Q: How do you define “Early Stage”?
A: “Early stage” refers to the period just after a company has launched its product or is working on their proof of concept. If your company has not yet registered under the Business Registration Ordinance, or if you have a prototype ready but not yet launched publicly, you are still welcome to apply for the programme. Afterall, your company’s business potential and founders’ experiences are what matter the most.
Q: Are there specific industries that you are looking for?
A: We welcome HKU early-stage startups from different industries and technologies, both software and hardware. To best fit the needs of our incubatees, our mentors are industry experts, entrepreneurs and senior executives from diverse backgrounds and have a wide range of skills and expertise to share with our teams.
Q: What does it mean to have “at least 20% ownership”?
A: We would like to support startups with significant affiliation with the University and with HKU members on the founding teams. We want to know how many of the company stock you own. A 20% stake means that one owns a 20% of a company as a co-founder of the company. With respect to a corporation, this means holding 20% of the issued and outstanding shares. Assuming that there is one class of shares, holding 20% of the shares means that one is entitled to 20% of any dividends that are paid. We expect the HKU startup founder owns at least 20% ownership of its company.
Q. How much equity will iDendron take? And how are investment deals structured?
A: Given the lack of traction, it could be difficult to give an accurate valuation for early-stage startups. Thus, we have set up an Investment Committee to assess the startups and will invest in the startups via a SAFE note (Simple Agreement for Future Equity). Through this instrument, we will make a cash investment in your startup and convert our investment to shares at a later date.
Q: What is SAFE?
A: SAFE stands for Simple Agreement for Future Equity. The SAFE instrument is a tool used in early-stage financings, having first been introduced by YCombinator in 2013. In essence, the SAFE involves an advance payment for shares to be issued at a later date upon a triggering event such as a future equity financing round, sale of the issue or IPO of the issuer. The price at which the advance payment converts into shares is based on the price of shares under the relevant triggering event.
Q: Why did we decide to invest via a SAFE note?
A: SAFE is a stand-alone document and is relatively easy and cheap to draft and negotiate. Fixed price equity issues usually involve multiple documents, such as subscription agreement, shareholders’ agreement and amended articles of association. It also includes more complex terms and mechanisms, as they must deal with all of the shareholders’ terms and protective mechanisms (which would otherwise be dealt with by future investors in a future equity round if the issuer had entered into a SAFE or convertible bond).
Q: When will I receive the investment?
A: The fund will be distributed in 2 instalments: (i) at the start of the programme (ii) mid-term, after completing the agreed KPIs.