This is the deal for startups that come through JFDI.Asia’s seed accelerator program. It happens in two stages:
- Selected teams receive their formal offer in the form of a binding Founder Agreement, an example of which follows below. It is a short document that might also be called a Term Sheet.
- Once a team arrives to begin the program, and has a properly constituted Singapore company with a bank account into which JFDI.Asia’s investment can be deposited, both JFDI.Asia and the team execute a longer-form agreement that sets out the terms in more specific detail, linked in to the company Memorandum and Articles of Association etc.
To minimise the time and hassle involved, and to make the process manageable, the documents are all standardized. Apart from the number and names of team members, a key variable is a valuation on the startup at the point it joins the program. Comparing that valuation with the scale of JFDI.Asia’s investment lets us figure a fair share of equity for JFDI.Asia.
If a startup has an independent, professional, external investor, whose cash into the business has set an objective valuation within the last 6 months, we will use that last-round valuation as a guide.
If a startup does not have an external investor, we negotiate valuation based on the state of its development, using a standardized table so that we can be fair to everyone:
|S$475,000||Startup has at least 100 paying customers (if B2C) or 20 paying customers (if B2B) and annualized recurring revenues of at least S$50,000 based on a 3-month trailing average.|
|S$390,000||Startup has at least 100 paying customers (if B2C) or 20 paying customers (if B2B) and cumulative revenues of at least S$50,000.|
|S$250,000||Startup has no revenues, but about 300 Daily Active Users for a consumer app or 10 recurring paying customers for a B2B app.|
|S$200,000||Startup has a prototype developed and launched, and at least 30 daily active users (B2C) or three positive customer testimonials (B2B).|
|S$170,000||Startup has no users, but a prototype developed based on at least 12 customer development interviews.|
|S$130,000||Startup has no prototype, but a team with strong co-founders with overlapping skills, an interesting idea, and a strong fit between the team and the idea.|
|S$100,000||Startup has no prototype, but has an interesting idea, a strong fit between one founder and the idea, but a team who have not committed full-time.|
For anyone making a comparison, these valuations are lower than a startup might obtain in (say) Silicon Valley, reflecting local market conditions. We recommend that anyone building a business for the US market should seek a place on a US accelerator. JFDI.Asia builds businesses in Asia for Asia. We have to balance ‘being fair to founders’ with the expectations of the investors who make JFDI.Asia possible.
JFDI.Asia’s investment comes in two parts: a cash lump sum of S$25,000, plus intangibles which we value at S$150,000. Most investment events occur at a single point in time, and JFDI’s cash investment happens that way, at the start of the program. However, the intangible part of the investment is delivered over a 100 day period. So JFDI’s investment is a line, not a point. The two endpoints of the line are illustrated in the table below for a variety of JFDI.Asia share percentages.
|if your company valuation is||at the start of the bootcamp we invest||for a stake of||by the end of the bootcamp, we have invested (in cash and in kind)||and your company should then be worth|
So, to calculate the percentage that JFDI would ask in your company, look up your current valuation in the first table, and match the valuation to the second table.
To set the above in context: a few months after the JFDI.Asia acceleration program ends, thanks to continued traction during those months, startups might subsequently expect to raise S$600–800,000 from a consortium of investors led by a TIS fund at a valuation between S$1.5M and S$3M. As ever, actual valuations are what a buyer is willing to pay so the table above is for indication only.
If your startup exceeds the maximum valuation from the first table, we can discuss extrapolations on a case-by-case basis.
Example text of JFDI.Asia accelerator Founder Agreement
This Agreement legally binds the following Parties with respect to the JFDI.Asia Bootcamp (“Bootcamp”):
- the Founders: the persons identified as such on the Signature Page.
- the Startup: a Singapore Private Limited Company owned by the Founders.
- JFDI.Asia Pte. Ltd.: the operator of the Bootcamp.
- JFDI.2014 Pte. Ltd.: an investor into the Startup.
By this Agreement the Parties express a mutual understanding as follows:
- The Bootcamp shall begin on _____ and end with Demo Day on _____. The Founders should be prepared to remain in Singapore through the end of (two months later) to negotiate funding.
- No later than 30 days after the beginning of the Bootcamp, the Founders shall have incorporated the Startup as a Singapore PTE LTD legal entity and have opened a Singapore corporate bank account.
- The Founders shall cause the Startup to ratify this agreement by corporate resolution, and otherwise agree to promptly undertake such actions as JFDI.Asia may request from time to time in writing to give effect to this agreement, including but not limited to a novation of this agreement, if requested.
- The division of equity in the Startup amongst the Founders and/or other employees, advisors and consultants is a matter for the Founders to agree on.
- The Founders warrant that they have no reason to believe that any other party may lay exclusive claim to any intellectual property, asset, or other proprietary interest of the Startup.
- During the Bootcamp, JFDI.Asia shall invest time and energy working with your team. We provide mentoring and administrative guidance. We value this ‘in kind’ component at S$150,000. The Startup will also be offered a chance to pitch to potential investors on Demo Day. It is possible that if your startup is struggling to show traction we will ask you to defer your Demo Day pitch to the following batch 3 months later. If your startup quits the program, then it will not be invited to attend Demo Day, neither to pitch nor as an audience member.
- The Founders shall attend substantially all of the Bootcamp. During the course of the Bootcamp the Founders shall treat the Startup as their exclusive work priority.
- The Founders are responsible for finding housing and for ensuring that their presence in Singapore complies with employment and immigration regulations.
- JFDI.Asia shall provide standardised legal paperwork such as a Shareholder Agreement, Vesting Schedule, IP Assignment Agreement, Memorandum and Articles of Association, etc.
- If the Founders intend to use an existing Singapore PTE LTD company (an “Existing Startup”), then the Founders shall prior to the beginning of the Bootcamp disclose to JFDI.Asia in writing:
- the Existing Startup’s corporate documentation including its memorandum and articles of association, shareholders agreements, directors agreements, etc.;
- the capitalisation table of the Existing Startup; and
- all material liabilities and contractual agreements of the Existing Startup.
- In the event that proprietary assets to be used in the Startup (including but not limited to intellectual property assets) reside with individuals or in another legal entity whether such individuals or entities are in Singapore or abroad, the Founders shall within four weeks of incorporation cause said assets to be transferred into the Singapore Startup legal entity, free and clear of any pledge, reservation of right, or other encumbrance.
- The parties intend that within two weeks of incorporation and creation of the Startup’s Singapore bank account, JFDI.2014 will make its investment of s$25,000 (twenty-five thousand Singapore dollars), and in consideration of this cash investment and for other good and valuable consideration described in paragraph 7 which the Parties agree to value at s$150,000, the Startup shall authorise and issue new ordinary shares, convertible debt, or other equivalent security in the corporation such that, subsequent to the investment, JFDI.2014 will own <<equity stake>> of the total common stock in the Startup.
- As an investor, JFDI.2014 will hold the following rights which the Founders and/or other shareholders may or may not also hold:
- voting rights;
- transferable preemptive right of first refusal in future investment rounds whether equity, preferred stock, or convertible debt; and
- tag-along rights in the case of sale of stock by a Founder.
- observer rights on the board.
- The JFDI investment will not carry the following rights:
- board rights as a member of the Board of Directors;
- drag-along rights;
- redemption rights, unless such rights are granted to the Founders; and
- extraordinary protective provisions regarding future financings.
- Subsequent to the Bootcamp, as a shareholder JFDI.2014 shall cooperate with future financings and other corporate activities by responding to paperwork requests in a timely fashion.
- The Founders shall have the responsibility to maintain the Startup as a legal entity in good standing with the Singapore authorities.
- The Founders shall execute a limited power of attorney to empower JFDI.2014 and its representatives, in the event the startup fails, to wind up or strike off the company in the absence of the Founders.
- This offer may be rescinded should the Founders be unable to comply with item 10 or fail to deliver other supporting documents requested by JFDI.Asia.
This agreement must be executed by all parties listed on the Signature Page by <<time stamp>> Singapore time. If it is not signed by all parties at that time, this agreement shall be null and void and of no effect.