onboarding

Frequently Asked Questions

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General

Welcome to Loyal. We have now invested in you. Our fates are tied together. Especially if you have given us common shares, we can’t succeed unless you succeed. So we clearly want to see you succeed. 

Note: Loyal pays you $1,000/month to do things you should want to do anyway. Reviewing your KPIs monthly, and reporting them to and discussing them with advisors is an important part of good management. Having an up-to-date data room makes future financing rounds fast and painless to complete. Being able to demonstrate good past monthly investor reporting is yet another positive sign to investors. Having someone paying you and holding you accountable just makes these good things more likely to happen more often.

As outlined in this disclaimer, all answers are provided for general information purposes only.

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Three Operating Principles

Loyal has opinionated partners and experienced mentors who will confidently give you advice, based on their experience. Perhaps 70% of the time that advice will apply and be very useful. The other 30% of the time it may be nonsense, wrong, or not apply in your case. You know the business far better than anyone, and you are responsible for the results. Listen to advice, see what you can learn from it, and then do what you feel is best for the company. Loyal invests based on your results, not whether you listen to them.

You may have wondered where the name comes from. Loyal invests in you early, often before any other investor would. They are looking for a chance to prove themselves to you and earn your loyalty now. In return, they hope you will be loyal to them when you are a big success and you have your choice of investors, especially if large investors offer to fund you only if you ‘clean up your cap table’. They hope you will be loyal then and will push back, rather than get rid of them. And it’s up to Loyal to earn that loyalty from you now.

You should never find yourself preparing or customizing documents just for Loyal. If Loyal is the impetus that gets you to something you should be doing anyway, e.g., signing employment contracts, that’s good. If you are doing a financial plan just for Loyal then a warning light should go off in your head saying ‘this isn’t what they want me to do’. You should never spend more than 2 hours per month on work ‘just’ for Loyal.

There are also a number of obvious principles that Loyal recommends following, because it makes life easier and smoother for all of us:

Being transparent is easier, simpler and more efficient. If you have something awkward or embarrassing going on, sharing it means we can just deal with it and move on, rather than wasting all our time in avoiding it. Loyal will be direct in our feedback to you; be direct back again. One of Loyal’s favorite quotes when it comes to reporting is “bad news is good news, no news is bad news, good news is no news”. If your other investors are equally friendly, then when you do a monthly report for us, why not just share it with all your investors? 

You have many people around you that can help with your business, now including Loyal and their over one thousand advisors. They make money if you succeed. They want to help you. If you need help, ask for it. Don’t try to solve all your business problems on your own. Make smart use of your resources, which includes Loyal’s time and support, and all your investors, advisors and others.

When you ask for help, make it easy to help you. Be as specific as you can with requests, e.g., ‘can you introduce me to Reshma at Seedcamp’ rather than ‘do you know any investors’. If you want an introduction, draft concise emails, i.e., 50-100 words, that the person helping can just forward on. 

If anyone offers you help, follow up - nicely - until the person follows through. You want the help. They are doing the favour: it is your responsibility to manage the process. A good rule of thumb is to remind someone once a week until they do what they promised or withdraw the offer.

Before introducing you to any Loyal advisors, investors or other, Loyal’s goal is to always do a ‘double opt-in’. Loyal asks both you and the person being introduced if they would like to speak, by sharing a short summary email about each person to the other. Currently Loyal is using a software tool called Bridge to facilitate these double opt in introductions. Please do not reach out to advisors on LinkedIn or in other ways, both to respect the advisor, and because it makes it harder to track the interaction and ensure that the advisor gets properly compensated for helping you.

Due Diligence

Loyal VC is a global venture fund, which invests across industries, using a unique gate stage investment process. Loyal believes that pitches are not a fair way to evaluate companies. Instead, Loyal provides monthly assistance and $1,000 cash payments during a pilot investment stage,in return for monthly reporting and equity in the company. Think of this like a free mini-accelerator program (or even better than free, since Loyal pays you).

The best companies in Loyal’s portfolio each month are offered a $200,000 investment, and the best of those are offered third and further rounds of investment. All companies, at any level, continue to benefit from monthly assistance, and Loyal’s network of 800+ global advisors and 300+ founders, for at least two years contractually guaranteed, and generally forever.

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Loyal would like to work with you to build a full due diligence data room. Our full list (below) will be the same as any other investor’s. A good place to start in the first month is to load (i) your cap table and corporate incorporation and governance documents (e.g., incorporation papers, any shareholder agreement, bylaws, etc), (ii) employee and major contractor contracts, (iii) major management documents such as your sales pipeline, product development timeline or marketing plan, (iv) your pitch deck, financial model and other fundraising documents, and (v) any quarterly or annual reports and financial statements.

Starting documents:

- contracts: employees, options, suppliers, vital obligations and assets, financial plan if you have one, CRM/sales funnel reporting

- Employment agreement for all staff, including yourself and people working for free

- Board consents for various things: opening a bank account, year ends, anything relating to issuance of options or shares, write a good option plan then you have freedom to do it without going to the board

- Sales: leads, opportunities, signed and their status; how many added to each major bucket

Speak with Loyal to discuss alternative solutions that work for you.

No. Load what is easy to do immediately. We will review the materials and will ask you to load more materials over time, building up to a full data room over a period of a few months. Note that we will want to review the data room before making a next investment, so it is better for you do have everything uploaded within the first three to four months.

No. Please don’t do work specially for Loyal. Load your old financial plan for now. If we are actively using and need it, we will contact you then about updating it. And if you need to update it in the future for other purposes, do so then.

Monthly Reporting

Loyal currently only offers funding to three types of companies:  

  • Founder Institute (FI) graduates recommended by their local program leader
  • Companies founded by an INSEAD alumnus
  • Companies given a ‘golden key’ by investors in the fund

For more information and to apply for funding, visit this page.

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Make sure you send your monthly report at least 24 hours before your monthly call with your Loyal partner. This will make sure that the partner is properly briefed before the call, and will make your call much more efficient.

You won’t be paid the $1,000 for that month. Sometimes that may be the right decision, if you think your time can generate more than $500/hour doing something else.

Generally, no. This makes our calls less efficient, and wastes time for both of us. It may be better to ask the Loyal partner to reschedule your call, which will depend on their availability.

No. Loyal can’t guarantee that they will read every weekly update from every company. Summarizing everything into one monthly update makes sure Loyal will read it, and also is often a useful exercise for you to review and reflect on your progress. (Of course, you can just copy paste the four weekly updates into one email if you insist.)

Yes. The call can still give you useful feedback, and give you access to mentors. And keeping Loyal up to date - even without a report - makes it more likely they will make a follow-on investment. You just won’t be paid that month.

The report should include financial metrics, operational metrics, commentary and - if appropriate - attachments.

Yes, of course.

Your operational metrics will vary depending on your company and your stage. Discuss the metrics you normally track with your Loyal partner, who may find them fine, or who may suggest some other metrics to consider. For instance, a B2C e-commerce business might report number of orders, order size, % gross margin and cost to acquire a customer. An early stage B2B company might share a sales pipeline and a product development timeline.

Key commentary fields to include are: ‘what’s gone well’, ‘what’s gone poorly’ and ‘how Loyal can help’. You can include additional commentary if you like.

This is useful if you want us to, e.g., review your sales pipeline or a marketing plan. Where possible, upload attachments into our shared Google Drive.

We recommend that you share the same report that you send to Loyal with all of your shareholders. They will appreciate the added detail, and be more valuable to you as a result.

At a minimum include your monthly sales, monthly expenses, cash in the bank.

Loyal sends out payments by bank transfer in the first week or two of the subsequent month to everyone who has delivered the previous month’s reports and requested data uploads.

Loyal pre-pays all of its own bank transfer fees. So Loyal has ~$1,020 deducted from its bank account. If you received $980 it may be due to fees charged by your bank to receive a wire or transfer, or fees charged by an intermediary bank between yours and Loyal’s (which can take some effort to track). You can check with your bank for more details. If useful, write accounting@loyal.vc for details on how the transfer was sent.

Besides sending us the monthly report, having your CEO take the monthly call, and loading any other data we ask for, you also need to tell us how to pay you. Do this by entering your banking details in the document entitled “Loyal banking details for monthly payments” located in the Google Drive folder “Wire Transfer Details for Loyal payments” that should have been shared with you during onboarding.

Mentoring & Support

There are 3 ways into the fund: as an FI grad, an INSEAD grad, or an LP referral. In all cases, you must be working full-time on your business and own 10% or more of the shares.

If you wish to apply, please visit our Prospective Founderspage

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You are welcome to skip any monthly call: you just aren’t paid for that month. And you put yourself at a competitive disadvantage for funding relative to other portfolio companies who have better used the opportunity to market themselves to the Loyal team.

You will find the Loyal partners are good people to give general advice related to entrepreneurship, based on their decades of experience. For specialist advice related to either industries, geographies and functions they will refer you to advisors specialized in those areas.

Yes, through Loyal’s website. You need to sign in to the Founder portal. You will receive credentials automatically when you complete your company profile by filling out the form in your onboarding email. You can then login at https://www.loyal.vc/login/portal-login, navigate to the "Portal" menu, click "Advisor Network" and find the advisor you want. Then reach out to them using the "Request to contact" link on their profile.

You are only paid for months where the CEO takes the call. Loyal will happily have an unpaid courtesy phone call with another team member if the CEO has to miss the call. (Loyal are shareholders in the company. Only the CEO is fully responsible for the company's success and other team members may be fired by the CEO at any time. Loyal, like all investors, want to speak with the person responsible, and the person who has full scope of action.)

If Loyal finds that there is a need for a specific new advisor, they will search their networks to find the right person, either for a one-off consultation, or to add to their advisor pool.

You may have written an unclear or uninteresting request, which may have been ignored (you will hear if they say no). And the advisors are busy people. Loyal uses a software tool called Bridge to generate automatic reminders and follow-up. And if you hear silence after 2-3 weeks, contact advisors@loyal.vc and we can nudge from our side.

Many Loyal partners are generalists. For specialist advice they will turn to the advisor network, which includes everything from digital marketing experts to a top ICU surgeon. Feel free to look through the advisor profiles yourself to identify good advisors to speak with.

Payments & Paperwork

If you are selected to join the fund, you will receive monthly assistance from one of our founding partners or a venture partner. We do this to track your progress and stay involved while believing it is your right to ignore our advice. However, if you stop attending our calls during the Pilot Stagewe will stop sending you money.

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If Loyal doesn’t have your banking information in time, a double payment will be sent the subsequent month.

Loyal has an active portfolio of over 100 companies. The only way that Loyal can manage tracking and managing that many payments is through setting up systematic processes. Exceptional transactions aren’t a good fit with a systematic process.

Loyal asks that you issue the paperwork within two months of your onboarding call. Loyal understands that this legal paperwork sometimes takes time.

Besides meeting your obligations, such as the monthly meeting and reporting, you also need to give Loyal your banking information, so they know how to pay you. You should have received a link to a shared drive where you can enter your payment information.

This is a simple and gentle consequence to use. The general principle is that if you are not meeting your obligations to Loyal under one contract, Loyal delays its obligations to you under the other contract.

Loyal delays the third and later monthly data payments until the shares/convertible note paperwork is issued. All delayed payments will be transferred to you at the normal payment time the month after receipt.

Payments are made in the first 10 days of the following month, starting with the month after your onboarding meeting (which counts as your first meeting and replaces the first report).

For Your Accountant

Loyal’s gate stage process starts every company at the same $10,000 Pilot Stage investment. We make 6 new pilot investments every month and each month the top 2% move to the next stage

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The $1,000 monthly payments are for a product (data) from the investee to Loyal Venture Advisors Inc. As such, this is income for the investee, and an expense for Loyal.

You actually signed two contracts. You are confusing cash payments from one contract with shares and a one time cash payment from the second contract. Loyal (i) makes $1,000 monthly payments based on your delivering data on the Data Contract, and (ii) receives equity, paid for via a $10,000 mentoring prepayment made by you, in the Mentoring and Investment Contract.

Yes. Please upload all of the invoices to the shared Google Drive we will give you. If you didn’t deliver the service one month - i.e., missed out on the monthly report or the monthly call with a Loyal partner (venture partners in training and advisors don’t count) - you can’t invoice for that month.

Because it is a regular, recurring monthly payment, Loyal will pay without the invoice. If it is easier, feel free to send an invoice for the previous month only after you receive payment. Note that Loyal can request to see the invoices at any time, and they must be available.

The monthly payments of $1,000 USD for data and the monthly expense of $500 USD are inclusive of tax. Loyal Venture Advisors Inc. remits any applicable sales tax in Ontario, Canada. If there are sales taxes applicable in your jurisdiction, you are responsible for calculating and remitting them, as the amount paid is inclusive.

The sales receipt is a prepayment for mentoring services. You prepay $10,000 which Loyal then returns for equity/convertible debt. The mentoring services are exactly like a subscription and the sales receipt acknowledges prepayment of this service. As a result, as mentoring is offered each month, the investee recognises an expense of approximately $500 USD per month. Loyal Venture Advisors Inc. generates invoices for $500 USD per month inclusive, and copies of these separate official receipts are available upon request. If you have received an invoice for the upfront amount, you should accrue the expense.

Loyal is based in Canada, and both services are delivered remotely between the two countries. Canada follows the rule that services are delivered where the recipient is located, which would mean the mentoring is delivered in your country, and the data is delivered in Canada. You will have to determine how your own country’s rules apply in this case.

The prepayment is not an upfront expense to the investee because of uncertainty about whether a portion will be refunded. It should be accrued over 20 months as it follows the vesting of the specific financial instrument you have negotiated. (Note: yes, the data contract pays over 10 months, while Loyal’s equity vests over 20 months. They are different contracts.)

Yes. If you find it easier to see two financial transfers, and you don’t mind incurring the bank fees (each party should pay their own bank fees), Loyal will receive a prepayment transfer of $10,000 from you, and will then transfer you $10,000 for shares or the note. Alternatively, you can use the written payment instructions in the Appendix to the Mentoring and Investment Agreement to transfer the funds directly to yourself on Loyal’s behalf, eliminating bank fees.

Feel free to contact our controller at accounting@loyal.vc.

For Canadian Companies

We make 2.5 Traction investments every month and each month the top 2% move to the next stage.

Companies take a median time of around a year to rise to the top 2% in their stage and hence move on. And progress is merit based. It has taken companies as few as 3 and as many as 40 months to move on. This flexibility to pick purely on merit is possible only because of our open-ended structure.

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If you have a Canadian company registered for HST or other provincial sales tax, the invoices for data services should indicate the tax rate and registration number. Note that the amount paid (i.e., the US$1,000 each month) is inclusive of tax.

The sales receipt acknowledges the prepayment of the mentoring services. It is not an invoice as the services have yet to be rendered (and equally note that the equity vests over 20 months). Invoices are created monthly for the mentoring and are available on request. HST is charged monthly for mentoring for Canadian companies.

HST is charged by Loyal Venture Advisors on all mentoring services for all Canadian companies, regardless of province.

The Next Round

Loyal makes one Growth Stage Investment per month. Loyal’s gate stage strategy is designed to, and consistently has delivered excess returns relative to the market.

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Loyal’s ranking and investing process is always the same. Loyal can’t answer theoretical questions about next month’s ranking without comparing you to everyone then. You will always be considered for funding in each month’s ranking, whether you ask for funds/are raising or not.

To date Loyal’s follow ons have taken anywhere from 3 to 40+ months, with 3 months being a fixed minimum. As a reminder, Loyal discusses and ranks all companies each month, with the top one to two receiving financing offers. A new ranking is done each month. See here for more.

Yes, Loyal is willing to lead or follow. Loyal leads around 50% of the time.

Loyal will follow whatever deal terms are agreed with the lead investor. Loyal will also give you advice on whether those deals are standard or fair in Loyal’s point of view. Loyal has even helped founders negotiate the terms with the lead investor. If Loyal doesn’t like the price or terms (see uncapped notes), Loyal will pass and advise you to take the better/best deal.

Loyal feels that the disadvantages for entrepreneurs of using a SAFE note (specifically the dilution and the long term uncertainty in how many shares are eventually given for the investment) outweigh the advantages of faster and cheaper financing for Loyal.

Loyal prefers to invest in common (ordinary) shares. For more see this legal briefing. Loyal will also consider leading a SAFE note round. Loyal does not lead preferred share or convertible note rounds, because we feel these are inferior choices (for you) that penalize the entrepreneur.

Yes, Loyal will consider a SAFE note investment regardless of where your company is incorporated, although there may be some legal or tax considerations based on your jurisdiction.

This will be unique to your company and your situation. A good place to start is to look at what you prepared for your last round. However, be aware that the bar will likely be higher for the next round. More is better.

Yes. You can opt out at any time by repaying the $10,000 and equity back to Loyal. Note that the $10,000 is nonrefundable, and repaying it back to Loyal just cancels the equity, and allows you to opt out.

Loyal makes funding decisions based on two main things: (1) the monthly data report that you send, and (2) a monthly ranking of all companies in the portfolio (called the Rankings Meeting). See this legal briefing for more information.

Yes, subject to the terms in the Mentoring and Investment Agreement.

Yes, start talking to Loyal and your other investors early, like the day after you close your last round. And use Loyal’s advice on fundraising.

That’s okay. Loyal understands that your needs and their goals may not align at every stage. You should consider yourself lucky if you have too many good options for investment. Just be transparent with Loyal about your plans, and let them know as soon as you can if you are planning to raise a new round.

Now. Seriously. The day after your last round closed.

If you don’t raise your next round, Loyal doesn’t want you to feel any pressure about this. Loyal is supportive of your decision to keep building your company without raising additional capital at this time. You can continue to use the Loyal network, and access Loyal’s resources and advice for as long as you want.

The best investors and acquirers take time to get to know you and your company. It is not unusual for it to take six months to raise the next round.

No, Loyal does not take uncapped SAFE notes. Uncapped notes are not fair to investors. The investor in the uncapped note gets shares at the same price as later investors, but takes the risk that the company will fail (with them losing their money) before the priced round. It makes no sense for any intelligent investor to buy an uncapped note: they should hold and wait.

Loyal believes you and Loyal will be in a long term relationship. Good long term relationships will be balanced, and fair to both parties. Loyal sees two common errors committed by lawyers:

i) legal drafting as competition fallacy: each person’s lawyer tries to get every advantage possible for their client. This results in later upset when the other person realises they were taken advantage of. Loyal prefers that your lawyer only include terms they would agree to if they were also on the other side of the table.

ii) bespoke legal fallacy: many lawyers give you exactly what you asked for. Loyal believes this is a mistake, and your legal documents should be simple, repeatable, off-the-shelf, and structured to last for years, not just one deal. This minimizes your legal costs over time, and makes future rounds fast(er) and easy(er). Bespoke documents often include names (‘Pamela’) instead of classes (‘investors with >10% of shares’).

Disclaimer

The foregoing and following is a summary discussion of certain frequently asked questions relating to Loyal’s investing. The terms of any investment will be detailed in the Data Agreement, a Mentoring Agreement, and, if appropriate, the Loyal Warrant (collectively ‘The Agreements). This summary is provided for general informational purposes only and may not be complete or applicable to all situations or companies. The information provided does not purport to address all matters relevant to Loyal or The Agreements in their entirety, nor does it purport to constitute a sufficient basis for companies to determine whether to enter into any agreement with Loyal.

Furthermore, this summary is qualified in its entirety by the terms of The Agreements, does not provide any representations or warranties related to such agreements, is not legally binding and is not a substitute for a review of the full terms of The Agreements. While this summary is offered in good faith and in the hope that it may be of use to companies, it is not guaranteed to be correct, up to date or suitable for any company’s purpose. Loyal accepts no liability in respect of this information or its use, and by using this summary you agree to hold Loyal and its affiliates free of any liability related to this summary.

Each company is solely and independently responsible for investigating the facts relevant to its circumstances, including all matters addressed in this summary, and for determining what other sources of information to consult. Each company is strongly urged to review The Agreements in detail, consult with their legal, financial, tax and other advisors, and ask any additional questions they may have of Loyal prior to signing any agreements. In the event of any conflict or discrepancy between this summary and The Agreements, the terms of The Agreements shall prevail.