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🌟 Headlines in Startupland 🌟 

Fintech Startup Bolt Receives $200 Million From A Mystery Investor

What if a startup was offered investment capital of $200 million, but the investor was anonymous and the deal came with strings attached? It may sound like a scenario played out in a college intro philosophy class, but this hypothetical is true for Fintech startup Bolt Financial.

The $200 million investment would be applied to Bolt’s Series F round, which would carry the startup to a $14 billion valuation. A number that large does not come without some sort of baggage. Per Axios, the investment deal stipulates that:

• There is a pay-to-play provision, an unusual criterion for an up-round investment

• Influencer marketing credits by the London Fund that total $250 million

• The reinstatement of Ryan Breslow as CEO with a generous package that includes a $2 million bonus, $1 million in supposed backpay, new stock options, a travel stipend and an indemnification agreement

• A requirement that Bolt invests in Breslow’s other company Love and the London Fund, which Breslow would join the board of

Axios requested a comment from Brad Pamnani, who was cited in the signature line of the letter. The Silverbear Capital executive claims this was “a misunderstanding and that Silverbear isn’t involved,” but Pamnani is affiliated with a Cayman Islands-based private equity firm that is. This firm allegedly is part of an SPV fund managed by a private equity firm in the UAE formed to raise the $200 million investment in Bolt. He declined to reveal the names of those involved, stating they would be revealed to investors when the deal is near closing. 

Should the deal move forward, Bolt states it would use the money to build “a super-app.”

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📚 Dive A Bit Deeper 📚

Investment Scams Are On the Rise: How to Remain Vigilant and Protect Intellectual Property

If there is one thing that will always perk up a startup founder’s ears, it is a potential new investor. For startup founders, sourcing a new influx of capital and connecting with someone who believes in their product enough to fund it can be a rush. Founders begin the due diligence process, which can involve sharing their intellectual property (IP) with this investor. However, it is in these moments of elation that one can overlook the signs that this investor is not checking out. The investor then withdraws their offer and has a startup’s IP to do with what they please. This type of IP theft is becoming increasingly common among U.S. startups, with many of the perpetrators coming from other countries. 

U.S. investment from firms outside the U.S. is not an uncommon practice. It is encouraged because it allows startups to establish a foothold in a new market and expand their operations. However, this practice has become a tactic used for malevolent intentions to the point that the  National Counterintelligence and Security Center (NCSC) issued a warning to U.S. startup founders this summer about it. The scammers are typically from countries adversarial to the U.S., but even this is changing. “It’s no longer just direct from the adversary country or through a person who’s obviously associated with the adversary country,” says Michael Casey, Director of the NCSC, in an interview with Marketplace. “We see it through third countries or masking themselves as even U.S. businesses.” 

IP theft can wreak havoc on a startup’s market share, investment prospects and can possibly lead to bankruptcy.

Signs to look out for

The NCSC outlined several red flags to look out for should startups encounter an investor from a country outside the U.S.:

• Complex ownership with “no substantive purpose”

• Investments are conducted through intermediaries

• Indirect investment through U.S. firms where an investor is an LP

• Requests for proprietary information/sensitive information before making an investment

• Preying on struggling startups

Casey says, “Admittedly, this is a difficult subject,” as many of these signs can be a normal part of the due diligence process for startups and potential investors. The key is to remain vigilant and do the necessary research. Investment is a two-way street; startups should conduct as much due diligence as their investors will be. Casey concludes, “This isn’t a ‘Don’t take risks.’ This is a ‘Please take smart risks’ warning.

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Deep Dives Galore

✨ SPARKLE, SPARKLE — Seven out of ten software companies with the biggest market calculations use a sparkle icon to showcase their AI features. Why has the effervescent symbol become associated with AI features of Big Tech companies? It lies in its simplicity and magical qualities.

🧑‍🧑‍🧒 FAMILY VALUES — Private equity is becoming a family affair, with more and more family offices entering the fold. Venture capital funding has been declining over the last couple of years while generational wealth has grown, leading to some families choosing to put their money in disruptive startups.