Investor Connect Podcast

Redemption Facilitation Process

Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

In an early-exit term sheet, it’s important to have a redemption facilitation process.

This includes the steps for setting up the bank accounts, capturing the investor’s interest, providing payouts, and investor updates.

The process also tracks escrow of repayment funds and later revenue share payments to complete the redemption process.

For the redemption exercise, here is the timeline and steps:

180 days from Note maturity:

  • Capture the current version of the cap table and financials, including the current income statement and balance sheet
  • Send a notice to the investors to consider their decision to redeem

90 days from Note maturity

  • Confirm the investors’ decision to redeem
  • Prepare payment options for the company to consider 

60 days from Note maturity date

  • Send notice to the investors of impending maturity and confirm their decision on redemption

30 days from Note maturity date

  • Update investors with status on a regular basis
  • Send notice of redemption to the company and ask for payment due in one week

23 days from Note maturity date

  • If payment is not received, then a payment plan will be due in one week by the company

16 days from Note maturity date if no payment plan is provided

  • Set up a follow-up meeting with the company to discuss options

Upon maturity of the Note or in the event of a Corporate Transaction payment

  • Create a promissory note of the debt due
  • Elect a board of directors with investors having a majority control

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Direct download: Redemption_facilitation_process.mp3
Category:general -- posted at: 6:00am CDT