Georgiev & Kolev advised Vitosha in the investment from TokWise.
TokWise, a software that helps renewable energy producers make accurate decisions and become active market participants, is designed to help them. This advanced platform bridges between complex electricity markets and physical assets, allowing for centralised renewable portfolio management. TokWise is proud of their accuracy and reliability. In 2018, TokWise was founded with the goal of accelerating the digital transformation in the energy sector with its AI-powered SaaS.
TokWise enables power producers like Encavis, to connect their assets directly with the power exchanges. This allows them to control the purchase and sales of electricity. This reduces risk on the volatile energy market of today.
Encavis’ investment in TokWise opens up new opportunities for the company, including access to new markets.
Vitosha Venture Partners, advised by Georgiev & Kolev, made a EUR 3 million equity in TokWise.
Q&A With Vanina Popova Head of Venture Capital Team of Georgiev & Kolev
-
Please provide more details about your involvement and professional responsibilities in this project.
Let me clarify before I answer your questions that Georgiev & Kolev’s team has a strong background in Venture Capital (VC), as well as other legal areas. We have gained a lot of experience over the years by providing legal services to Vitosha Venture Partners (AIF) and Morningside Hill, two alternative venture capital funds. Currently, Georgiev & Kolev’s VC team is responsible for providing full legal services to both Alternative Investment Fund Managers. This includes all matters relating to the investment activities of Alternative Investment Funds managed by these AIFMs. Total resources of both AIFS amount to approximately EUR 70 million. The Fund of Funds in Bulgaria provided 70 million EUR in public funding, and the additional funds were provided by fund managers and private investors. In 2021, our team began working with these companies when they hired us to provide legal advice and assist them in the establishment of their VC Funds. This required a successful award of a procurement by the Fund of Funds and approval of their application by the Fund of Funds. We then advised the companies in matters relating to the incorporation of Funds and Fund Managers as well as their registration with the Financial Supervision Commission. We developed a professional relationship with our clients during this long process, which allowed us to continue to advise them on legal issues ranging from their internal structures to their investment activities.
Vitosha Venture Partners has participated in two investment rounds, the first of which was led by Vitosha. Vitosha Venture Partners acquired shares in the capital of the company. I led the VC team at Georgiev & Kolev in providing legal support to Vitosha Venture Parnters for both investments. The preparation of 100 documents is required for each equity or quasi-equity transaction. These documents must be checked, signed and negotiated. The Venture Capital team that I lead was responsible for preparing all documents necessary for the Fund of Funds to approve the investment. This included a detailed due diligence report and checking the enterprise’s compliance with the European regulations.
In the Investment and Shareholders’ Agreement negotiations, I was joined by my colleagues Maria-Magdalena Stoilkova and Preslava Petrova to represent the Fund. More than 15 parties were involved. In 2021, our Venture Capital team first met TokWise Ltd. with its Founders when we drafted an Investment Agreement for VVP’s first investment. Over the years, our professional relationship has grown and we’re happy to see the growth of TokWise Ltd. as more investors take an interest in their product.
-
What were the skills and abilities of your team that were best suited for this project, and how did they all contribute to it?
G&K’s VC team is made up of six professionals who have extensive experience in venture capital as well as in commercial law, M&A and IP rights. We also specialize in this area because VC Funds invest in early-stage companies (startups), which are classified as SMEs under the Small and Medium Enterprises Act. We advise our clients about the legal issues associated with the management and portfolio companies of the Funds, including follow-up investment (such as TokWise Ltd.), capital restructuring, reorganisations, share swaps, etc. All of this, I think, gives us the ability to see things from a broader perspective and to be more helpful to our customers in a wider range of areas. Our law firm places a high value on teamwork because we have to provide complex and wide-ranging legal services. We can provide the best solutions to our clients by working closely together, utilizing each person’s knowledge and expertise.
Georgi Valentinov Georgiev, our Managing Partner and we at Georgiev & Kolev say that the law is a kind of societal physics charged with settling ever more complex relationships in today’s societies – not a regulator who interferes with business operations.
Following this motto, in the past two years our VC team has closed more than 125 equity investments and quasi-equity deals totaling EUR 50 million. These investments allowed us to get to know a wide range of companies, with different legal and corporate forms and structures, including foreign legal entities that have no equivalent in Bulgaria. Others introduced us to new projects, businesses, products and market expansions. These factors, when combined, helped us to develop our valuable know-how as well as our business-oriented approachthat sets us apart from the competition. Our team members devote their time and full attention to our clients’ needs and goals.
TokWise Ltd.’s investment round gave me, Maria-Magdalena Stoilkova, and Preslava Petrova the chance to use these skills because the company has grown since VVP made its first investment, and therefore, entered into more legal and business relationships. TokWise was a perfect example, as it had developed from a seed stage company into a startup with a complex structure of capital and many business partners.
-
Were there any obstacles you encountered during this project? How did you overcome these challenges to achieve a successful result?
As more investors, business angels and funds show interest in companies in which a Fund already has a stake, it is our responsibility as lawyers to ensure that the rights of each client are protected. We believe that the modern legal profession should not limit itself to the interpretation of law. Instead, we must create the best possible legal structure to solve the client’s problems. This requires creativity and consideration of both the client’s needs and legal options.
We were flexible, and we took into account the business aspect of things. But, our clients’ best interests never came at the expense of flexibility. We believe this is why VVP trusted us. Our team is known for its ability to be creative and to approach each client individually. Most VC Funds operate in Bulgaria with EU funds. Therefore, they must comply with many regulations, including the Public Procurement Act and State Aid Rules. Due to this, they are bound by many restrictions and must comply with more requirements than private funds. It is a good example of a need that our clients have, which we as lawyers always consider when protecting their interests. This is especially true when negotiating with private investors. They may not want to comply with all the requirements. We explain to them what the mandatory standards are for VC Funds and what responsibilities the Fund Manager must include in any investment or shareholder’s agreement.
We were responsible, during the most recent investment round of TokWise Ltd. to ensure that all parties understood the EU Regulations and the Operational Agreement between Vitosha venture Partners OOD and Fund of Funds in accordance with the public procurement. We were fortunate to have other professionals with deep knowledge of the VC sector in Bulgaria and the European Union working with us on the TokWise Ltd. transaction.
-
Can you explain the process of due diligence conducted by your firm in order to assess any legal risks associated with TokWise Ltd. investment?
The legal Due Diligence Report is an important part of our services because each Fund must make an informed investment decision. The report focuses (at a minimum) on reviewing the general corporate history of the company and its current status, as well as important contracts and agreements made with creditors and banks, such agreements for the purchase or disposal of material assets, contracts on commercial agreements, share purchases, convertible loans and other contracts to acquire share capital. It also covers intellectual property issues, employment, intellectual properties, pledges, mortgages, and other encumbrances on the assets of the firm, and litigation. If the Fund makes a follow-up investment, like the equity in TokWise Ltd. one might assume that it has already been informed of the legal issues surrounding the company. It is important to conduct a thorough investigation when preparing the Due Diligence report. Many things could have changed in the months or years following the initial investment. It is important to do this to make sure that the Investor knows the state of the company and its legal affairs prior to investing more money in it. Our reports not only point out legal risks but also make recommendations as to how certain issues can be avoided or resolved so that documents of the company are sound legally before the Investor gets involved. This is not only beneficial to the VC Fund but also the Final Recipient.
-
How did your company ensure compliance with regulatory landscapes given the complexity of renewable energy markets, technology and business ideas? As more companies seeking venture capital funding with business ideas that revolve around renewable energy at an early stage are developing their businesses?
It is not enough to know corporate law in order to succeed as a lawyer within the venture capital industry. To represent your client’s interests, whether they are an institutional investor, a business angel, or even a founding team, you need to have a thorough understanding of the law and business. You also need to be open to new trends, legislative updates, and innovation.
Even before venture capital became popular in Bulgaria, Georgiev & Kolev Law Offices possessed a wealth of experience. It is not enough to understand the key clauses of the shareholder’s agreements. To be able to successfully navigate regulatory frameworks, our team must familiarize itself with the business of the company and its activities. Each document that we draft, from the checks for the compliance of the business with European requirements relating to public financing to the legal due diligence report to the investment contract, is customized to the specifics of the business. The documents we draft must accurately reflect the actual situation, and only then can our clients’ interests be protected.
Tokwise is no different. In recent decades, renewable energy has gained more and more attention. Renewable energy is now a major player in the energy market. The EU has set a target of at least 42,5% renewable energy for energy consumption by 2030. Renewable energy is the cornerstone of the European Green Deal. This entire legal framework has been taken into consideration when we closed the investment in TokWise Ltd. We believe this will be one of the most successful deals for Vitosha’s Venture Partners Fund I partnership.