Orion Startups set up process

Dear entrepreneur,

Congratulations! You have been pre-accepted to our acceleration program and you are subject to receiving a seed investment of 30K USD.

This page will guide you and provide you with useful information for the set up.

Setup

Letter of Intent

The Letter of Intent is a document you receive notifying that you have been accepted in the acceleration program, and you might be subject to receiving an investment of 30K USD.

Surveys

You need to answers a series of surveys for completing the due diligence, and to know more about your expectations and goals in the near future. Click on the links below to answer the surveys.

Acceleration Program Contract.

A contract with the accelerator is required to be signed. This is for the service you will receive during the 5 month program.

Brochure “Welcome to Chihuahua”

This brochure includes basic information of the City of Chihuahua, location, tourism, main attractions, daily expenses, restaurants, transportation, among other things.

Delaware Incorporation

All startups must be incorporated in the US, preferably as a Delaware corporation. This process can be initiated before starting the program, and continue during the acceleration. Have in mind that in some cases the process can take some time, and it is required before receiving the investment. Entrepreneurs should run this process by themselves and/or with the help of a lawyers.

Move to Chihuahua

Your presence is required since the beginning of the program, therefore you will need to have had arranged your accommodation previously.

Stock Purchase Agreement

After incorporating your company, we need to signed a Stock Purchase Agreement, which is a document that specifies the sale and buy of the stock in the company for the investment provided. Also some other documents need to be signed such as the Technology Assignment Agreement.

First Installment of Investment

The investment is usually divided in 2 or 3 installments. You will receive the first installment in no more than 10 days upon the reception of all de documents of incorporation and the stock purchase agreement. The second installment will be deposited after participating at least three months in the acceleration program.

Glossary

This glossary shows the meaning of the main terms used during the investment process. Please take a look at them. In some of them, you will find the documents we use.

Letter of Intent

A document containing a declaration of the intentions of the writer. This document specifies that you have been selected as a participant for the acceleration program and a potential receptor of the seed investment by the Orion Startups Fund. It is important to note that this letter creates no obligation from the Orion Startups Fund to invest in your company until a Stock Purchase Agreement is signed.

Term Sheet

The term sheet is the document that outlines the terms by which an investor will make a financial investment in your company. You can have access to our draft term sheet here.

Termsheet_OS_DRAFT

Acceleration Contract

It is an agreement or contract between the entrepreneur and the accelerator. Have in mind that the Accelerator is a different entity to that of the Fund, though they both have the same name though. The fund is US corporation, while the acceleration is a Mexican entity. The accelerator is the service provider, that is the reason a contract is necessary to be signed.

Company Incorporation

Incorporation is the legal process used to form a corporate entity or company. A corporation is a separate legal entity from its owners, with its own rights and obligations.

We usually recommend to get the advice of a specialist or lawyer that can help you with this process. Although there are some online options such as Clerky, LegalZoom, StartupDocuments, and of course the mainstream legal firms.

Stock Purchase Agreement

The Stock Purchase Agreement is the definitive agreement that finalizes all terms and conditions related to the purchase and sale of the shares of a company. It is made between each shareholder and the corporation, determining how much stock will be purchased, the price of the stock, and how the payment will be made (cash, IP, or another form or combination of consideration). Stock Purchase Agreements come in two forms: Non-restricted and Restricted. In Non-restricted stock purchase you pay for your shares, they are yours. Restricted stock purchase agreements are used when a co-founder’s shares will vest over time. The Stock Purchase Agreement should match exactly to the terms stipulated on the letter of intent.

An example of the SPA we use can be downloaded here. Have in mind that this documento is a draft and clauses and terms can change during the negotiation process.

Technology Assignment Agreement

The technology assignment agreements deal with IP that was created by the IP owner before the owner became a shareholder of the corporation (such as IP created by founders pre-incorporation). Signing a technology assignment agreement, the shareholder assigns to the company (sells, transfers, conveys, etc.) intellectual property to the corporation. A typical technology assignment agreement will list the IP to be assigned to the corporation on an exhibit to the agreement, with the shareholder representing the sole owner of the IP. The shareholder has to agree to execute all necessary documents to effectuate the IP transfer. The technology assignment agreement can be referred to in the stock purchase agreement, as an IP transfer to the corporation can be consideration for the stock purchased by the shareholder.

Shareholders Agreeement

Shareholder agreements are contracts between some or all of the shareholders of a company in which they agree to regulate the exercise of some of their rights as shareholders.

A shareholders agreement is a supplement to the company’s constitution and will generally regulate shareholders rights – like a shareholder’s right to transfer his or her shares, rights of first refusal, redemptions upon death or disability, etc. – and regulate the management and operation policy of the company.

Bylaws

Bylaws outline in writing the corporate governance of your startup (day-to-day rules for the corporation’s internal administration and management), providing comprehensive guidelines to keep things running smoothly. Startups often fail to draft bespoke bylaws. Don’t be one of these startups, unless you are 101% sure that your startup will never have any corporate governance issues and I’m 101% sure that no one should be 101% sure of that.

Certificate of Incorporation

It is a legal document relating to the formation of a company or corporation. It is a license to form a corporation issued by state government. Its precise meaning depends upon the legal system in which it is used.

Stock

A stock is a type of security that signifies ownership in a corporation and represents a claim on part of the corporation’s assets and earnings.

There are two main types of stock: common and preferred. Common stock usually entitles the owner to vote at shareholders’ meetings and to receive dividends. Preferred stock generally does not have voting rights, but has a higher claim on assets and earnings than the common shares. For example, owners of preferred stock receive dividends before common shareholders and have priority in the event that a company goes bankrupt and is liquidated.

Read more: Stock http://www.investopedia.com/terms/s/stock.asp#ixzz4YyJ8k3GL
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Capitalization table

It is a table providing an analysis of the founders’ and investors’ percentage of ownership, equity dilution, and value of equity in each round of investment.

Option Pool

An option pool consists of shares of stock reserved for employees of a private company. The option pool is a way of attracting talented employees to a startup company. Employees who get into the startup early will usually receive a greater percentage of the option pool than employees who arrive later.

At Orion Startups we usually ask the company to assign between 10-20% of shares to the Option Pool for future employees.