Questions

Can a parent company have 2 different online businesses raise funds simultaneously from different investors?

Assume company X has 2 online businesses abc.com and xyz.com. Can both these portals raise funds? How could this affect the parent company's stake? Any examples you can share.

3answers

You can raise money for 2 online businesses with the same parent at the same time. The term sheet and closing documents need to be crystal clear regarding the ownership and rights. If the parent company pays compensation for any of the employees that work on the 2 online businesses, a management agreement may make sense to outline the percentage of time allocation.

I have seen this arrangement in many situations and the "if" - compensation - is one of many "ifs", you should think through when deciding if you should raise money with the existing legal entities or set up new one(s).

You do need to make certain the arrangement is transparent and clear to all or disputes can slow the progress of the business. Please feel free to schedule a call if you would like to discuss the arrangement you have in mind.


Answered 5 years ago

In your case, X will raise funds not abc.com and xyz.com as the portals are under the company X. You may raise funds from two investors, however, you need to:

1. Either, raise in two separate rounds
2. Or, club both the investors in same round

For understanding in detail, fee free to setup a call.


Answered a year ago

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