Joining & Exiting

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🚪 Joining a Village

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Eligibility & Application

To join an existing village, prospective members must:

1. Meet Eligibility Requirements:
   • Be an employee of a pre-IPO company in the relevant sector or theme
   • Hold vested or vesting equity in that company
   • Commit to the minimum contribution value (typically $10K)
2. Complete Application Process:
   • Submit an application via the Backerville platform
   • Verify employment and equity ownership
   • Review and accept the village agreements
   • Complete KYC/AML verification
3. Contribution Assessment:
   • Value of equity is assessed based on last round price or accepted secondary pricing
   • Minimum commitment thresholds must be met
   • Maximum contribution limits may apply to maintain diversification

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Promissory Note Execution

Once approved for membership:

1. Draft Customization: Promissory note is tailored to the specific contributor and equity details
2. Legal Review: Opportunity for the contributor’s legal counsel to review
3. Digital Signing: Electronic execution of the promissory note
4. Security Filing: UCC filing to establish the village’s security interest

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Unit Issuance

Upon execution of the promissory note:

1. Village Unit Calculation: Units are calculated based on the contribution value relative to total village value
2. Unit Issuance: Digital units are issued representing the member’s pro-rata ownership
3. Member Portal Access: New member receives access to the village portal and documentation
4. Onboarding: Introduction to village systems, voting procedures, and member responsibilities

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Example Joining Process

Example: Jane works at AITech and wants to join the AI Sector Village. She applies and commits $100,000 worth of her AITech equity via promissory note. The village’s total pre-existing value is $4,900,000. Jane receives $100,000 ÷ $5,000,000 = 2% of the village units and becomes a full member with voting rights.

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🚶 Exiting a Village

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Planned Exits

Members may exit villages under several conditions:

1. Full Satisfaction of Obligation:
   • Member has delivered the full promised equity or proceeds
   • All contractual obligations have been fulfilled
   • Exit requires no additional approval
2. Replacement Contributor:
   • Member finds another eligible employee willing to take over their commitment
   • Replacement must meet all eligibility requirements
   • Administrator must approve the replacement
3. Buy-Out Option:
   • Member may request to buy out their obligation for fair market value
   • Requires administrator approval
   • May incur a premium payment to compensate the village for lost upside

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Changes in Member Circumstances

When a member’s circumstances change, they generally remain in the village with adjusted rights:

1. Employment Termination:
   • If a member leaves their company, they remain a village member
   • Member retains ability to participate in admiration votes and general governance
   • Member loses ability to participate in bullishness votes due to loss of insider knowledge
   • No exit process is triggered solely due to employment changes
2. Company Sector Transitions:
   • If a member’s company pivots to a different sector, they remain in the village
   • No change to membership status or voting rights
   • The diversity of the village portfolio is maintained
3. Village Dissolution:
   • If 80% of members vote to dissolve the village
   • If the village fails to maintain minimum membership requirements
   • Upon regulatory changes that make continued operation impractical

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Exit Mechanics

The process of exiting varies based on circumstances:

1. Unit Cancellation: Member’s village units are cancelled or transferred
2. Obligation Resolution: Determining if the promissory obligation is satisfied, transferred, or bought out
3. Documentation: Executing appropriate release or transfer documents
4. Settlement: Finalizing any payments or transfers required for exit

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🔄 Transferability of Interests

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Village Unit Transferability

Village units have limited transferability:

1. Internal Transfers: Units may be transferred to other existing village members with administrator approval
2. External Transfers: Generally restricted to maintain investment club status
3. Estate Planning: Limited exceptions for estate planning purposes

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Promissory Note Transferability

The underlying promissory obligation:

1. Non-Transferable by Contributor: The contributor cannot assign their obligation to a third party without approval
2. Transferable by Village: The village may assign its rights to the administrator or other entities
3. Upon Employment Change: Special provisions apply when a member changes employers within the sector

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💰 Liquidity Events & Partial Exits

When liquidity events occur for specific companies:

1. Partial Activation: The promissory notes for members from that company activate
2. Proceeds Contribution: Members contribute the specified proceeds to the village
3. Continued Membership: Members typically remain in the village with their units

This differs from a full exit, as the member maintains their village units and continues to benefit from the diversified portfolio.

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⚠️ Special Circumstances

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Early-Stage Villages

For villages in formation:

• Founding Member Terms: May have special governance rights or reduced fees
• Minimum Activation: Villages officially launch only upon reaching critical mass (typically 10+ members)
• Pre-Launch Exit: Simplified withdrawal process before official launch

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Voting Rights Adjustments

If a member’s employment status changes:

1. Former Employees:
   • Retain full membership in the village
   • Continue to participate in admiration votes and general governance
   • Restricted from bullishness votes due to lack of current insider knowledge
   • No exit or transfer is required
2. Potential Conflicts:
   • Members who move to competitors or develop conflicts of interest may have additional voting restrictions
   • Confidentiality obligations remain in full effect
   • Village administrator may implement custom voting restrictions based on specific circumstances

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💵 Tax Considerations

Exiting a village has specific tax implications:

1. Unit Cancellation: Generally not a taxable event
2. Obligation Satisfaction: Tax consequences arise when equity is sold and proceeds delivered
3. Buy-Out: May create taxable income if payment exceeds basis

This structured approach to joining and exiting ensures that villages maintain their integrity while providing reasonable flexibility for members’ changing circumstances.