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Investor Education & Disclosure

Last Revised: November 6, 2020

Overview

Thank you for accessing www.bioverge.com. Through www.bioverge.com, Bioverge, Inc. and its subsidiaries, including Bioverge Funds Management LLC and Bioverge Funds, LLC, may make securities offerings based on certain exemptions from registration under the Securities Act of 1933, as amended (the “Securities Act”). Such offerings will be in the form of interest in special purpose vehicles created to invest in private companies. Should you participate or contemplate participating in an offering, you must read this Investor Education & Disclosure Agreement.

By accessing this site and any pages thereof, you agree to be bound by the Terms of Service, Privacy Policy, and this Investor Agreement.

Bioverge is not a registered broker-dealer and does not make investment recommendations. No communication, through this website or in any other medium, should be construed as a recommendation for any security offered on or off this investment platform.

For Investors

Bioverge uses a syndication model to enable access and democratize the investing landscape for investors interested in investing in early-stage healthcare companies. We create special purpose vehicles, or Bioverge Funds (or “Fund”), to provide investors access to our highly vetted opportunities. The purpose of the Bioverge Fund is to aggregate accredited investors into a single group, which enables us to keep the investment minimums low. This structure is also advantageous for the companies, since only the Bioverge Fund will appear on the company’s cap table.

Who can invest through a bioverge fund?

Our Funds may make offerings pursuant to Section 4(a)(2) of the Securities Act of 1933 (the “Securities Act”) or a rule promulgated thereunder, such as Rule 506(b) or Rule 506(c). To participate in any private offering, you will be required to comply with other requirements as determined by us.

Under Regulation D offerings, only accredited investors are permitted to invest in a Bioverge Fund:

Rule 506(b) Offerings

Rule 506(b) offerings will not be accessible by anyone except those that meet the investor qualification standards as set by Bioverge Funds Management, LLC. Any investor that (i) is not accredited or (ii) does not have a substantive pre-existing relationship of the type that would lead Bioverge Funds Management, LLC to reasonably believe that such investor is accredited will be permitted to access or view any Rule 506(b) offering. You certify that if you meet (ii) above, you are an “accredited investor,” as that term is defined in Rule 501 of Regulation D promulgated under the Securities Act, that you are financially able to bear the risk of loss of any investment you make, and that you have the financial and business experience, either alone or with advisers, to make an investment decision in a private offering, in which there is no public market.

Rule 506(c) Offerings

Rule 506(c) offerings will not be accessible by anyone except those that meet the investor qualification standards as set by Bioverge Funds Management, LLC. Any investor that is not an “accredited investor,” as defined in Rule 501 of Regulation D promulgated under the Securities Act will be permitted to access or view any Rule 506(c) offering. If you participate in a Rule 506(c) offering, you certify that you are an “accredited investor,” as that term is defined in Rule 501 of Regulation D promulgated under the Securities Act, that you are financially able to bear the risk of loss of any investment you make, and that you have the financial and business experience, either alone or with advisers, to make an investment decision in a private offering, in which there is no public market.

An “accredited investor” is defined in SEC Rule 506(a) of the Securities Act of 1933. In order to meet the definition of accredited, you must meet one of the following requirements:

  • Have individual net worth, or joint net worth with your spouse exceeding $1 million
  • Have income exceeding $200,000 in each of the past 2 years and expect the same this year
  • Have income (with your spouse) exceeding $300,000 in each of the past 2 years and expect the same this year
  • Invest on behalf of a VC firm or other registered investment company
  • Invest on behalf of a business with $5 million in assets or in which all the equity owners are accredited

You can refer to the SEC website for additional information here..

Bioverge takes reasonable steps to verify the accredited investor status of each prospective investor. This may include an investor's self-certification, checking publicly available information and gathering specific documentation from such investor as applicable.

WHAT FEES DOES BIOVERGE CHARGE TO INVESTORS?

Our compensation is similar to traditional venture capital funds and comes from the combination of management fees and carried interest, which is a share of the profits upon a successful investment exit. There is also a standard administrative fee charged to investors to cover the costs of operating the Fund over the entire life of the entity, including regulatory filings, accounting, and K-1 distribution.

Investors should refer to the deal documents for the specific details regarding our fee structure.

HOW DO I SELL MY INVESTMENT?

Investments in private companies are illiquid and cannot easily be sold. Investors may earn a return by selling the investment when the startup achieves a liquidity event, such as the sale of the company or an IPO. When this occurs, investors receive their pro-rata share of the returns generated from the investment.

While you are restricted from doing so for the first 12 months post closing, per the SEC’s Rule 144, you may exit your investment by selling a security privately to a limited set of prospective buyers, so long as you have held your security for at least a year and are not an “affiliate” of the company (i.e., you are neither an officer of the company nor a shareholder with a greater than 10% stake in the company). Even still, it’s best to assume there won’t be anyone willing to buy your stake.

HOW DO I EARN A RETURN?

Investing in a startup is inherently risky. When investing in something as risky as a startup, there may be no return at all. It is important that you acknowledge the indefinite holding period and real risk of total loss of your investment when investing capital. Only invest what you can afford to lose.

The value of a startup, and therefore the value of your investment, may be susceptible to factors underlying the technology, industry, and/or regulatory pathway, and often bears a greater risk than an investment in a vehicle or fund that invests in a broader range of securities.

The startup market is highly fragmented, competitive and the percentage of companies that succeed in creating a sustainable business is small. Moreover, the percentage of startups that successfully earn a return for investors is also small and investors should be prepared to lose all, or substantially all, of their investment.

In addition to the typical challenges startups encounter, such as product development, manufacturing, sales and marketing, intellectual property, financing, and general management, healthcare startups face additional and unique risks including, but not limited to: scientific, technical, government regulation (i.e. the Food and Drug Administration), and reimbursement.

That being said, should a company’s value rise over time, your investment is also likely to accrue value on paper. If not equity, most startups will use a convertible note or SAFE agreement to raise funds. The note or SAFE can be converted to company equity if the company raises a "priced equity round" at a later date.

Investments in startups are illiquid. It is important to realize investments in convertible notes, SAFEs, and preferred equity shares are not easily traded or sold. There are no public markets for the securities and investments cannot be easily sold or transferred, if at all. An investment in a startup or Fund will be illiquid, not freely transferrable or assignable, and involves an exceptionally high degree of risk. Many startups have substantial capital needs and require additional financing that may consist of additional funds, or other investment means. Such financing(s) may contain terms that may not be favorable, and in some cases, the startup may not be able to obtain any financing at all. Generally, you will not receive a liquid return unless the company experiences a liquidity event, such as (a) going public or (b) getting acquired by another company.

If you invest through a Bioverge Fund, you will hold a share of the Fund as opposed to holding the company's securities directly and do not own shares of the company in which the Fund invests. As such, investors cannot make decisions with respect to the management, disposition or other realization of any investment made by the Fund, or other decisions regarding such Fund’s business and affairs. Investors have no rights to inspect the books or conduct an audit of business financials.

THE INVESTMENT PROCESS

For each deal, investment minimums are outlined in the deal profile and in the Subscription Document. Syndicates are limited to only accredited investors up to a maximum 99 investors per syndicate.

Once a minimum threshold is met (typically $80,000) the Fund is created. Investors who have indicated interest through the platform will then sign documents to invest in the Fund. Each investor should carefully review the fund documents associated with a particular investment prior to making an investment decision, including:

  • Operating Agreement
  • Private Placement Memorandum
  • Subscription Agreement

Funds are intended to be passive investment vehicles and will in most cases accept the terms offered by lead investors.

Funds are not liquid investments. As with direct investing, investors should expect to have their capital tied up for several years and be prepared to lose 100% of their investment.

We do not charge companies fees, Bioverge is compensated based on management fees and carry.

TYPES OF SECURITIES OFFERED

The most common forms of securities an issuer can offer are equity or debt. The securities we offer include the following:

Common Stock: Conveys a portion of the ownership interest in the company to the holder of the security. Stockholders are usually entitled to receive dividends when and if declared, vote on corporate matters, and receive information about the company, including financial statements. This is the riskiest type of equity security since common stock is last in line to be paid if a company fails. You should read our discussion of the risks of early-stage investing here, and pay special attention to the fact that your investment will only make money if the investment succeeds, and to the risk of possible share value decrease resulting in the loss of some or all of invested capital. The Common Stock of companies appearing on this platform is generally illiquid, and should therefore be thought of as a long-term investment. Common stock issuers may decide to sell additional securities in the future, resulting in a dilution of prior investors’ interests in the issuer and a corresponding decrease in those investors’ limited voting rights with respect to the securities purchased.

Preferred Stock: Stock that has priority over common stock as to dividend payments and/or the distribution of the assets of the company. Preferred stock can have the characteristics of either common stock or debt securities. While preferred stock gets paid ahead of common stock, it will still only be repaid on liquidation if there is money left over after the company’s debts are paid. In certain circumstances (such as an initial public offering or a corporate takeover) the preferred stock might be convertible into common stock (the riskiest class of equity). You should review the terms of the preferred stock to know when that might happen. Preferred stock may decrease in value and investors may lose some or all of their investment.

Debt / Revenue Share: Securities in which the seller is obligated to repay the investor's original investment amount at maturity plus interest. Debt securities are essentially loans to the company and the major risks they bear are that there is no guarantee of interest payments and the possibility of issuer default. Revenue share security risks include no guarantee of investor returns and possible loss of principal invested due to possible insufficient issuer revenues. Securities in which the seller is obligated to repay the investor's original investment amount at maturity plus interest. Debt securities are essentially loans to the company and the major risks they bear are that there is no guarantee of interest payments and the possibility of issuer default. Revenue share security risks include no guarantee of investor returns due to possible insufficient issuer revenues and possible loss of principal invested.

Convertible Note: This form of investment is popular with technology startups because it allows investors to initially lend money to the company and later receive shares if new professional investors decide to invest. The sort of convertible note that is most often offered on Bioverge may limit the circumstances in which any part of the loan is repaid, and the note may only convert when specified events (such as a preferred stock offering of a specific amount) happens in the future. You will not know how much your investment is “worth” until that time, which may never happen. You should treat this sort of convertible note as having the same risks as common stock. There is no guarantee that investors will experience a return on their investment and that investors may lose some of all of their investment.

SAFE Agreement. Inspired by the Y Combinator Agreements, a simple agreement for future equity (“SAFE”) grants an investor the right to purchase equity at a future date. The Crowd SAFE is designed for a startup raising under Regulation Crowdfunding. Unlike a convertible note, a SAFE is not a loan. As such, it does not accrue interest or have a maturity date. This makes things simpler and negates much of the need to amend the agreement in the future. For example, it helps startups not waste time extending maturity dates or revising interest rates, if a Series A financing takes longer than you first expect. It also better aligns with the intention of most equity investors, who never intended to be lenders. If no subsequent equity financing or similar liquidity event occurs, the Crowd SAFE will not convert and therefore will produce no return. There is no guarantee that investors will experience a return on their investment and that investors may lose some of all of their investment.

DUE DILIGENCE MATERIALS

Any and all materials provided on the www.bioverge.com website are "as is," without warranty, implied or otherwise, of accuracy, consistency or thoroughness about a given startup or its investment prospects. It shall be further understood that each investor shall be responsible for conducting their own due diligence, and that any reliance by one investor upon the materials of another shall be at the investor’s own risk.

LEGAL AND REGULATORY RISKS ASSOCIATED WITH FUNDS

Funds are not, nor will be, registered as an “investment company” under the United States Investment Company Act of 1940, as amended (the “Investment Company Act”), pursuant to an exemption set forth in Sections 3(c)(1) and/or 3(c)(7) of the Investment Company Act. There is no SEC assurance that such exemptions will continue to be available to these entities. No Fund plans to register the offering of any Interests under the United States Securities Act of 1933, as amended (the “Securities Act”). As a result, investors in Funds will not be afforded the protections of the Securities Act with respect to investments in the relevant Fund.

WAIVING RIGHT TO SUE

Investors who invest in a Fund, hereby waive the right to sue or bring any action or proceeding against Bioverge, Inc., Bioverge Funds Management, LLC, Bioverge Funds, LLC, or affiliated entities (collectively “Bioverge”), Board of Directors, Members, Staff or Analysts, Investment Committee, or subject matter experts in each case on the basis of any Bioverge activity, including but not limited to (i) the success or failure of any investment, (ii) the sharing of information, whether in connection with due diligence or otherwise, (iii) the service of a Bioverge member as a board director, advisor, executive or employee of a Bioverge portfolio company, (iv) any investment presentation, diligence material, or any educational or informational program of Bioverge.

CONFLICTS OF INTEREST

Investors in a Fund may have conflicting investment, tax, and other interests with respect to investments. As a consequence, decisions made by the manager of a Fund on such matters may be more beneficial for some Investors than for others. Investors should be aware that the manager of a Fund intends to consider the investment and tax objective of each Fund and investors as a whole when making decisions on investment structure or timing of sale, and not the circumstances of any investor individually.

Instances may arise in which the interest of a lead investor (or its members or affiliates) may potentially or actually conflict with the interests of a Fund and/or its investors.

TAX ADVISE

Bioverge does not provide tax advice and you should consult your tax advisor for information about the tax consequences of investing in a Fund.

PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE

The past performance of a startup or its management, a lead investor, or advisors, is not predictive of a startup’s or a Fund’s future results. There can be no assurance that targeted results will be achieved. Loss of principal is possible, and even likely, on any given investment.

FORWARD LOOKING STATEMENTS

The information available on this website may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements often include words such as "anticipates," "estimates," "expects," "projects," "intends," "plans," "believes" and words and terms of similar nature in connection with discussions of future operating or financial performance.

Any forward-looking statement made by a startup speaks only as of the date on which it is made. Startups are under no obligation to, and generally expressly disclaim any obligation to, update or alter their forward-looking statements, whether as a result of new information, subsequent events or otherwise. Not all startups follow GAAP, and therefore any and all presentations shall be presumed to include references to non-GAAP financial measures.

The foregoing risks are not a complete explanation of all the risks involved in investing through a Fund. Other inherent and extrinsic risks do exist. Each investor should seek their own independent legal and tax advice and read the relevant investment documents before making a determination whether to invest in a Fund.

FOR COMPANIES

For companies, the syndicate structure ensures only the Bioverge Fund appears on your capitalization table. This is beneficial to ensure your follow-on financing won't be at risk. Venture capitalists and institutional investors don’t like a “messy” cap table consisting of a large number of small investors. With a Fund, these smaller investors are aggregated and represented by a single entity.

This is also an opportunity to invite individuals in your network to participate that wouldn’t be able to participate otherwise due to a relatively small check size and associated challenges.

Please contact us at info@bioverge.com to learn more.