A growth share subscription agreement, also known as a GSSA, is an investment structure that allows investors to purchase shares in a company at a discounted price in exchange for sharing in the company`s future growth. This type of agreement is often used by startups and early-stage companies looking to raise capital without diluting equity.
Under a GSSA, investors agree to purchase a certain number of shares in a company at a discounted price, typically based on the company`s current valuation. In exchange for this discounted price, investors agree to share in the company`s future growth, either through a percentage of future revenue or a multiple of their initial investment.
One of the benefits of a GSSA for both the company and the investor is that it allows the company to raise capital without giving away equity. This can be especially attractive for startups and early-stage companies that may not want to dilute their ownership stake. Additionally, because the investor is sharing in the company`s future growth, they may be more motivated to help the company succeed and provide additional support beyond just their initial investment.
However, there are also potential drawbacks to a GSSA. For example, because the investor is sharing in the company`s growth, they may be entitled to a greater return than they would receive under a traditional investment structure, which could limit the company`s flexibility in the future. Additionally, because a GSSA is a relatively complex investment structure, it may be more difficult to attract investors who are not familiar with the concept.
Despite these potential challenges, a GSSA can be a useful tool for startups and early-stage companies looking to raise capital without diluting equity. By offering investors the opportunity to share in the company`s future growth, a GSSA can be an effective way to attract capital and build long-term partnerships with investors. If you`re considering a GSSA for your company, it`s important to work with a qualified attorney and financial advisor to ensure that the agreement is structured in a way that is beneficial for both you and your investors.