How to accept lead investor commitment on a schedule
Closing a pre-seed round 1.4 m USD for 18 month,
the lead investor wants to invest on a quarterly basis, instead of a full commitment upfront.
How would you structure the shareholder agreement would I still put the total amount raised and the no shares the investor would receive
+ a schdule for the inbestment to flow in
OR should I not do a shareholder agreement, since the investor wouldn't be receiving the shares upfront ?
I would imagine it would be simplest to administer if you treat it as an installment sale.
The price and number of shares is fixed, the investor has a legal obligation to make future payments, the company has recourse if they don't.
Although, you have to expect any recourse to either be untimely or unsatisfying for the company. If the investor wants to stop making payments, they will, and going to court will take too long. So, your terms should be explicit about what happens when a payment is missed, and you should try to make that as wrapped up as possible.
Alternatively, maybe set it up as options expiring every 3 months. Cause that's more honestly what it is.
I would treat it as closing a $233,333 investment.
Because until the money is in the bank, it's not in the bank.
You will need to close another round in three months.
To put it another way, it's not an ideal deal.
It suggests that the investor doesn't have the financial wherewithal to do a $1.8m deal, e.g. cashflow. Or doesn't have a strong belief...that's why it's not a full commitment.
It might be the best deal you can get. But it will require more energy from you and your team than getting all the money at once would.
Good luck.