Metis Law specialises in raise capital for tech companies. That’s why we were so excited when Neighbourlytics reached out when they were about to do a seed investment round.
The Client: Neighbourlytics
Neighbourlytics is a data analytics startup based in Melbourne that works with the property sector to provide data about the urban life of neighbourhoods.
Measuring urban life using traditional data sources - like the census or surveys - is expensive, time-consuming, and unreliable – so the team built a better way.
Neighbourlyticsmake it their mission to help build better communities by understanding people'shabits and needs. They analyse vast amounts of information about how localneighbourhoods work, providing insights into a range of Urban Life aspects.From which businesses are popular, to where are the hubs of activity on theweekends, Neighbourlyitcs provides the property sector with data that changesthe way decisions are made in urban planning. .
They measure urban life and provide the property sector with data that changes the way decisions are made in urban planning.
The Challenges
Undertaking seed investment for the first time
When we came across Metis Law, we were about to undertake our seed investment round. As a naive start-up group of founders, we really had no idea what we were about to embark on. And so, we worked very closely with My-Linh and her team to guide us through the process for how we raise capital. And in particular how we structure the legal around getting the best terms and the best agreements in place with the shareholders.”
Jessica Christiansen-Franks, Co-Founder and CEO of Neighbourlytics.
Neighbourlytics didn’t have the knowledge and expertise required to raise capital for their seed investment round. Neither did the company have a share option plan that worked, because they had relied on standard “off-the-shelf” documentation.
Hitting a hurdle with using “off-the-shelf” employee share option plan documentation
Neighbourlytics also needed to resolve the issues created by its existing incomplete and unworkable employee share option plan.
Christiansen-Franks explains:
“When we started several years ago, we had no money to hire lawyers. And so we just used some standard documentation that somebody else had given us for our employee share option program. And that documentation worked fine until it got tested by an employee needing to exercise their share options and actually purchase some. Because we hadn't tested the documentation yet, we didn't realise there were a number of holes in it. Just using off-the-shelf documentation wasn't an ideal way to do it.”
The Solution
The Process
Metis Law collaborated with Neighbourlytics by providing strategic advice to the Founders on structuring the capitalisation table (“Cap Table”). Metis Law advised the Founders on their investment in the company, prepared Convertible Notes and advised on the conversion of the notes to shares as part of the capital raise. This can get tricky.
Metis Law advised Neighbourlytics on the legal documentation for the capital raise. They also worked tirelessly to educate the Founders on what the company’s obligations were under the capital raising documentation and what the company was asking of investors under the documentation. In this way, the Founders were well versed in the language and practical implementation of the legal documents before approaching investors, and during negotiations.
The Results
Great Term Sheet leads to great relationship with investors
Metis Law helped Neighbourlytics understand the Term Sheets, how to negotiate the Term Sheets and exactly what Neighbourlytics were asking from investors. Metis Law enabled Jessica and her co-Founder, Lucinda Hartley, to understand what prospective investors were asking throughout the capital raise.
The whole process made it possible for Neighbourlytics to form a great relationship with investors, leading to a very positive negotiation process and outcome.
Jessica explains one of the things she greatly appreciated and which made an incredible difference is Metis Law’s constant availability.
“It made a world of difference to have Metis Law in ourcorner, answering the phone at any moment when we had a question about something that the investors had come back with. We could really understand what the investors were looking for, but also put our best foot forward and be informed when we went back to continue the negotiation with the investors.”
Improved employee share option plan (ESOP) documentation
Metis Law helped Neighbourlytics to develop a plan to resolve the issues created by using incomplete “off-the-shelf” employee share option plan (“ESOP”) documentation.
Jessica explained that finding a solution and putting in place a revised employee share option plan was very time-sensitive since they had employees looking to exercise their options.
“So we had to work closely with Metis Law to make sure we could resolve the issue quite quickly. Metis Law put a plan in place for how we could, over time, improve what we had and make sure that we weren't stumbling into that problem again.”
More investment capital
Neighbourlytics is looking forward to closing their Series A round. Metis Law has already helped them complete a bridging round.
In the next 6-12 months, Neighbourlytics anticipates bringing in significantly more investment capital. And for the first time, they will be looking at working with substantial venture capital.
This translates to more risks, but Jessica is confident because they will have all the help they need from Metis law.
“So the stakes will be a lot higher when it goes into negotiating that process, and My-Linh and her team will be beside us when we do that. No doubt helping us understand the terms and what we need to be asking for and negotiate the best deal that we can with investors.”
Final Words from the Happy Client
“The main thing I wanted to say is how fantastic it is to work with My-Linh and her team. They’re so responsive and make us feel like we know what we're doing, which is difficult to come by with legal advice. We've worked with other lawyers that know their stuff, but it can be an intimidating work relationship. And My-Linh's team never makes us feel like that.”
Jessica Christiansen-Franks, Co-Founder and CEO of Neighbourlytics.
Raising capital? Chat to a savvy, experienced capital raising lawyer. Email us at metis_at_metislaw.com.au or buzz us on + 61 2 8880 9383.