Operation
The operation of Startupxplore, described in detail below, is the following: investors invest directly in the early-stage company, through the assumption of shares through capital increase. In order to facilitate the governance of the company, investors will syndicate voting rights corresponding to their shares with the reference investor of the operation, who will decide the direction of the vote of all of them.
Startupxplore differs from other platforms in that it contains the largest community of investors and startups in Spain, and counts with a pool of renowned investors in the technology sector (whom we will generically call reference investors), such as JME VC, Vincent Rosso, Faraday Partners, Yago Arbeloa, Javier Llorente or Carlos Domingo, among many others. These investors co-invest in the various investment projects promoted through Startupxplore, together with registered investors (backers, hereinafter referred to as "Startupxplore"), who may be both small savers who wish to start investing in innovative and emerging companies, always complying with the limits laid down by law regarding non-accredited investors, as well as significant assets who wish to diversify their investment portfolio.
The investment process in the different projects is described below, explaining the role of each of the parties involved.
Phase 1: promotion of projects and formalization of investment commitments
Startupxplore starts the campaign of investment in the innovative company through its website indicating the period during which backers will be able to participate thereof and the target amount of funding. In particular, a specific section is published on the website dedicated to the investment operation with a public part that summarizes the generic aspects of the operation and a private part (only for registered investors), which includes business data of the operation, the questions and answers submitted by investors and the following documentation: A Guide to the Opportunity, the PowerPoint presentation of the company (deck) and the terms and conditions summary (Termsheet) in relation to the Shareholders Agreement. The availability of the operation is also communicated to all investors by e-mail.
During the campaign, Startupxplore checks the profile of registered backers interested in investing, in order to classify them as accredited or non-accredited and identifies them formally. In addition, Startupxplore requests them to verify their phone number (for the purposes of subsequent communications) and asks them to sign up using a digital signature platform (Signaturit) a statements letter in which they shall confirm the amount they?re going to invest, that they understand the risks of investing in this kind of company, declare their investor profile (accredited or non-accredited) and to commit themselves to signing the shareholders agreement of the promoter. On the other hand, the following documentation is sent to them by e-mail for analysis:
- A syndication agreement in which the reference investor is defined so that, in the event of carrying on the planned investment, it is the reference investor who exercises the political rights associated with the company's shareholdings assumed by the backers via capital increase, thus facilitating the company's governance.
- The shareholder agreement to which they will have to adhere if the operation is successful.
The term of duration in Startupxplore is by default 20 days or until the target amount of the transaction has been reached (if it is reached within 20 days). This period may be extended by 25 % by decision of Startupxplore.
In parallel, investors are requested to transfer the amounts committed to an escrow account previously opened by the sponsoring company in BANKINTER, S. A. (payment institution designated by Startupxplore). This type of account establishes a limitation so that the deposited funds are only released if at least 90% of the target amount of the financing is reached, and the capital increase that gives entry to the investors in the developer's capital is formalized and registered in the Mercantile Registry.
Once the deadline established in the launching conditions has elapsed (20 days, by default, although the duration may be different in each operation), and if the investment campaign has not been successful, the promoter and all investors are informed via e-mail of the failure of the campaign and the campaign is closed. In that case, the funds shall be fully returned to the investors.
In case that the investment does not go out well (the company in which it has been invested closes), the company shall be dissolved, which will imply the loss, or the partial recovery of the invested capital. In case that the investment offer benefits (either through dividends, repurchase or through the partial or total purchase of the company), all investors will receive the capital invested plus capital gains generated.
Phase 2: investment execution
If the campaign is successful (i. e. if at least 90 % of the target funding amount is reached or if the target amount is exceeded before the deadline has expired), it is successfully closed. Startupxplore then sets a time frame for investors to (a) transfer the amount of their respective investment commitments to the escrow account of the promoter held at BANKINTER, S. A., if they have not already done so, and (b) sign the adhesion letter to the promoter's shareholders' agreement and the voting syndication agreement with the reference investor via the digital signature tool (Signaturit)
After receiving all the letters of adherence to the shareholder agreement and the syndication agreement signed by all the investors, as well as having all the funds transferred to the escrow account, the company formalizes the capital increase under which investors become partners thereof. As soon as having the writing of a capital increase duly registered in the corresponding Commercial Register, copies are sent to all investors. In addition, the company and Startupxplore confirm in writing to the bank that the capital increase has been registered and the Bank releases the funds from the escrow account in favour of the company.
Phase 3: investment monitoring
Once the investment has taken place, the following financial information will be asked periodically to the promoter, which will be made available to investors by email:
- On a quarterly basis, the most relevant milestones in terms of business, financial development and the most important metrics.
- Annually and within the quarterly report, the annual accounts of the promoter in registration format duly deposited in the Commercial Registry.
Phase 4: returns
In the case that the investment generates returns, either by the decision to distribute dividends by the company or from a situation of exit, investors will receive such remuneration or capital in the bank accounts through which initial disbursements were made in the increase of capital of the company. In the event that this account is not the desired one to receive the returns, this must be notified to Startupxplore expressly indicating the details of the new account.
Deduction for Investment in Companies of Recent Creation
As a result of Spanish Law 14/2013 of support to entrepreneurs, a new deduction was incorporated, which consists in allowing those who decide to invest capital in new business projects to deduct 20% of their state income tax quota of the amounts contributed with a maximum of ?50,000 in base (maximum deduction in quota of ?10,000). Both the entities in which it invests and the investors must comply with certain requirements set forth in the Personal Income Tax Law.
In addition, there are autonomous deductions, which are those issued by each Autonomous Community and that have different characteristics and requirements.
Risks
These companies are organizations in search of a business model that can be scalable and global. During the process a large number of projects fail, a few are profitable and very few produce a high return on investment.
Investing in emergent companies with high potential for revaluation is an investment product considered as high-risk investments and high potential return. Given the level of risk of these operations you should never invest a significant portion of its assets. Should invest only that amount you can afford to lose.
The investment in these companies consists of the acquisition of shares in companies already incorporated by means of the assumption or subscription of shares in a capital increase. This issue is not authorised or supervised by the CNMV and the information provided by the issuer has not been reviewed by the CNMV nor does it constitute an information prospectus approved by the CNMV.
Similarly, the participatory financing project is not authorised or supervised by the CNMV or the Bank of Spain and the information provided by the promoter has not been reviewed by them. Furthermore, the platform is not a member of any investment guarantee fund or deposit guarantee fund.
Startupxplore operates according to the guidelines of the Participatory Financing Platforms Act and, in any case, does not carry out the activities reserved for investment services companies or credit institutions. It is a participative financing platform that brings investors and companies together, enabling investors to co-invest with more experienced investors, benefiting from their knowledge and access to investment opportunities.
Any investor who makes an investment in one or more companies with high growth potential through Startupxplore, should be aware that such investments have a high degree of risk. In particular, the following risks must be taken into account:
Risk of total or partial loss of the invested capital
Investments in emergent companies with high potential have a high degree of risk and uncertainty. These companies have to face significant operational and financial risks. While the expected returns by investing in this kind of companies are high, investors should be aware that such returns may never occur or may be limited taking into account the level of risk assumed. The total loss of the invested capital is possible and can easily occur.
Risk of not getting the expected return
The investment in these companies is totally uncertain, so even if a given investment has been sold to a third party, the returns obtained may not compensate for the time spent in obtaining them or may not reach the initial capital provided.
Risk of lack of liquidity of the investment
Investments in early-stage companies with high growth capacity are illiquid and there is no secondary market for the transfer of shareholdings, there is therefore a risk of not finding a buyer for the shares or holdings acquired by the investor. The maturity terms of these investments are uncertain and may take years, in some cases, until the investment is recovered.
Dilution risk of participation in society
These companies may need more capital in the future and, as a result, agree to further capital increases. Although members are generally granted the right to take over or subscribe, there is the possibility of removing this right. It is therefore possible that the percentage of the total share capital represented by the shares acquired may be reduced as a result of future capital increases.
Risk of not having dividends
There is a risk that profits will not be generated during the year and, consequently, dividends may not be distributed to the shareholders. In addition, even in the event of profits, generally, are reinvested in improving processes, products and expanding the markets where it has presence, among others, so it is not common to receive dividends from such investments and cannot be expected.
Risk of not being able to influence the management of the company
When taking minority shareholdings, there will be no option to be a member of the company's governing bodies or to influence their management.
Requirements
The activity of Startupxplore is regulated by the law on the Promotion of business financing, laying down certain investor protection measures. To this end, there are minimum requirements that any investor must meet in order to be considered an accredited investor and be able to invest without limit of quantity:
- A natural or legal person who has an annual income higher than ?50,000 and/or a higher financial wealth of ?100,000.
- An entrepreneur which individually meets at least two of the following conditions:
- the total of its assets is at least 1 million euros,
- the amount of the annual turnover is at least 2 million euros,
- or their own resources are equal to or greater than 300,000 euros.
- An institutional investor whose usual business is to invest in securities or other financial instruments.
- Any of the following entities: a credit institution, investment service companies, insurance companies, collective investment institutions and their management companies, pension funds and their management companies, securitization funds and their management companies, which currently operate in commodities and commodity derivatives as well as operators who contract in its own name and other institutional investors.
- A State or a regional administration, public agencies that manage public debt, central banks and international and supranational institutions such as the World Bank, the International Monetary Fund, the European Central Bank, the European Investment Bank and other similar ones.
- An investor who, previously, requests to be considered as an accredited investor, and expressly renounces his treatment as an unaccredited investor. In this case, acceptance of the application and waiver will be conditional upon Startupxplore making an appropriate assessment of the client's experience and knowledge, ensuring that it is able to make its own investment decisions and understands its risks.
If any of the above requirements are not met, the investor will be classified as an non-accredited investor. Non-accredited investors can invest between at least ?500 and a maximum of ?3,000 in each project published in Startupxplore, and up to ?10,000 per year in total, adding the investments made through all the participatory financing platforms.
What is a reference investor?
A reference investor is a person (or legal person) who undertakes to associate his public image and invest his own capital in an opportunity within Startupxplore. This implies that:
- Makes available to the investment community of Startupxplore an investment opportunity considered as interesting and to which most investors usually have no access.
- It is in charged of providing recommendations regarding the negotiation of the shareholders' agreement and other key aspects with the company in which it will invest, where all the elements that define the operation are considered.
- The reference investor always commits its own funds and invests at the same time and conditions as the other Startupxplore Investors. It is not necessarily the one that makes the largest capital contribution in the investment round but it must have a significant commitment, at least 10 % of the amount being offered in Startupxplore.
- Usually takes part of the board of the company with whom he meets at least every 3 months and which is responsible not only to add value and support the company but also defending the interests of all investors who he is representing and helping to grow the business to take it the next level.
- If an opportunity of divestment appears, carefully analyzes it and evaluates their interest for all investors of Startupxplore, and if it's necessary he negotiates with new investors an output in order to generate capital gains.
What are the requirements to be considered as reference investor?
Startupxplore uses a number of criteria to accept new reference investors, and do not necessarily have to do with public visibility:
- Criteria. It must be an investor with proven ability to analyze investment operations in early-stage, high growth companies and evaluate the business of such companies and make reasoned decisions to participate in them.
- Experience. One of the key aspects is that it must have carried out a significant number of operations previously and know all the key aspects and keys of investing in this type of companies. In addition to having a track record of investment in first level companies that are in early stages and demonstrate high growth capacity, and will be valued very positively if already had divestments ("exits") in yits portfolio.
- Independence. The reference investor must declare any possible conflict of interest, must not have participation in companies that are direct competition of the company or any type of personal or professional relationship with the company or its employees, among other aspects to which it undertakes.
- Commitment. The reference investor´s interests are always aligned with those of the other investors, as the reference investor invests a significant amount of the round at the same time as the other investors.
- Management. The reference investor must undertake to be part of the company's board and support it at all times, while managing and defending the interests of Startupxplore's investors.
What is the process we follow in selecting projects?
We have developed our Investment Criteria, which have been published and which must be met by all companies that wish to be financed through our platform. These criteria address certain risks that we have identified as indispensable to mitigate, i. e., if the company meets these requirements it will have those risks mitigated.
In Startupxplore we take very seriously offering quality projects to our investors, so we have an investment committee, which comes into play in this next step. This committee will decide which companies will pass to the next level and which will not based on the target analysis on the investment criteria to which we have referred. Those companies that do not meet these requirements, will be informed of the impossibility to be funded through the platform and the reason why, and those who do meet the requirements will pass to the next stage, in which we analyze the company (its market potential, the product, the computer, legal aspects, etc.) in greater detail. This next level will be subject to approval of the Analysis Committee, which making use of the following analysis will finally decide whether the company is selected for its capital increase through our platform or not.
These companies will then have to undergo a thorough analysis carried out by the Startupxplore analysis team. This process will have to be surpassed by the selected companies, being this a final conditioning factor to offer the entry into capital to investors.
At Startupxplore we know that efficiency and agility are essential, and that is why we attach great importance to the speed with which we can respond to all companies with high growth potential that are interested in increasing their capital through the platform.
How is the information provided by companies received and processed? What criteria are followed for its publication?
The information provided by the companies will be received through cloud storage services where only Startupxplore and the promoter (the company) will have access. The criteria will be the same for all of them, as well as the criteria for their publication.
The information published follows totally homogeneous standards for all companies. The same information, tailored to the sectors in which it operates, will be published to ensure the same chances of success in the Startupxplore funding round based on the information provided.
What would happen if Startupxplore ceased its Activity?
In the event of the platform's operation being discontinued the investments made by the investor users are not at risk.
With regard to the services to which Startupxplore committed itself, that correspond essentially to those of communication between the promoters (the companies with high growth potential) and investors, which will be provided by an entity which will be appointed by Startupxpllore and which will be subject to approval by the investors, who will decide in the manner provided for in the syndication agreement. This mechanism will be activated automatically with the notification of the cessation of activity, fulfilling in time and form all the obligations to which the platform was initially committed and without any harm being done in the process.
What measures does Startupxplore take to minimize the risk of fraud?
In order to try to reduce the risk of fraud, Startupxplore carries out various procedures:
- Checks that both the company and its directors do not have any open insolvency issues and are fully up to date with their tax obligations.
- Analysis of the financial, legal and product statements to verify that the information provided is truthful, with special emphasis on those items that are relevant and where the company's greatest likelihood of fraud has been identified (essentially the debt, cash, expenses and income sections).
What measures does Startupxplore take to minimize operational risk?
In order to ensure that operational risk is mitigated, Startupxplore carries out various procedures:
- Identification and evaluation. In order to identify the operational risk of the platform, internal factors such as the structure of the platform and the nature of its activities, and external factors such as changes in the sector and technological advances that may affect the development of the activity, are considered. Startupxplore holds a meeting every six months in which these components are analysed beforehand and the analysis carried out by the management at the meeting where the heads of each department are present.
- Control and Mitigation. Startupxplore has control processes in place to ensure compliance with the operational risk management policy. In order to ensure the continuity of the operating capacity and the reduction of losses in case of business interruption, the platform has contingency and business continuity plans, according to the size and complexity of the operations as indicated in the section on cessation of activity.
What does Startupxplore do to avoid conflicts of interest?
Check out our Code of conduct and conflict of interest management.
Is Startupxplore Audited?
All Participatory Financing Platforms registered in the CNMV are required to be audited, that is why we have a first level Auditor: BDO Auditores y Consultores, S.L.
What is the Startupxplore complaints and claims procedure?
In Startupxplore we want to be close to our clients (investors and companies) in the good and bad, so we have implemented a clear and simple troubleshooting procedure in case something fails or can be improved.
The first and most importantly, how you can contact us if something goes wrong?
- Email: complaints@startupxplore.com
- Address: C/ Salvá, 10 2b 46002 Valencia
What procedure will we follow to resolve a complaint or claim?
In an ideal scenario, we will resolve it on the spot, but that will not always be possible. Therefore, those that cannot be resolved immediately will follow this procedure:
- Identification of the client and of the incidence
The complaints or claims shall be carried out personally with supporting documents at STARTUPXPLORE?s address or by means of electronic media (e.g. email or other electronic messaging or a telematics system) to the e-mail address complaints@startupxplore.com.
The procedure is initiated by the filing of a document which will include:
- The identity of the client: First Name, Last name (or company name) and address of the claimant and, where available, of the representative, duly accredited with; DNI/NIE if person and CIF if it is a legal entity. E-mail address and contact telephone number.
- Reason for the complaint or claim, with express mention of the matters on which a ruling is requested.
- A copy of the documents that support the complaint or claim.
- Place, date and signature.
- Acknowledgment of receipt
Once you have notified us of such complaint or claim, it is up to us to notify you (acknowledgement of receipt) of the e-mail from which we have received such notification (within 15 days) that we are aware of the filing of the complaint or claim and to gather further information if necessary.
- Admission to filling and processing
At this point we analyze aspects such as:
- Subject: That the person who presents it is truly a Startupxplore client (promoter or investor).
- Deadline for submission: That no more than 2 years have passed since the customer had knowledge of the facts leading to the complaint or claim.
- Causes of rejection (apart from the violation of the two above):
- When the complaint or claim does not provide necessary data for analysis or nothing is request in this regard.
- When the complaint or claim has been resolved, identifying the client and the facts, or has already been processed by other administrative, arbitral or judicial proceedings.
- When the complaint or claim is oblivious to the rights of the customer with respect to the obligations of STARTUPXPLORE.
The rejection of the complaint shall be communicated to the client, giving him a term of ten (10) calendar days to correct the defects. Once received, if the causes of rejection are kept, the final resolution shall be notified to the customer.
Startupxplore can ask to the customer data or additional information it deems pertinent to adopt its resolution. If it doesn?t do so within 10 calendar days his complaint or claim will be archived. If you once archived the client provides the necessary documentation, Startupxplore will reopen the file.
The term given to the client to correct errors or complete the documentation will not be taken into account for purposes of calculating the period of 2 months for the resolution of the file by Startupxplore.
- Notification of resolution
The resolution shall be notified to the customer by email or other electronic messaging system or a telematics system in a maximum period of two months.
With the resolution, the file can be concluded by any of the following circumstances:
- The friendly settlement agreement between the parties, once adopted it shall be binding on the parties and the complaint or claim will be archived.
- Burglary at the client's request on behalf of STARTUPXPLORE.
- customer dissatisfaction with the resolution. The customer, in the event of a disagreement with the outcome of the pronouncement, or after the period of two months without having obtained answer, may refer the matter to the competent authorities.
- Withdrawal of the customer: The client may at any time desist from his claim, with which the procedure will end.
In addition, a file will be kept of all complaints and claims received, their status and, in case of being closed, the final resolution taken. Startupxplore PFP will inform you of its inclusion in the register and the other conditions set forth in the Law 15/1999 of 13 December on the protection of personal data. The data entered in the register shall be kept for at least five (5) years after having been registered or updated for the last time. The data from that file will be strictly confidential.
