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Exit

Goal

The goal of start-up investing is achieving an exit. An exit is typically a sale of the whole start-up to another company within 5-10 years from the date of the investment. Alternatively, companies might opt for an exit route through listing their shares on a traditional stock exchange, such as NASDAQ.

The Process Unveiled

Sale

  1. 1.
    Potential buyer (Acquirer) contacts Start-up (Target)
  2. 2.
    Acquirer and Target enter into Sale Agreement, Shareholders are informed
  3. 3.
    Acquirer deposits the Purchase Price in an Escrow Banking Account.
  4. 4.
    Shares are transferred to Acquirer, and proceeds are released from Escrow Banking Account to Shareholders (closing)
  5. 5.
    Liquidity Pool is closed
For the disbursement of proceeds, Shareholders are requested to furnish their banking IBAN to the start-up. In instances where a Shareholder opts not to share their IBAN, an alternative option is available: selling their tokens on the secondary market before closing (will be announced in advance).

Stock Exchange Listing

  1. 1.
    Board of Directors proposes Stock Exchange Listing
  2. 2.
    Shareholders vote on Listing
  3. 3.
    Shareholders transition tokenized shares to receive new shares (via a bank), tradable on a stock exchange (so called intermediated securities).
  4. 4.
    Liquidity Pool is closed.
In theory, a dual listing of shares on a traditional stock exchange and a decentralized exchange is possible. However, this is unlikely. If users don't want to provide an IBAN, they can sell their shares before the listing on the secondary market.

Exit Function

Typically, an acquirer is only willing to pay the purchase price, if he can buy 100% of the company (i.e. all shares). Therefore, start-up investment contracts include a "Drag-Along Clause." This clause mandates all shareholders to sell their shares if a buyer seeks to acquire all the shares.
In our share contract, we've embedded an exit function. This function facilitates the transfer of shares to the buyer, given their deposit of the purchase price in the escrow banking contract. Activation of this function is contingent upon meeting contractual obligations, and Shareholders receive prior notice of its implementation. This function ensures the availability of a sale as an exit choice and guarantees that investors will receive the proceeds from the transaction.
Shareholders will be informed prior to the exercise of the exit function, allowing them to sell their shares on the secondary market.