Series A Round, Financing and Convertible Preferred Shares in a Venture Capital Investment

What is a Series A round or Series A financing?

A Series A round, or Series A financing refers to the first round of venture capital or private equity investment where certain investors (e.g., private equity funds and/or individuals) invest in a company and the company issues certain (convertible preferred) shares to the investors in return. The shares issued are called Series A shares.

What are Series A convertible preferred shares?

Series A – Shares are called Series A if they are the first batch of a series of convertible preferred shares issued by the company. Future rounds of financing will usually be called Series B, Series C, and so on.

Convertible – Preferred shares are convertible into common stock. At an (qualified) IPO of the company, venture capitalists may convert their preferred stock into common stock (subject to any lock-up period), which may then be sold to the general public on the stock exchange. Huge profits can be realized in this move.

The lock-up period may be a restriction specified in the share subscription agreement and a restriction imposed by the stock exchange (e.g., the Hong Kong stock exchange or the New York stock exchange).

Preferred – Shares are preferred if they give the shareholders certain rights and privileges over the common stockholders. Preferred rights usually include preemptive rights, right of first refusal, co-sale rights, protective rights, registration rights, etc. Issuance of securities with such rights may affect the company’s ability to issue securities in future rounds of financing.

Key Components of a Business Plan – Part I

A good business plan has ten key components. Providing a comprehensive assessment of each of these components is critical in attracting investors. This article discusses the first five components. A subsequent article will detail the remaining elements.

1. Executive Summary. The Executive Summary provides a succinct synopsis of the business plan, and highlights the key points raised within. The Executive Summary must communicate to the prospective investor the size and scope of the market opportunity, the venture’s business and profitability model, and how the resources/skills/strategic positioning of the Company’s management team make it uniquely qualified to execute the plan. The Executive Summary must be compelling, easy-to-read, and no longer than 2-4 pages.

2. Company Analysis. This section provides a strategic overview of the company and describes how the company is organized, what products and services it offers/will offer, and goes into further detail on the company’s unique qualifications in serving its target markets.

3. Industry Analysis. This section evaluates the playing field in which the company will be competing, and includes well-structured answers to key market research questions such as the following:
- What are the sizes of the target market segments?
- What are the trends for the industry as a whole?
- With what other industries do your services compete?

4. Analysis of Customers. The Customer Analysis section assesses the customer segment(s) that the company serves. In this section, the company must convey the needs of its target customers. It must then show how its products and services satisfy these needs to an extent that the customer will pay for them

5. Analysis of Competition. This section defines the competitive landscape of your business. It identifies who the direct and indirect competitors are, assesses their strengths and weaknesses and delineates your company’s competitive advantages.

The first five sections of a business plan are critical because in most cases, investors will not read the full plan. As such, winning the investor’s interest early is critical. In addition to providing background on the full business opportunity, these sections provide the market research to back up the business’ potential, another critical factor in gaining an investment.

Refinancing Investment Property ARM Home Loans

Rental properties have been used by investors as a sort of safe haven against the ups and downs of the stock market. recently many investors took advantage of adjustable rate  mortgages or the more exotic option ARM loan in order to finance their investments.

Faced with resetting payments and rising rates many of these types of investors have tried to refinance and found that is now harder then ever to refinance adjustable rate mortgage on rental property that they own.

Why Investors May Not Be Able To Refinance Their ARM Home Loans

Reduced Property Values- Many people jumped into the rental property market when times were good and creative financing programs allowed them to buy second or even third homes with 100% financing and little proof of income. But now as banks have tightened up and property values have dropped many investors are finding they owe more then the house is worth and they can at best get a loan for 75% of the value of the home.

Not Enough Income- Because many of these loans were purchased with no doc or stated loans they are very hard for the owners to refinance using their actual incomes. Stated loan,no doc loans and high DTI loans are long gone so if you need this type financing and do not make enough to debt ratio properly you are in big trouble.

What Can You Do If You Are Unable To  Refinance

The best thing that you can do as a property owner who is in trouble is to call your lender and try and work out a reduced interest rate or payment. Many times if you were a great customer before the lenders will change your loan to a fixed rate and set the rate to your initial rate or one that reflects the current going rate in the market place.