Is the Wayra Agreement negotiable?
Not really. Significant effort has been made to ensure that the terms are as competitive and reasonable as possible. Wayra manages a global portfolio of many hundreds of investments and it is essential that all documentation align with the general Wayra precedents as far as possible. That being said, if one or two practical “tweaks” are required due to your specific circumstances, then these can be discussed. In the interests of fairness and consistency between participant companies, wholesale or significant amendments aren’t possible.
Is my agreement with Wayra or Novartis or both?
The Wayra Agreement is with both Wayra and Novartis. Although it is Wayra making the investment in your company, Novartis is obviously a full partner with Wayra in the Health Hub and has provided both funding and expertise to make the programme possible. Novartis is a party to the Wayra Agreement to ensure that it can benefit from rights of commercialisation. This does not create nor do we attempt to create any exclusivity for Wayra or for Novartis.
What form does the Wayra investment take?
Instead of taking shares in your company from the outset, we prefer to give you the funds you need via a convertible loan note. A convertible loan note is, in simple terms, a loan that has the right to convert into shares in your company in the future, usually when you get further funding at a later date. The terms and conditions of the loan note are that it is made up of two parts: (a) a £34,000 loan (in two tranches of £17,000 each); and (b) services valued at £34,000 (again in two tranches of £17,000 each) unless you spend additional time in the Wayra Academy in which case the value of the Services are increased at a rate of £4,000 per month.
Tell me more about the ‘two tranches’?
At ‘first completion’ when you sign the Wayra Agreement we advance you the first £17,000 of loan and commit to provide the first £17,000 of services and you must issue us with the first £34,000 of loan notes.
We intend to work closely with you as your business develops and will discuss goals and objectives. Once you’ve demonstrated that your business is developing as expected we will agree that ‘second completion’ has occurred. At ‘second completion’ you must issue us with the remaining £34,000 of loan notes in return for us advancing you the second £17,000 of loan and committing to provide you with the second £17,000 of Services.
Wayra charges £34,000 for “Services”, what do these actually include?
There is a description of the Services in Schedule 3 but essentially these include a space to work in a dynamic environment, mentoring and access to a broad network of potential investors and entrepreneurs – enabled both by Wayra and Novartis.
The Services may differ slightly from cohort to cohort and each participant won’t necessarily use the Services in exactly the same way but Wayra makes every effort to ensure that all participants benefit equally. Rest assured, each participant costs far more than the Services amount in the contract and the £34,000 is a significantly subsidised figure.
What causes the loan notes to convert into shares?
Full details of this are set out in Schedule 2 of the Wayra Agreement. However the most common way for conversion to happen is for your company to be successful in achieving a fund raising round which meets certain criteria (designed to demonstrate a positive trajectory for your company). If you do a round which doesn’t quite meet this target then we may choose to convert but do not have to. If there is no conversion due to fund raising within 2 years then the loan notes automatically convert on ‘maturity’. Wayra can also choose to convert the loan notes if you sell your company to someone else.
Why is there a conversion minimum and a conversion maximum?
The idea of a conversion minimum is a relatively standard feature of a convertible loan note. It gives Wayra some certainty around the minimum level of its shareholding upon conversion. Wayra has undertaken a benchmarking exercise to ensure that this conversion floor is competitive. If you have not raised before it will be set at 7%, however if you have raised funding before we will usually go by your most recent post money valuation where the investment has been substantial (unless a substantial period of time has occurred).
There is also a conversion ceiling (add 3% to the conversion floor but never more that 10%) so you’re given some comfort around the maximum shareholding that Wayra can receive.
Why is there a discount in the conversion formula?
This formula essentially means that we will get 20% more shares on conversion than we would otherwise have been entitled to (subject of course to the floor and the ceiling). We believe this is fair market standard for a loan note and in consideration of the risk Wayra is taking on investing in your company benchmarked 20% as being a common position in the market.
Why does the Wayra Agreement contain an IP assignment?
This is to ensure that any relevant IP developed to date that is held by the founders personally is transferred to the company.
Just to be clear this does not mean that you are transferring the IP to Wayra. It will be one of your company’s assets and your company will be owned by its shareholders. This clause only has effect to the extent that such assignment has not already occurred. If you have transferred the IP already, then this clause re-confirms it.
What are the ‘Protective Provisions’ at Clause 10?
This section sets out certain important business decisions that we would need to be involved in as they could have a material effect on your company and our investment. When the loan notes convert we expect you to ensure that your new investors agree to Wayra having these rights and also some basic commonly found rights around minority shareholder protection set out in clause 10.2. However, most of these will fall away where we convert to shares and you have proper minority shareholding rights provided with sufficient safe majority rule voting structure.
Can you explain the thinking behind the “other rights” in clause 11?
Here Wayra and Novartis are asking you to discuss any potential product commercialisation with us before anyone else and then allow us commercial access to your products on the same terms as other third parties. We have made it clear that this will be on a non-exclusive basis and that you can continue any pre-existing commercial discussions with other parties provided that you have disclosed these to us. The purpose of this clause is not to restrict your business – rather we believe that the Novartis and Telefonica groups may be able to offer you a fantastic platform to successfully commercialise your products. Therefore they should not be seen as a barrier to working with other people (something which Wayra supports and actively encourages).
I’ve noticed that I need to get Wayra’s consent to do certain things, what does this involve?
Wayra adopts as “light touch” a position as possible and aims to restrict their consent rights to the big issues. Most of Wayra’s consents can’t be “unreasonably withheld or delayed” and are usually granted very quickly. It’s not in Wayra’s interests to stop or delay your company making important decisions. We want your business to be a success as much as you do!
What are the Warranties all about?
In schedule 4 you will find a list of assurances that specific facts or conditions about yourselves and the business are true. If any of the statements are incorrect please bring this to our attention. This helps to encourage mutual trust and ensures that all relevant information is brought to our attention from the outset. The statements are only intended to be accurate on the date you sign the Wayra Agreement.
Can I start in the Wayra office if my agreement isn’t signed yet?
No. Agreements must be signed by any deadline we communicate to you and certainly before the day that you arrive in the Wayra office.
How long am I allowed to stay in the Wayra Office?
According to the contract (and assuming all goes well and you hit your milestones), you will stay in for 8 months. Depending on circumstances, Wayra may choose to extend this period for up to 12 months in total if you so wish (although there’s no guarantee of this) for which the value of the Services is increased by £4,000 per month.
We also may invite you to stick around after this twelve months and should this occur, we can discuss any possible deal then.
Do I need to be registered for VAT?
As the Services provided by Wayra are VATable supplies, you will be required to pay VAT on them. Therefore it is important that you register yourself for VAT as soon as possible so that you can claim back the VAT amount we charge you.
Please note that these FAQs are not intended to provide you with legal advice (which we encourage you to obtain independently) and should not be relied upon in any way or as any sort of substitute for you reading the Wayra Agreement carefully in full. They are simply provided by us in good faith with the intention to make our relationship with you more transparent.
We do have a number of third party independent legal advisers who have left there details should anyone wish to get advice. If you need a list, please let us know and we can send you this list for you to choose to seek assistance here if you wish.