We have a key role to play during the COVID-19 crisis.
Following a number of discussions and meetings with entrepreneurs, startups, investors, and financial institutions we decided that strategic reallocation of funding from the ISSF’s existing indirect investment (funds) to its direct investment (companies) is necessary.
- Indirect to direct (up to $7.5M in two or more steps starting with $3M now and up to a $7.5M ceiling). This funding will provide liquidity to startups which have been affected by the COVID-19 crisis and are in need of working capital ($2M), and/or companies which seek to increase capital to modify their business models or their value propositions to address COVID-19 impacts and/or opportunities ($1M).
- Convertible notes will be the primary instrument used by the ISSF, to make new direct investments in startups experiencing difficulties raising funding due to COVID-19. The advantages of issuing convertible notes in the current context are twofold: First, for startups, it avoids dilution (i.e. the decrease in ownership for existing shareholders that occurs when a company issues new shares) at a time when their potential and valuation have yet to be determined, due to their early-stage of development and the uncertainty of the macro/ COVID-19 environment. Second, convertible notes require a more basic and faster due diligence process than traditional equity.
- ISSF will be ready to receive applications online through our website starting May 10th
- Compliance: To receive ISSF funding, companies will have to submit annual audited financial statements for their past one to three year(s) of operations. The funding cannot be used to restructure existing debt in any form, settle facilities, etc., to pay dividends, or to settle any outstanding dues to founders/shareholders.
- The following additional changes will only apply specifically for an amount of $2M direct investments:
- Ticket size will be in the range of USD 50,000 to 150,000, which corresponds to the working capital needed by Jordanian seed-stage startups for a three to six-month period. It is expected that most of this funding will pay staff salaries, which are the primary asset of such companies.
- Companies will need to be legally registered, have no more than 5 years of existence, be Jordanian centric, already have a minimum viable product (MVP), generate revenues (pre-COVID-19), and have a path to sustainability for the future (i.e. – founders capable to adapt and find opportunities in and after COVID-19). Companies which have already benefited from the JLGC’s guarantee facility since the COVID-19 outbreak or have participation or ownership by any other public entity will be ineligible.
- Relaxing institutional/ Lead-investor requirements. Contrary to the traditional direct investments made by the ISSF thus far, the startups benefiting from the convertible notes will not need to have Lead investor(s). Indeed, due to the current context discussed above. However, to be eligible, startups will need to have already received funding from an institutional investor, which was previously not a requirement for ISSF’s traditional direct investments.
- Due diligence will be carried out by the ISSF internally, led by its Investment Team. They will check the tax and social security certificates (pending or disputes), the business value proposition, the roll-out plan for the next 12 months, the financials for the last 3 years, the schedule of major customers and suppliers, and the key employment terms for staff and contracts.
- Streamlined process. While ISSF’s direct investment process usually lasts a minimum of 10 weeks, the investment process for convertible notes is expected to be reduced to 5 weeks, from application submission to the approval and sign off.
APPLICATIONS BEGIN MAY 10TH, 2020
For Inquiries, you can call us on: +962 77 8000 969