the next steps and Your Eligibility, frequently asked questions and other resources.
Next Steps & Your Eligibility
Investors will need to sign and have a binding mutual non disclosure agreement approved by our general council. Investors will also need to fill out a disclosure that says that they you are accredited investors or qualified buyers this is known as a Subscription Agreement, this can be found in the “Apply” tab above.
When you have filled out the aforementioned paperwork we will then begin walking you through the various stages of the process of funding the Venture Cap fund and how your investment will be allocated in conjunction with the opportunities they are involved in.
There are certain restrictions on what can and cannot be owned by investors in the Cannabis industry, depending on residence in Colorado and the period of time and investor resides in Colorado. Your qualifications give you eligibility to invest in certain types of funds and dictate what you may own. (Equity and/or profit sharing).
After selecting which fund you are interested in and what suits your needs you will have a call with our in council attorney, a business development investment specialist and if you choose your attorney or advisor as well. We will send over the Private Placement Memorandum that goes through all of the various scenarios, goals and return of capital for the fund itself.
We will then arrange a tour through our facilities, meet some of our strategic partners, 3rd party shareholders as well as talk to some of the businesses we have acquired and are in various stages of development.
Private Equity/Venture Capital
Private Equity and Venture Capital funds are investment vehicles formed by investment managers, known as sponsors, looking to raise capital to make multiple investments in a specified industry sector or geographic region. Private funds are “blind pools” under which passive investors make a commitment to invest a set amount of capital over time, entrusting the fund’s sponsor to source, acquire, manage and divest the fund’s investments.
Calling the Capital
Unlike most investments, private equity capital funds work on a slightly different basis than other investments. Your commitment to a certain amount of capital that will only be called on an as needed basis when we have opportunities that need to be funded inside of the fund itself. We do not sit on any cash, its either invested or it’s in your possession. You will receive a month’s notice before we call a percentage of your funds committed and then you will be liable to deliver said funds on a pre-determined date.
Return of Capital
Much like how we call the money, the funding will be returned to you as investments complete and as ROI turns positive. Depending on the investment, this can happen anywhere from 2-6 years from the initial funding. Most private equity deals have a 7 year time horizon, our time horizons are considerably shorter due to the high margins of our industry.
PRINCIPAL LEGAL DOCUMENTS There are certain standard principal investment documents and other ancillary documents typically used in a private equity fund formation. PRIVATE PLACEMENT MEMORANDUM The private placement memorandum is the primary marketing document through which the fund markets its interests to prospective investors. The US federal securities laws do not require PPMs to be delivered to sophisticated investors such as QIBs and accredited investors in connection with a private offering of fund securities (see Securities Act), although it is generally market practice to provide a PPM to prospective investors. Regulation D of the Securities Act governs the information requirements for nonaccredited investors in connection with a private placement of fund interests. However, because the information requirements are onerous, private equity fund interests are not typically marketed to nonaccredited investors (see Practice Note, Section 4(2) and Regulation D Private Placements: Information Requirements for Non-Accredited Investors (http://us.practicallaw.com/8-382-6259)).
Although no formal rules under the Securities Act govern the content of PPMs, generally they contain the following information: ” Business sections. From a business and marketing perspective, the sponsor wants the PPM to describe: ” the target investments of the fund; ” the background of the sponsor and its investment team, including its performance track record; and ” the target industries and geographic regions in which the fund will invest. ” Summary of terms. Describes the key legal terms to be contained in the operating agreement of the fund. ” Risk factors and conflicts of interest. Describes the key risk factors involved in making an investment in the fund to apprise the investors of the primary risks related to, among other things: ” an investment in the fund; ” the target industries or geography in which the fund expects to invest; ” the management team; and ” other material considerations and risks of which a reasonable investor would expect to be apprised. In addition, the PPM often includes a description of the primary conflicts of interest involved in making an investment in the fund, or in the management and operation of the fund by the sponsor and its investment team. For example, sponsor conflicts when managing the fund along with other funds, ventures, projects, or businesses managed by the sponsor. ” Other key legal and tax considerations.
Often, PPMs targeting a particular investor base include a summary of key tax considerations for an investor making an investment in the fund (for a discussion of the common form of entity and tax treatment of a private equity fund, see Investment Fund). For example, a US fund may include a summary of material US tax consequences that a US or non-US investor would want to take into consideration before making an investment. Other PPMs may include a description of other key regulatory restrictions on investors who might not be otherwise qualified to invest or key regulatory considerations for investors before making an investment (such as filing requirements or potential liability under applicable law). ” Advisers Act compliance.
The Advisers Act contains numerous rules regarding the content of marketing materials that may be provided by registered investment advisers to investors which are typically reflected in a fund PPM (see Investment Advisers Act). Even for unregistered investment advisers, the SEC takes the position that certain information in marketing materials, especially prior performance data, could be misleading to investors if not presented in a certain manner. FUND PARTNERSHIP OR OTHER OPERATING AGREEMENT The fund’s operating agreement (typically either an LP agreement when the fund is formed as an LP or an LLC agreement when the fund is formed as an LLC) is the primary operating agreement that governs the arrangements among the sponsor (as the GP or managing member) and the investors in the fund. It typically sets out, among other things: ” The investment objectives of, and investment restrictions, on the fund. ” The economic terms, including the allocations of profits and losses, carried interest and management fees, although sometimes the payment of management fees is covered in the investment advisory agreement of the fund (see Allocations and Distributions, Carried Interest and Catch-up and Management Fees). ” The payment of the fund’s expenses (see Fund Expenses).
” The manner in which conflicts of interests are administered (see Managing Conflicts). ” The mechanics surrounding the issuance of capital calls to the investors and any decreases and increases in an investor’s capital commitment (to account for, for example, capital calls, returns of capital calls and recycling) (see Recycling of Capital Commitments). ” The distribution waterfall, tax distributions and other terms regarding the timing and manner in which the fund may distribute proceeds to its investors (see Allocations and Distributions). ” Capital commitment default provisions which create severe penalties for a defaulting investor, such as: ” forced sale of the defaulting investor’s capital account to other existing investors at a discount; ” interest penalties; ” automatic reduction of the defaulting investor’s capital account to cover owed amounts and penalties; or” the loss of all or certain rights as an investor, including participation in future investments or voting determinations. ” The delivery of annual and quarterly financial reports and other informational reports to the investors. ” Provisions for transfers of interests by the investors, which typically only permit transfers according to the provisions of the operating agreement and require GP consent. ”
Other standard legal terms, depending on the form of the vehicle and its jurisdiction of incorporation. SUBSCRIPTION AGREEMENT AND INVESTOR QUESTIONNAIRE An investor subscribes to a fund as a limited partner, member or other equity holder by executing a subscription agreement, which sets out the investor’s capital commitment to the fund. By executing the subscription agreement, the investor also agrees to the rights and obligations of
the investors in the fund’s operating agreement and makes representations and warranties to the fund, including representations and warranties confirming that is it qualified to invest. Investors are typically required, including with the subscription of interest, to fill out an investor qualification statement or other investor questionnaire: ” Confirming that the investor is qualified under applicable laws to invest in the fund. ” Providing other supplemental information and appropriate representations required by the sponsor.”
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