This glossary explains jargon relevant to startups operating and raising capital in Southeast Asia. For further explanation, check out our guides and videos on raising capital in the region.
Click on the term for full text.
- a mentoring program designed to speed up the growth of very early stage startups, usually over a period of 3-6 months. The services are generally offered in exchange for the issue of shares to the accelerator.
- used when a company intends to bring in employees from a target company, rather than acquiring that target's business or assets. Acqui-hires are common amongst well-funded startups looking to hire other teams. See our template acqui-hire agreement.
- a transaction in which a buyer acquires another company’s shares or its business and assets. See our template M&A term sheet.
- the Accounting and Corporate Regulatory Authority of Singapore, the statutory board that oversees the regulation of companies in Singapore. Many startups in Southeast Asia have their holding company incorporated in Singapore.
- an individual who invests in startups, typically at the seed investment stage.
- a mechanism which adjusts downwards the conversion price of preference shares when shares are subsequently issued by a company at a lower price than the price paid by the holders of those preference shares. Anti-dilution provisions are often introduced in series A investment documentation and are almost always provided on a weighted average basis (rather than a full ratchet).
- an individual who has left a company in certain specified negative circumstances (for example, they are terminated for cause). Under ESOP rules, an employee who is a bad leaver may have all of their options cancelled (whether vested or unvested). Under a founder vesting agreement, a founder who is a bad leaver may forfeit shares held by way of a claw-back by the company.
- Badan Koordinasia Penanaman Modal, the regulatory board which administers and approves foreign capital investment in Indonesia. Many corporate actions involving Indonesian companies require approval from BKPM.
- the board of directors of a company who are responsible for the day to day operations of the business of that company.
- a right to appoint and remove a director to a board of directors. Investors typically want the right to appoint at least one director to represent them on the board of an investee company. This right may be subject to the investor or investors maintaining a minimum percentage of shares in the Company.
- a form of weighted averageanti-dilution protection which includes in the formula both the company’s shares in issue, as well as shares which could be issued by converting all other options, rights, and securities, including employee share options. Using a broad-based weighted average results in a higher conversion price for the holders of the preference shares than with a narrow based formula, and is therefore more favourable to founders.
- the repurchase of a shareholder’s shares by a company. Company buy-back transactions generally need to follow strict company law procedures.
- the purchase by a third party of shares in a company.
- the process by which a company raises capital, generally by issuing shares or alternatively, convertible notes to investors.
- used in the employment context but also in ESOP rules or related to founder vesting. Cause typically describes scenarios where a founder or employee is terminated on grounds of misconduct or breach of certain obligations. This may include a material breach of their employment agreement, breaching a non-compete or being convicted of a criminal offence. Being terminated for cause normally results in an individual being considered as a bad leaver.
the primary source of corporate and commercial law in Thailand.
- the satisfaction of key obligations in an agreement (e.g. payment of an investment amount, delivery of share certificates, etc.). Often, the closing date is set as the date on which the agreement’s conditions precedent are satisfied or waived, or within a few days afterwards.
- an opinion occasionally provided at the request of investors on closing of a fundraising transaction. Such opinion typically covers the due incorporation of the investee company and the enforceability of the transaction documents.
- the right of certain shareholders to require a buyer of another shareholder's shares to also purchase an equivalent percentage of their shares on the same terms. Investors often have the benefit of co-sale rights which are triggered if founders wish to sell some or all of their shares in a company.
- US terminology that is sometimes seen in term sheets in Southeast Asia and which should correctly refer to ordinary shares.
- the Act that regulates the formation, administration and governance of companies incorporated in Singapore.
- the act that regulates the formation, administration and governance of companies incorporated in Malaysia.
- the statutory body that oversees the regulation of businesses and companies in Malaysia.
- satisfaction of key obligations in an agreement (e.g. payment of an investment amount, delivery of share certificates, etc.). Often, the completion date is set as the date on which the agreement’s conditions precedent are satisfied or waived, or within a few days afterwards.
- steps and actions that need to be carried out before completion of a transaction occurs. As a minimum, the delivery of board and shareholder resolutions approving the transaction is typically a conditions precedent that must be satisfied.
- information that one party has provided to another party, and that is not in the public domain. Parties to a transaction are usually bound by restrictions on the use of other parties’ confidential information from the time after signing a term sheet.
- in the context of a share sale transaction, monies paid to shareholders in exchange for those shareholders agreeing to transfer their shares to a buyer.
- the governing document which sets out the rights, powers and duties of a company, the board and each shareholder of a company.
- (i) in the context of a convertible note, the price per share that an investor will have to pay to convert their investment amount into shares. Normally this is calculated based on the lower of a valuation cap, and the share price of the next financing round less a discount. (ii) in the context of rights attaching to shares, the price that is applied on conversion of preference shares into ordinary shares. Initially this is based on the subscription price paid for the preference shares, but can be adjusted downwards due to anti-dilution protection.
- the directors’ and shareholders’ resolutions, waivers and any consents required to approve the entry into a corporate transaction. Often required as part of the conditions precedent to be satisfied.
- the practice of funding a project or business by raising small amounts of money from a large number of people, typically via online platform.
the legislation governing data protection in the Philippines which came into force on 8 September 2012.
a physical, or more commonly a virtual, data room, used for storing company documentation presented to investors or a buyer as part of a transaction.
- a form of fundraising involving the issue of a debt instrument by a company to investors. Most commonly for startups, this would be done via a convertible note.
- a document under which new parties agree to be bound by the terms of an existing agreement (such as a shareholders’ agreement).
- a document which formally transfers the ownership of one party’s intellectual property to another party. Investors in, or purchasers of, a company will often require such deeds executed by founders, employees, and contractors evidencing that the company owns all of the intellectual property required to operate its business.
- the right of an investor to certain remedies if a company breaches provisions of an agreement (often including breaches of the warranties provided under a share subscription agreement).
- the reduction in a shareholder’s proportionate ownership of shares in a company when new shares are issued.
- in the context of a convertible note, the discount applied to the price per share at which the investment amount converts into shares if a qualifying equity financing occurs. This discount rewards the investor for the risk taken in investing so early in the company. In Southeast Asia, the discount is typically in the range of 15-25% less than the share price paid by incoming investors on the financing round.
- a provision which sets out rules as to how parties should proceed if there is a dispute under a legal agreement. In Southeast Asia, many dispute resolution clauses in investment and sale documentation require disputes to be resolved by SIAC.
a payment made to shareholders from a company, which can include cash as well as liabilities incurred by the company on behalf of the shareholders.
- directors’ and officers’ insurance which protects the company and its personnel against liability arising from actions taken by directors and officers on the company’s behalf. Commonly required by investors on series A deals.
- a mechanism in an ESOP under which a percentage of unvested options immediately vest (i.e. accelerate) on an exit, where the vesting of the unvested options is conditional on a second event occurring. The second event is typically an employee being terminated, or that employee resigning with good reason within a certain time period after the exit event. Whilst commonly adopted in US investment documents, double trigger acceleration is less commonly used in ESOPs for Southeast Asia startups.
- an investment round under which new shares are issued at a price that is lower than the price paid by investors in earlier fundraising rounds.
- rights which enable shareholders holding a specified majority of shares to force the minority shareholders to sell their shares in a company to a third-party buyer. Sometimes drag-along rights can only be triggered if a majority of the holders of preference shares also approve such a transaction and/or if the exit valuation is higher than an agreed amount.
- in the context of a convertible note, the date on which the investor advances the investment amount to a company.
- investigations undertaken by an investor or buyer prior to investing in, or purchasing, a company or business. Commonly includes enquiries into the company's or business' legal, commercial, financial, technological, and tax affairs.
- an arrangement included in a sale transaction whereby the seller of a company or business will recieve additional payments conditional upon performance of the target company or business.
- formed in April 2018 through the merger of IE Singapore and SPRING Singapore, the statutory board that focuses on enterprise development and growing Singapore as a trade and startup hub.
ownership in a company, generally represented by holding shares.
- a form of fundraising involving the issue of shares to investors.
- employee share option plan, a scheme under which a company grants employees, directors, and contractors options to purchase shares in the company which typically vest over a period of time.
- an employee share scheme, a scheme under which a company issues shares to employees which vest over a period of time. Unlike an ESOP, shares in the company (rather than options over shares) are issued to participants of the scheme, but the company has an option to claw-back unvested shares in certain circumstances.
- a transaction where a third party acquires the majority of shares or assets of a company.
- remedies (sometimes involving a forced buy-back or redemption of shares) provided to investors if the company does not achieve an exit within a stated period of time. In Southeast Asia, exit rights tend not to be requested by investors until at least series A and then are between 5 and 7 years from closing of the particular transaction.
the process of re-domiciling a company in a country different to its place of first incorporation. This can be done by way of share transfer and interposing a new holding company, or alternatively by way of a transfer of assets.
the Act which sets out US anti-corruption laws. It is typical for investors in Southeast Asia to seek warranties and undertakings from startups as to compliance with FCPA standards, even if the business has no connection to the US.
- an individual who plays a significant part in establishing a startup and is key to its success. Founders typically are directors and initially own the majority of the company’s shares.
- anti-dilution protection which provides that where shares in the future are issued at a lower price than what an investor paid for its preferential shares, the investor is either issued new shares to reflect the same share price, or the conversion price for the preferential shares is adjusted down to the lower price. Full ratchet anti-dilution rights can be very harsh on the holders of ordinary shares.
- a common standard adopted for the disclosure of documents, whereby information must be disclosed such that an investor can sufficiently understand the details of the documents and underlying information.
- the process by which a company raises capital, generally by issuing shares or convertible notes to investors.
- matters deemed to be disclosed to investors, which could include a company’s accounts, searches of public registers, and the contents of a data room which has been made available to investors or a buyer.
- an initial coin offering, a form of fundraising where a company sells newly created cryptocurrency to investors in order to raise funds.
- similar to an accelerator, an organisation or program which provides financial and mentoring support to startups.
- a clause under which one party agrees to bear another party’s losses or damages on a dollar-for-dollar full reimbursement basis. Indemnities can be a remedy for a breach of warranties and/or separately cover specific risks identified.
- sets out the relationship between a company and a party engaged to provide specified services to the business. Independent contractor agreements typically set out the terms of remuneration and provide that all IP created by the contractor is assigned to the company. See our template independent contractor agreement.
the law which regulates foreign investment activities in Indonesia in all sectors and can be relevant for startups who operate with a Singapore holding company.
the law which regulates the procedures, terms and conditions regarding the establishment and the management of a company in Indonesia.
- in the context of a convertible note, the rate at which interest accrues until the investment amount has been converted into shares under the terms of the note. Interest is generally rolled up on conversion of the note into shares in the company.
- Badan Koordinasia Penanaman Modal, the regulatory board which administers and approves foreign capital investment in Indonesia. Many corporate actions involving Indonesian companies require approval from BKPM.
- a director nominated by an investor to be on a company’s board of directors. In fundraising deals in Southeast Asia, investors will often seek a board appointment right as a condition to investing.
- rights over creations of the mind, and includes copyright, trade marks, patents, and registered designs. IP clauses in the commercial contracts of tech companies are key and should set out the ownership position between parties (i.e. that each party owns their IP that existed prior to the contract, and IP that was not developed in the course of that particular contract).
- an initial public offering, a form of fundraising in which a company offers some or all of its shares to the public as part of an application for its securities to be admitted to trading.
- the Keep-It-Simple-Security a short form convertible note released online by the US accelerator 500Startups in 2014 and which is adapted and used by startups across Southeast Asia when completing a seed investment. The investment amount converts on a qualifying equity financing, exit, or on the maturity date, and typically acrues interest. See our template KISS convertible note.
the act which regulates companies, partnerships and private enterprises in Vietnam.
the act which regulates investment activities in Vietnam and can be relevant for startups who operate with a Singapore holding company.
- typically the investor who invests the largest amount on a fundraising. Lead investors often receive additional rights above those granted to the other investors in the round.
- the amount to be received by the holders of preference shares in priority to the holders of ordinary shares. This preferential amount could be equal to the investment amount or possibly a multiple of it (e.g 1.5x or 2x). In Southeast Asia, liquidation preference amounts are generally set at 1x the investment amount.
- the proceeds of a liquidity event, which in most cases will be the proceeds received from a buyer on a sale of the company.
- a transaction where a third party acquires the majority of shares or assets of a company. Commonly includes M&A deals and amalgamations, but not generally an IPO.
- a merger and acquisition, i.e. a sale transaction in which the ownership of a company and/or businesses are transferred to a third party buyer.
- preferential rights sometimes given to the lead investors investing a significant amount of money in the company. Major investor rights are seen in convertible notes and in equity investments.
- in the context of convertible notes, describes those noteholders who invested a specified majority of the total investment amount of the particular series notes. This concept can be used to ensure that key decisions are taken, or rights are waived on a majority rules basis – rather than by individual investors.
- a detailed interactive tool to review typical funding terms on investment transactions in Southeast Asia created by Kindrik Partners. See the tool here.
- an interactive list of venture capital firms and active investors in Singapore, created by Arnaud Bonzom and Florian Cornu. See the tool here.
- the Monetary Authority of Singapore, the central bank of Singapore which, amongst other things, helps shape Singapore’s financial industry by promoting a strong corporate governance framework and close adherence to international accounting standards.
- in the context of a convertible note, the date on which the debt converts into shares or becomes repayable in cash at the investor’s option. Usually set to be after a reasonable period of time from the note’s date (e.g. 12-24 months), so that the company has the opportunity to complete a qualifying equity financing.
- documents that previously needed to be filed in order to incorporate a company in Singapore. The Companies (Amendment) Act 2014) replaced their documents with a constitution.
(or Kemenkumham) the Ministry which oversees the incorporation of companies in Indonesia.
- Minister of Communications & Informatics Regulation No. 20 of 2016 regarding the Protection of Personal Data in an Electronic System, the implementing regulation of the EIT Law in Indonesia.
- The model constitution often adopted on incorporation of a Singapore company and which is set out in the Companies (Model Constitutions) Regulations 2015.
- in the context of a convertible note, the right for a noteholder to exchange the note issued to it for any subsequent convertible note issued by the company on more favourable terms.
- an agreement under which parties agree how each party’s confidential information is to be handled.
- a form of weighted average anti-dilution mechanism which includes the company’s shares on issue (including all ordinary shares to be issued upon conversion of the preference shares) but excludes shares which could be issued by converting all other options, rights, and securities, including employee share options. Using a narrow-based weighted average formula results in a lower conversion price for the holders of the preference shares than with a broad-based formula. This is less favourable to founders because, on conversion, more ordinary shares will be issued to investors, causing further dilution to ordinary shareholders.
- describes documents and agreements that are not legally enforceable (e.g. a term sheet).
- dividends that do not roll over from year to year if they are not paid and may be withheld by a company at its discretion. Typically a right associated with preference shares, they are much more common than cumulative dividends.
- entitles holders of preference shares to receive back a fixed as a minimum on a company’s liquidity event, with the remaining proceeds distributed on a pro rata basis to ordinary shareholders only. For example, a 1x non-participating preference ensures that an investor will receive back the higher of (i) their investment on a liquidity event and (ii) their pro-rata equity share in the company.
- the National Venture Capital Association, the US venture capital association.
- entitles an individual to attend board meetings in a non-voting capacity. Such rights are often granted to investors as an alternative to a full board seat.
- the process of a company giving options to a recipient (which is typically an employee, contractor, or director of the company).
- a person to whom options have been granted.
- shares in a company which do not have any special or preferential rights. Ordinary shares generally give holders one vote and are typically held by founders and/or the initial shareholders of a company.
- after payment of a liquidation preference amount, entitles holders of preference shares to share in the remaining liquidation proceeds on a pro rata basis with the ordinary shareholders. Participating liquidation preferences can significantly reduce the amount of proceeds that ordinary shareholders will receive on a liquidity event, and are not as common in Southeast Asia as non-participating liquidation preference.
- the legislation governing data protection in Malaysia.
the legislation governing data protection in Singapore.
- an individual’s legally binding promise to ensure that a debt will be repaid. It is common practice for banks to require founders to give personal guarantees for loans to early stage businesses. Personal guarantees are rarely provided in the context of convertible notes however.
- the value of a company after it has received investment in a fundraising round.
a formal authority that a company or person grants to another company to sign certain documents on their behalf.
- the obligation of a company to offer any new shares and/or securities to investors and/or the existing shareholders of the company pro rata before issuing them to any third party. Pre-emptive rights allow investors to maintain their existing shareholding percentage, and are a common principle set out in shareholders’ agreements and constitutions.
- the value of a company before it has received investment in a fundraising.
- a class of shares which takes priority over ordinary shares in various respects (i.e. gives the shareholder preferential rights). There are various types of preferential rights including liquidation preference, anti-dilution protection, conversion rights, and preferential dividends. Most series A deals in Southeast Asia will involve issuing preference shares to investors.
the legislation which regulates investments in Malaysia and requires investors to obtain government approval for all domestic and foreign investment in Malaysia.
Perseroan Terbatas Penanaman Modal Asing, a limited liability company established under Indonesian law which allows for foreign shareholders and which is subject to more restrictions than a company which has only local shareholders.
- an IPO which is completed above a specified valuation and/or which raises gross proceeds above an agreed amount.
- the right of a shareholder or a company to redeem shares in issue at a specified price. Rights of redemption are sometimes included as part of exit rights, so that if an exit is not achieved in a specified time frame, investors can get their money back via a redemption of their shareholding.
- Government Regulation No. 82 of 2012 regarding Provisions of Electronic systems and Transactions in Indonesia.
- the list of shareholders of a company and details of their shareholdings. For companies incorporated in Singapore, this would be the EROM.
- rights held by investors which oblige a company to sell securities to the public. These rights are common in the US, and increasingly included in investment documentation in Southeast Asia.
- included in a share subscription agreement and a SPA, a set of statements that the company (and sometimes founders) confirm as being true as part of a fundraising or exit transaction. If any of the representations or warranties are untrue, investors may be entitled to make a claim against the warrantors.
- restrictions on a company from taking certain actions without the consent of a specified investor, or investors holding a certain percentage of a class of shares (usually a majority). Also referred to as affirmative vote items or investor veto items.
- a clause which restricts one party from competing with the other party, and/or obtaining or soliciting the other party’s clients, customers and/or employees.
- right of first offer - the obligation on a shareholder wishing to sell their shares to a third party to first invite offers from some or all of the other shareholders, which the selling shareholder is not obliged to accept.
- right of first refusal - the obligation on a shareholder wishing to transfer their shares to a third party to first offer those shares to the other shareholders on a pro rata basis.
- the length of time a company can continue to operate if its income and expenses stay the same based on the company’s burn rate and the company’s cash.
- a simple agreement for future equity, a form of convertible note that was released online by the US accelerator, Y-Combinator in 2013. The investment converts on a future equity financing or on exit but has no maturity date nor interest acruing. As a result, a SAFE is generally considered to be more favourable to the company than a KISS and investors are less inclined to invest using this form of instrument.
- sometimes part of a fundraising transaction, the sale of shares by existing shareholders to an incoming investor.
- the Act which regulates securities in Singapore. Under this Act, all offers of securities in Singapore must be accompanied by a prospectus unless the offer is exempted under the Act.
- the laws which govern the issue of securities to investors in a specific country. Such laws will often require a company to comply with disclosure requirements (such as issuing a prospectus) if it wishes to issue securities to the public, unless the issue of such securities falls within certain exceptions. Securities laws vary from country to country and companies need to consider where each investor is domiciled.
- a very early investment into a startup. Seed investors commonly include friends and family or angel investors. See our template seed investment term sheet.
- an agreement made between a company and all of the shareholders of that company which, amongst other matters, sets out how a company is to be governed.
- The Singapore International Arbitration Centre, an independent arbitration organisation based in Singapore. In Southeast Asia, most dispute resolution clauses in investment documents require disputes to be resolved by SIAC. SIAC is seen as a reliable venue for dispute resolution due to Singapore’s strong reputation and legal system.
- a sale and purchase agreement which documents a transaction in which a buyer aquires another company's shares, or its business and assets.
- tax that needs to be paid when executing share transfer documentation in certain countries, including Singapore.
- the Singapore Venture Capital Association, the member based organisation which promotes venture capital development and private equity in Singapore.
- rights that allow minority shareholders to sell their shares in a company if a majority wishes to sell their shares in a company. The majority shareholder(s) must ensure that the proposed purchaser also buys the minority shareholders’ shares on the same terms, or the sale cannot proceed.
token generation event, a form of raising capital in which cryptocurrency tokens are generated and sold to investors. Some commentators distinguish TGEs from ICOs by way of the security or type of cryptocurrency offered up for sale.
a form of investment where subscription monies are paid in instalments by investors over a period of time, often subject to the company achieving certain performance milestones.
- the long form and legally binding documents that record the terms of an investment transaction or acquisition.
the Act which sets out UK anti-corruption laws. Investors in Southeast Asia sometimes seek warranties and undertakings from startups as to their compliance with UK Bribery Act standards, despite having no connection to the UK.
- venture capital - the term used to describe capital investment in startups or early stage businesses, usually by professional investors.
- shares or options which have gone through a vesting period, and are now unconditionally owned by their holder with no further ability of the company to claw-back shares.
- the process by which shares or options become vested progressively over a period of time or once certain conditions have been fulfilled.
- the right to vote attached to shares held in a company, such rights which are set out in the constitution.
- an agreement that enables a holder to buy shares in a company at a fixed price. Warrants are often issued to investors as an additional incentive for investing and can typically accompany venture debt rounds.
- the instrument that creates a warrant and sets out its terms.
- the entities and/or individuals providing representations and warranties to investors in connection with an investment or sale transaction.
- a type of anti-dilution protection which provides that where shares are issued at a lower price than holders paid for their preference shares, the conversion price is adjusted down in accordance with a formula. The weighted average formula looks at the shares issued across the life of the company, which results in a much fairer adjustment from the founders’ perspective, as compared to full ratchet anti-dilution protection. Weighted average formulas can be broad based or narrow based.
- the process by which a company’s assets are sold to pay off the company’s debts in connection with a ceasing of the business' operations.