Firm to buy shares in fintech through SAFE note – Business
KARACHI: Cordoba Logistics and Ventures Ltd (CLVL) on Monday said it will invest Rs 31 million in an upcoming fintech Neem Exponential by purchasing a “SAFE note” for future equity capital.
SAFE notes represent a “simple agreement for future equity” – a capital-raising method that is becoming increasingly popular, especially in the start-up sphere dominated by foreign investors.
Talking to SunriseCLVL CEO Misbah Khalil Khan said the purchase of a SAFE note will allow his company to take a stake in a fast-growing early-stage startup when its valuation is on the downside.
SAFE notes are popular among startups looking for ways to raise seed capital. They are eventually converted into shares at a discounted price at a future date. Many SAFE notes have value caps, which means that the investor already knows the highest possible conversion rate.
“For each new financing round, the share of existing investors in a start-up goes down. But we will get a better share price than some future investors because the SAFE note has a value ceiling, says Khan.
The investment entity is listed on the Pakistan Stock Exchange. Formerly known as Mian Textile Industries Ltd, the company changed its name and business model last year. It mainly operates as an aggregator of commercial vehicles to major players, such as Daewoo Express, in the transport and logistics sectors.
Separately, CLVL has equity investments in a portfolio of ventures that include online platform for shippers and carriers Trukkr, learning portal Investors Lounge, children’s clothing company Cotton Candy and most recently language teaching institute Berlitz Pakistan.
As for Neem Exponential, Khan claimed that it is one of the country’s leading embedded finance companies – technology firms that integrate financial services traditionally offered by banks into the product portfolio of non-financial entities.
“The company provides back-end services and technology support to startups offering digital wallets and charges a service fee. It is run by an experienced team of entrepreneurs with a proven track record,” he said.
Separately, CLVL informed the investors in a regulatory filing on Monday about the subscription status of the rights issue consisting of 50 million shares worth Rs10 each. Companies offer rights issues to raise new capital by inviting their existing shareholders to buy additional new shares at less than the market price at a future date.
Published in Dawn, August 23, 2022
