On October 31, 2016, CEELM reported that the Ukranian start-up eTachki had obtained USD 1 million investment from local capital fund TA Ventures. We asked the Head of Legal at eTachki, Marina Makarova, to tell us more about the deal and the structure of her in-house legal team.
CEELM: How did you persuade TA Ventures to invest in eTachki? What do you think is your chance to win the following investment rounds from TA Ventures again?
M.M: eTachki is a national-scale e-commerce project for the sale and purchase of used cars, and in fact is the only online service in Ukraine that allows sellers of used cars to get a quick and quality service.
TA Ventures is a well-known supporter of innovation and IT business on the Ukrainian market. TA Ventures is interested in partnership with us due to a number of factors, such as eTachki's unique business model for Ukraine, its IT platform, which provides eTachki with an advantage over other market players, and also the huge interest of consumers in the used cars market.
As for the following rounds of investment by TA Ventures, in my opinion, eTachki’s potential makes this project interesting for investors and allows looking forward to further investment for the development and scaling of the project, including possible future rounds of investment by TA Ventures.
CEELM: Could you elaborate on the process of structuring the TA investment and the final result of it?
M.M: After the initial phase, which involved a preliminary analysis of the eTachki business concept, the investment process identifies the main conditions of the subsequent shareholders agreement — the result of which was a Term Sheet between TA Ventures and Head Company of eTachki.
Later, at the due diligence stage, the parties agreed upon and analyzed all the legal and financial aspects of investing, verified the financial model of the project, and made sure all agreements, obligations, list of powers, and the expectations of the parties within the framework of the investment process accompanying this investment round were included in the shareholders agreement and in the contract of sale and purchase of shares.
eTachki's investment conditions envisaged financial investment of USD 1 million from TA Ventures in exchange for issuing of preferred shares from the Head Company of eTachki. The process of obtaining financial investment was divided into 2 stages: the first stage provided for financial investments after the signing of the shareholders agreement; the second stage was connected directly to the achievement of key goals in the development of eTachki agreed by the Parties.
As a result of the investment round, the venture fund TA Ventures invested USD 1 million in eTachki.
CEELM: How big is your legal team at eTachki? What was the rationale behind setting up an in-house legal team in your company rather than outsourcing legal services as is usual in start-ups?
M.M: Today, eTachki's legal team includes two lawyers.
At the initial stage of development eTachki actually used the services of outsourced lawyers for resolving of all legal issues. However, in a period of eTachki’s dynamic development, the availability of in-house lawyers has become vital in light of the large (and increasing) amount of functions and tasks that need immediate reaction and permanent communication with internal structural elements, as well as with external contacts.
CEELM: What tasks are traditionally handled by your in-house team and which tasks are traditionally assigned to external counsel?
M.M: At the moment our in-house team provides legal support for eTachki activities in general and is responsible for the legal tasks in the fields of contract, labor, and tax law, including intellectual property rights and corporate rights.
The range of the legal tasks for which eTachki engaged external consultants is basically connected with the scope of international law, the management of corporate rights outside Ukraine, and counseling and support for venture capital investments.
In such cases, we consider that it is necessary to invite foreign law firms or foreign lawyers with international experience and reputation in such issues for the provision of legal consulting.
CEELM: Why did you retain Redcliffe Partners to help you on the structuring?
M.M: eTachki invited Redcliffe Partners as a law firm that has a high level of professional legal service and international experience, including matters of venture investment in connection with investments by TA Ventures.
Redcliffe Partner's team accompanied the investment deal with TA Ventures by participating in the coordination of investment structure and by preparing the shareholders agreement and the contract of sale and purchase of shares.
In the future, we also see the possibility of a successful partnership with Redcliffe Partners because eTachki plans to attract further investment and carry out new investment rounds, in which Redcliffe Partners' team's international experience in legal practice will be necessary.