Whether you’re a start-up, angel investor or venture capital firm, if venture capital funds have been received or given, there’s a lot of money at stake and one of the first things you should do is protect it. There are many ways to do this, but first and foremost, a life insurance policy should be obtained.
If you are a key employee or owner who is a valuable asset to the business, what happens if you die during the payback phase? Enormous problem. You’ve contributed to most of the company’s success, and now the VC investment seems like it’s about to go down the drain. What is the company going to do to pay this money back and grow the company without this owner? Instant Zero.
If there was a life insurance policy in place on this owner’s life specifically to protect this large investment, the business could continue and grow as normal. The life insurance benefit would replace the business value of the owner, so the company could hire another person with similar experience and move forward as planned. Back to Hero!
If an owner or key employee is invaluable to the business and contributes a great deal to its success, a life insurance policy should be obtained so that the venture capital investment is protected should this person die during the payback phase.
We are familiar with the underwriting process and the steps you must take to get coverage. While the underwriting process is not an easy task, it is definitely necessary and can be done if you work with someone experienced. Not all insurers will even touch cases like this, especially when a start-up company wants millions of dollars in coverage and cannot show the experience or assets to back it up, other than this new investment. If you work with the right people, however, you’ll get covered.
Tech companies are extremely susceptible to this issue, as they don’t have many tangible assets to show, typically. The business owners are usually the main asset because they are the ones marketing the company and overseeing the day-to-day operations.
We specialize in assisting companies to obtain life insurance policies to protect their new venture capital investment. If you’re a start-up company, angel investor or venture capital firm and would like information on how to protect your investment, contact us today.
Also, be sure to read our article “From Hero to Zero: How to Instantly Lose your Venture Capital Investment