MGMT 243: Tony Stark and Pepper Potts, co-founders of Stark Pte. Ltd. incorporated the Company on January 1, 2023: Public Administration Assignment, LUMS, Singapore

Tony Stark and Pepper Potts, co-founders of Stark Pte. Ltd. incorporated the Company on January 1, 2023, with Tony Stark having 7,000,000 ordinary shares, Pepper Potts having 2,000,000 ordinary shares, and 1,000,000 ordinary shares reserved for issuance under an employee stock option plan (“ESOP”).

The Company successfully raised US$5,000,000 via convertible notes in February for research and development, closing their initial closing with Mandarin Capital II Pte. Ltd. (US$3,000,000) and Goblin Ventures L.P. (US$1,500,000) on February 2, 2023, and Crimson Capital, L.P. (US$500,000) on February 22, 2023. Mandarin Capital II Pte. Ltd., Goblin Ventures L.P. and Crimson Capital, L.P. did not negotiate for any pro-rata rights. The terms of the convertible notes issued to all 3 convertible note investors are identical, and the key terms of these convertible notes are set out in Annexure 1.

In June, Tony was persuaded by one of his close friends, James Rhodes, who is a partner at Winter Venture Partners to take a US$1,000,000 investment from Winter Venture Partners before the Company raises its Series A round as James strongly believes in Tony and wants to be one of his early backers. James and Tony agreed that Winter Venture Partners would invest the US$1,000,000 on YC’s standard valuation cap, no discount (Singapore) SAFE, along with YC’s standard pro-rata side letter. The signed SAFE and pro rata side letter between Stark Pte. Ltd. and Winter Venture Partners are attached as Annexure 2 and Annexure 3 respectively.

It is now August 2023, and the Company has successfully launched its first military surveillance drone prototype and secured orders for it from the Singapore Armed Forces and the New Zealand Defence Force. This led to many investors submitting term sheets wanting to lead the Company’s Series A round. After much consideration, Tony finally decided to let Crimson Capital, L.P. lead a US$20,000,000 Series A round at a pre-money valuation of US$80,000,000 as they have been an invaluable partner to him ever since their investment in February.

Crimson Capital, L.P. wants to invest US$15,000,000 out of the US$20,000,000, and James at Winter Venture Partners has indicated to Tony that he wishes to exercise his pro rata right per the terms of the pro rata side letter entered into between Winter Venture Partners and the Company. Tony wishes to give the remaining available allocation, if any, to Dynamo Ventures L.P., a new investor.

Crimson Capital, L.P. has also asked that the Company do a pre-money increase to the ESOP pool such that the unallocated pool would equal 10% of the post-Series A share capital. At the moment, out of the 1,000,000 ordinary shares initially reserved for issuance under the ESOP, the Company has only granted options for 100,000 ordinary shares, leaving 900,000 unallocated ordinary shares.