Keep. It. Simple. (Stupid).
Entrepreneurs, you are creative and innovative, but when raising financing it is ok to follow the norm. There is no need to try and reinvent the wheel. Standard also works. I would even argue that from an investment perspective it is superior.
When there are too many moving parts, you run the risk of getting side tracked.
I understand that securing financing is not always enough, you want to procure added value from your investors, for example manufacturing, distribution and marketing networks.
It is easy to get tempted by alternative structures, or to try and roll too many transactions in to one. You invest in us, we will simultaneously incorporate a joint venture to do A, B and C together and we will grant you a separate license to our technology for X,Y and Z.
It sounds attractive as you have opened up various distribution channels for your product. However, the details can act like quick sand, sucking you away from closing any deal at all, while consuming your time and resources.
For most start-ups it is difficult enough to procure investment. You have to convince potential investors that there is a real market need, your product answers that need in a way that outshines your competitors, and that your company valuation is justified. Current reports also suggest that startup investment is cooling. The last thing you require is additional obstacles.
If there is synergy before the equity investment, there will be synergy after. I understand that the demands may come from the investors, who are making a strategic investment in a technology they may ultimately want to commercially exploit, but try any buy yourself time. If you cannot buy time, you can still try and keep it as simple as possible.
Remember this is the start of what will hopefully be a fruitful relationship for all involved, you do not want it to turn sour from extensive negotiations.
Standard also usually means tried and tested. I have been part of many transactions where advisors have offered all types of creative models, usually for tax reasons. One, it later transpired, had serious and unintended consequences and had to be revised at the last minute. Almost all have delayed the actual investment. At the end of the day, no matter how complex your corporate structure, if “management and control” remains in Israel, when you make your exit the Israeli tax authorities are going to come knocking.
Thinking long term, consider that if you give too much to the current investors (rights of first refusal/offer on distribution, an exclusive license etc.) you run the risk of deterring future third party investment – particularly from strategic investors (and will set a precedent). A plain vanilla subscription agreement is your friend.
Focus your innovation and creativity on your product. Keep the investment terms simple.