This article will walk you through the process of generating a Bridge Note (or Convertible Note) in Shoobx. To learn more about Bridge Notes generally and how they work, visit this article.
Please note that this article specifically covers the "Create New Bridge Note" path of the Bridge Note workflow, not the upload path.
Creating Bridge Notes (or Convertible Notes) in Shoobx
You'll find the "Bridge Note" workflow under the "Financing" section of workflows. The workflow will lead you through the process of creating the documents and completing the financing. Here’s what will happen:
1. You'll indicate whether you want to create a Term Sheet for approval before the other documents (see the check box on the first page of the workflow, where you also indicate that you want to generate documents for execution). This Term Sheet will need to be signed by your lead investor and the company representative.
2. Once you complete that step, you'll be asked to confirm compliance with securities laws. If you're unsure which option to choose, we recommend consulting with your attorney.
3. On the next screen, you'll enter the terms which will be used in the financing documents (e.g. the Note Purchase Agreement, a Form of Note that will be used for each investor, board and stockholder approvals). Note that only those terms with a blue * next to them are required.
4. On the next page, you'll be asked to add any information relevant for the Disclosure Schedules to the Note Purchase Agreement. Here, we recommend reviewing the Representations and Warranties from the Note Purchase Agreement with your attorney, as they can work with you to determine what information, if any, should be disclosed.
5. You will then indicate any investors who will be investing in your first closing. Simply add their names and investment amounts (or indicate that they will be naming their investment amount), and Shoobx will generate a Note for them.
6. If the company has any Subordination Agreements, you will indicate that on the next page. Unless the company has already taken in any outside financing from a bank, it's unlikely that this will be applicable, but your attorney can work with you to confirm.
7. If the company will be providing a Certificate of Good Standing to your investors (which can be obtained through your lawyer or your registered agent, or directly from the Delaware Secretary of State), it can be uploaded on the following page.
8. On the following page, you'll be provided details on the closing process for your investors, after which, you can provide wire information for your company. This will be visible to your investors after they sign so they know where to wire funds.
9. Should you wish to tailor the email that your investors will get, inviting them to log in and sign their investment documents, you can do so on the next page.
10. You will need to solicit approval from the company's board of directors and if desired, stockholders. Please note that you have several options for how you would like to do this: you can (a) upload an executed consent, (b) create a new board consent to be signed along with your investment documents, or (c) upload a consent that is fully drafted but requires execution.
11. The Checkpoint will provide you a list of the financing documents so you can confirm they are all correct. The legal review bar at the top of the page will either inform you that these documents will be sent to your lawyer for review, or give you the option to send them for review, depending on your counsel involvement settings.
12. Once you pass the Checkpoint (and legal review is completed, if applicable), Shoobx will obtain signatures from the appropriate parties, after which, you will be able to confirm the closing.
Who can invest using a Convertible Note?
Only Accredited Investors can participate in a Convertible Note financing on Shoobx. Accredited Investors can include individuals and investment firms.
My investors aren’t on Shoobx. Is that ok?
Of course! Investors who are new to Shoobx will receive an email inviting them to set up their Shoobx account and then review and sign their documents. If your round includes existing investors who already have access to Shoobx, they'll get an email to notify them that the financing documents are awaiting their approval.
Do I need help from my counsel?
All financing events should involve guidance from outside counsel. Your counsel involvement settings will determine whether your note financing documents will automatically go to your attorney for review, or whether you can choose to send them.