Almost 40 participants from the startup and angel investor scene were present when GESSIthe joint project of the Business Angels Netzwerk Deutschland e.V. (BAND) and the Federal Association of German Startups e.V. for the development of standardized templates for investors and startups, hosted the kick-off workshop for the newly published standard contract “Syndication & Pooling” in Düsseldorf on September 23. The new standard contract has been developed under the legal leadership of TIGGES Rechtsanwälte Marius Rosenberg and Christian Schon and we therefore had the pleasure of hosting the event.
After the opening by the two BAND board members Dr. Roland Kirchhof and Dr. Ute Günther, Rosenberg and Schon presented the key points of the standard documents and answered numerous questions from the participants. The workshop was rounded off by a special on the topic of pool representatives presented by angel investors Robert Stammen, Apex Ventures and Thomas Weidner, Weidner BC, as well as a panel discussion with the participation of angel investor Egbert William, Ken Investment and startup entrepreneur Ronald Derler, Managing Director of Red Ventures GmbH.
With the standard documents “Syndication & Pooling”, the German Standards Setting Institute, supported by Business Angels Netzwerk Deutschland e.V. (BAND) and the Federal Association of German Startups (Startup Association), provides legally secure and practice-oriented agreements for business angels interested in a joint investment (syndication, also pooling). The interests of the groups involved – in addition to the angel investors, these are the founders and any subsequent investors – are taken into account in a balanced manner over the entire duration of the investment through to the exit.
BACKGROUND
Business angels are becoming increasingly important as a source of financing for start-ups seeking capital. Increasingly, business angels are not acting as individual investors, but are more and more frequently participating in joint ventures. The advantages for angels and start-ups are obvious: together, angel investors can realize larger financing rounds, the founders benefit from a multiple of the know-how and follow-up investors are also easier to acquire in the group. If angel investors share the financing, the risk of the capital investment is spread across several shoulders. Syndication also has the advantage that business angels with different levels of experience can join forces and, in particular, people with special expertise in the target sector can be involved.
There are various forms of pooling. In the case of a voting rights pool, each business angel remains an independent shareholder in the target company; only the management rights, in particular the voting rights, are pooled among the business angels, who thus speak to the outside world with “only one voice”. With the capital pool, on the other hand, the capital pool itself becomes a shareholder and the pool members only have an indirect stake in the target company.
In detail, the GESSI standard documents “Syndication and Pooling” contain the following documents:
- Standard document “Voting trust and pool agreement including power of attorney”
- Standard document “Kapitalpool GmbH with shareholder agreement”
- Standard document “Capital pool GbR”
- as well as detailed instructions for the use of these documents
As usual, the contract documents are provided as Word files in German and English, available here.
The GESSI standard documents are a successful model: the documents “Convertible loan”, “Term sheet”, “Employment contract”, “Financing round”, “Shareholder resolution” and “NDA”, which have been available since 2018, have been downloaded over 40,000 times to date. All contributors, including the law firms involved, contribute without remuneration. The aim of all GESSI standard documents is to consider the interests of both sides, founders and investors, in a fair and balanced manner. For this reason, the working groups are composed of representatives from both sides in addition to the lead law firm and neutral members.
LEGAL MANAGEMENT TIGGES RECHTSANWÄLTE
- Marius Rosenberg (Lawyer, Partner, Commercial and Corporate Law / M&A, Venture Capital & Startups, Düsseldorf)
- Christian Schon (Lawyer, Commercial and Corporate Law / M&A, Venture Capital & Startups, Düsseldorf
