BANDakademie “Silent partnerships and profit participation rights – the investment alternative for business angels?” in cooperation with Osborne Clarke
Early-stage investments are often made through convertible loans to avoid the complex contractual arrangements and associated costs of a financing round. As a lender, the business angel has no direct influence or say. However, the conversion usually doesn't change this. By the first major financing round at the latest, business angels, assuming they had any say at all, typically lose massive influence, whether through the loss of veto rights, advisory board mandates, or through the pooling of their voting rights. And not only does this influence diminish with each financing round, but the risk to their own investment also increases due to dilution and priority liquidation preferences.
The workshop will address the question of whether and to what extent silent partnerships and profit participation rights represent alternatives to traditional financing instruments for business angels, in which cases they can be used effectively, and how they should be designed to address the above-mentioned problems and ensure the business angel's interest in a fair share in the startup's success.
