KARACHI: Cordoba Logistics and Ventures Ltd (CLVL) said on Monday it’s going to invest Rs31 million in an up-and-coming fintech Neem Exponential by purchasing a “SAFE note” for future equity.

SAFE notes represent a “simple agreement for future equity” — a capital-raising method that’s getting increasingly popular especially in the startup sphere dominated by foreign investors.

Speaking to Dawn, CLVL CEO Misbah Khalil Khan said the purchase of a SAFE note will allow his company to take an equity stake in a fast-growing startup at an early stage when its valuation is on the lower side.

SAFE notes are popular among startups looking for ways to raise seed capital. They ultimately get converted into stocks at a discounted price on a future date. Many SAFE notes carry valuation caps, meaning the investor already knows the highest possible conversion rate.

“With every new round of funding, the equity share of existing investors in a startup goes down. But we’ll get a better share price than any future investors because the SAFE note carries a valuation cap,” said Mr Khan.

The investing entity is listed on the Pakistan Stock Exchange. Formerly known as Mian Textile Industries Ltd, the company changed its name and business model last year. It mainly operates as an aggregator of commercial vehicles to major players, like Daewoo Express, in the transport and logistics sectors.

Separately, CLVL holds equity investments in a portfolio of ventures that includes online platform for shippers and carriers Trukkr, learning portal Investors Lounge, children’s clothing company Cotton Candy and, most recently, language-teaching institute Berlitz Pakistan.

As for Neem Exponential, Mr Khan claimed it’s one of the country’s leading embedded finance companies — technology firms that integrate financial services traditionally offered by banks into the product portfolio of non-financial entities.

“The company provides back-end services and technology support to startups offering digital wallets and collects a service fee. It’s run by an experienced team of entrepreneurs with a proven track record,” he said.

Separately, CLVL informed investors in a regulatory filing on Monday about the subscription status of its rights issue consisting of 50 million shares worth Rs10 each. Companies offer rights issue to raise fresh capital by inviting their existing shareholders to purchase additional new shares at less than the market price on a future date.

Published in Dawn, August 23rd, 2022