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Early stage investment terms in india (seed stage)

Early stage investment terms in india (seed stage)



Terms that founders should be aware of when raising a seed or angel round in India. Presented at Bangalore Startups.

Terms that founders should be aware of when raising a seed or angel round in India. Presented at Bangalore Startups.



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    Early stage investment terms in india (seed stage) Early stage investment terms in india (seed stage) Presentation Transcript

    • Early-Stage Investment Terms Bangalore Startups 7TH MARCH 2014 In India
    • Who Am I 12+ years on Wall Street (technology & operations in hedge funds) Got bored. Quit. Moved to India in 2007. Started a company. Failed. Co-founder of HeadStart and founder of Startup Weekend India building community TLabs an accelerator run by Times of India Couple of angel investments 500 Startups India & NYC BANGALORE STARTUPS
    • Seed fund and accelerator program (Mountain View, San Francisco, Mexico City) Mentor Network / Community 200+ design, technology, marketing, and product experts provide 1:1 mentoring to portfolio companies Over 650 companies, 1,400 founders in 40+ countries around the world, provide peer review and feedback on products, industry verticals, platforms, etc. Conferences & Events Dedicated conference team has completed 50+ events w/ 300-1,000 attendees per event; total reach of over 25,000+ people Geeks on a Plane Invite-only tour for startups, investors, and founders Learn about global trends, meet international companies, and gain insight/ access to foreign markets 500 Startups 3 BANGALORE STARTUPS
    • Pre/Post-Money Pre-money = value of co before investment Post-money = value of co after investment 4.5Cr Pre-money 1.5Cr Investment Post-money = 6cr Dilution = 25% BANGALORE STARTUPS
    • Beware: Dilution in India General Terms asked for: 25% Dilution at angel round + 10% option pool (usually created before investment so no dilution for investors) 30%+ dilution at Series A + 20% option pool 2 founders/ 50% each Before closing angel round 10% option pool / 45% per founder After closing angel round, each founder at 33.75% Target: 10-15% at angel round, maybe 20% 20-25% at Series A, possibly 30% BANGALORE STARTUPS
    • Board of Directors Control & Responsibility + fiduciary duties as directors Typically at early stage angels ask for one board seat. Push back or ask for resignation at Series A BANGALORE STARTUPS
    • Beware: Vesting Earn your equity. You don’t own it…yet. Vesting clock starts when you start working for company Typically, founders vest stock monthly; employees generally have a one year cliff (usually 25%) Sometimes investors ask to start clock upon closing the round. Push back hard on this. If founder leaves, unvested shares are bought back by company BANGALORE STARTUPS
    • Pari Passu Talk to YOUR lawyer Usually negotiated much later than seed/angel stage (whether liquidation preference of Series B should be senior or pari passu w/ Series A) BANGALORE STARTUPS
    • Liquidation Preference Who gets paid first (and how much) when the company gets acquired or shuts down (linked to Pari Passu) Strive to keep it simple. BANGALORE STARTUPS
    • Information Rights Monthly, quarterly and yearly financials Minutes of meetings of Board of Directors and copies of materials distributed to the Board BANGALORE STARTUPS
    • Redemption/Drag-Along Rights Usually not seen in the US at seed / angel rounds Be careful of provisions that: Force founders / company to buy back investors’ shares at fair market value (redemption rights) Force founders / investors to sell the company (drag-along rights) BANGALORE STARTUPS
    • ROFR (Right of First Refusal) / Co-Sale Rights Typically any founder common stock being sold is first offered to investors Investors have co-sale rights on any stock founders sell (if they turn down ROFR rights) Typically no time-limit on these rights held by investors
    • Resources http://500.co/blog http://www.gothamgal.com http://avc.com http://www.feld.com http://www.bothsidesofthetable.com Venture Deals by Brad Feld