model Agreements and see this as an important step in further strengthening Singapore as a hub for Venture Capital in Southeast Asia. The VIMA does this by helping entrepreneurs and investors align on the legal and commercial terms of their relationship based on a balanced and fair set of investment documents that are consistent with international standards. 

Through Morrison & Foerster’s work in the leading startup ecosystems of Silicon Valley, Asia Pacific, and Europe, we observe that where the terms of an investment round provide a framework for collegiality and long-term alignment between founders and investors, then this is a catalyst for building strong, innovative, and dynamic global companies. Singapore already has in place the innovation economy, investors, and legal system for a thriving startup and FinTech sector.  The VIMA serves to further open access to this infrastructure and will be a helpful basis for entrepreneurs and investors who are seeking to build or invest in the next generation of companies in Southeast Asia and to take them to the world stage.

The VIMA firmly cements Singapore’s position as the “go to” jurisdiction and ecosystem in Southeast Asia for entrepreneurs as well as for international investors seeking to provide innovative companies from this region with the capital and mentorship they need to achieve regional and global scale.

Morrison & Foerster LLP (Oct 2018)

 

The Model Agreements published represent a very important first step toward establishing a more mature venture capital ecosystem in Singapore and Southeast Asia. This project brought together various participants in the venture capital community as we pooled our collective insight and experience with the shared aim of producing a set of documents that is accessible to every participant in the venture capital community but does not prejudge the outcome of the commercial negotiations for any given investment.  As one of the initial contributors to this project, I sincerely hope that the Model Agreements see a wide adoption within the venture capital community here in Singapore and beyond, leading to a positive feedback loop, which hopefully will in turn result in improved iterations being published at regular intervals.

Jaewon Yoon, Head of Legal, Jungle Ventures (Oct 2018)

 

The VIMA initiative is a step in the right direction for the growth of the VC ecosystem, as it will help create a common language for startups, VC investors, and professional practitioners alike. Costs and time to completion will also be reduced, allowing founders to focus on the real work of building their companies to solve problems from Singapore for the world.

SGInnovate (Oct 2018)

 

DISCLAIMER

No document or information provided in VIMA should be construed as legal advice (including for any fact or scenario described in such documents or any assumptions made in relation to such documents). The documents and the information in VIMA is a starting point only and the relevant documents should be tailored to meet the specific legal and commercial requirements of the contemplated transaction. Additional documents may be required for the contemplated transaction. Legal and tax advice should be sought before using these documents. Neither the Singapore Academy of Law nor any of the working group members or contributors takes any responsibility for the contents of the documents provided in the VIMA.


[1] In 2017, there were more than $1.2 billion in VC investments in Singapore across 112 deals. See KPMG Press Release, “2017 Global Venture Capital Investment Hits Decade High of US$155 billion following a strong Q4” (18 January 2018).

I’m glad to see that the model agreements seek to provide a balance between the interests of the VCs and the founders.

Chua Kee Lock, Managing Partner,
Vertex Ventures SE Asia & India (Oct 2018)

[VIMA] will definitely make the process simpler, faster and more cost efficient.

Jeffrey Tiong, Founder & CEO,
PatSnap Pte Ltd (Oct 2018)

[T]he culmination of legal professionals active in the venture capital industry to make quality legal advice and documentation accessible by the youngest companies. … make it easier for entrepreneurs to focus on what they do best – building their company.

Kelvin Goh, General Counsel and Executive Director, OpenSpace Ventures (Oct 2018)

An incredibly helpful initiative … This is especially critical for entrepreneurs as they can secure funding quickly and get back into building what matters most - the company.

Angela Toy, Head of Operations & Finance,
Golden Gate Ventures (Oct 2018)

[A] timely and useful initiative to help standardize fair legal terms and lower the overall legal cost … will definitely recommend the VIMA to suitable investors and startups within our community.

Ms Huang Shao Ning, Managing Director,
AngelCentral Pte Ltd (Oct 2018)

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