Case Study

Investing In The Metaverse

A pioneering Web3 organization, with ambition to match, is set to change the way we live, work and play. Investors were at the ready to fund—but the company wasn’t ready to meet its destiny.  Yet.

Client Challenge

Our client needed trusted legal partnership to guide them through Series A transaction terms from a top-tier venture capital firm while completing a spin-off from the client’s parent co. The client saw the opportunity to partner with this VC firm as too important to pass up. But they needed a steady hand to manage the creation of this promising new relationship while navigating separation from the company whose support helped them reach this milestone moment. The parent, itself a heavy hitter in the web3 space, still wielded considerable influence over the client’s corporate decision making mechanisms; the parent’s support was needed at each step of the drafting and negotiation process, even as its influence declined, while that of the Client and the outside investor increased, as a result of the transaction. Allowing the Client to grow while preserving its relationship with the parent company was of paramount concern.

Strategies, Tactics, and Solutions

Working with the client’s Chief Executive Officer, its General Counsel and other members of the team, we knew that a personal touch would be essential to keep all parties involved moving in the same direction. We remained in constant communication with the parent company and the investor to ensure that the parent’s new relationship with our Client would flourish and be in sync with the terms of the Series A financing we negotiated with the VC firm and carve out and transition plan negotiated between the parent and Client. We identified solutions that connected the disengagement with the financing, such as contributing some of the parent’s controlling interest in the client towards replenishing its equity incentive plan. We worked with the parent as we outlined the pro forma capitalization of the company accounting for the VC firm’s preferences to right-size the capital structure and the parent’s influence on the company. When we sensed possible disagreements between the parent and the VC firm, we went into full-on consensus building mode and aligned all parties’ interests through honest human engagement and expert deal making.

Favorable Outcomes & Happy Clients

The final financing documents remained true to the term sheet. They protected the benefits of the bargain struck by the client and the investor without alienating the parent company. The client continues to lead from a foundation of consensus, striking boldly at new opportunities to grow and scale while seeking guidance from its newest partner and support from its oldest one.