<seedfund>             Demystifying Term Sheets                 Shailesh Vickram Singh                       SEEDfund     ...
<seedfund>   Type	  of Alternative Investment Class              •  Seed	  Fund	                 •  Aim	                • ...
<seedfund>   Investment Deal Structures             •  Types	  Of	  deals	                    –    Startups	              ...
<seedfund>   Deal Structure             •  Startup	  Structure	               	                   –  Startup	  aims	  to	 ...
<seedfund>     Deal	  Structure             •  Risk	  faced	  by	  VC/	  Investor	  if	  agreed	  to	  this	  this	       ...
<seedfund>   Risk Management             Liquidity	  Preference	  /	  Debt	                   Split	  of	  proceed	  if	  ...
<seedfund>         Proposed structure from VC player             Debt                           Investor        Entreprene...
<seedfund>   •                   Protection Rights                  ROFR	  :	  Right	  of	  first	  refusal	               ...
<seedfund>   •                   Don’t raise VC / PE Money                  Don’t	  like	  external	  players	  in	  BoD	 ...
<seedfund>             Questions?
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TiE Institute - Termsheet

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TiE Institute - Termsheet

  1. 1. <seedfund> Demystifying Term Sheets Shailesh Vickram Singh SEEDfund svs@seedfund.in QUARTERLY REPORT, APR-JUN 2007
  2. 2. <seedfund> Type  of Alternative Investment Class •  Seed  Fund   •  Aim   •  Venture  Capital     –   Superior  return  in  5  to  7  years   •  Buyout  /  Leveraged   –  Asymmetrical  Informa;on   Buyout     –  EBITDA  expansion   –   Financial  Engineering   •  Growth  Capital   •  Special  Situa;on   Funds   – Stressed  Asset   – Real  Estate  Fund   – Infrastructure   Funds   – Secondary  Funds  
  3. 3. <seedfund> Investment Deal Structures •  Types  Of  deals   –  Startups   –  Fresh  Equity  –  Growth  Capital   –  Buyouts     –  Leveraged  Buyouts   •  Issues   –  Performance  clause   –  Dilu;on   –  Exit  Scenario   –  Taxa;on  Issues  
  4. 4. <seedfund> Deal Structure •  Startup  Structure     –  Startup  aims  to  raise  ~    INR  1  Crore   –  Proposal   •  VC  contribu;on  ~  INR  1  Crore  for  40%  stake   •  Entrepreneur  ~  60%  of  share  for  idea,  execu;on  and   delivery  
  5. 5. <seedfund> Deal  Structure •  Risk  faced  by  VC/  Investor  if  agreed  to  this  this   structure   –  Split  of  proceed  if  venture  fails   –  Split  of  proceeds  if  venture  succeeds   –  Investor  IRR   –  Good  faith  investment  from  entrepreneur  :  Skin  in   the  game   –  Clause  for  staying  in  the  venture  :  ves;ng  
  6. 6. <seedfund> Risk Management Liquidity  Preference  /  Debt   Split  of  proceed  if  venture  fails     Split  of  proceeds  if  venture  succeeds   IRR     Capital  Contribu;on     •  Good  faith  investment  from  entrepreneur  :  Skin  in  the  game     Share  Ves;ng     •  Clause  for  staying  in  the  venture       Tranche  
  7. 7. <seedfund> Proposed structure from VC player Debt Investor Entrepreneur Debt INR 50,00,000 $0 Preferred Stock INR 46,00,000 Common stock $0 40 shares @ INR 10000 per INR 4,00,000 - share (40% stake with Investor) 60 shares @ INR 10,000 per - INR 6,00,000 shares (60% with Entrepreneur) 1,00,00,000/- INR 6,00,000/-
  8. 8. <seedfund> •  Protection Rights ROFR  :  Right  of  first  refusal   •  An;  Dilu;on  right   •  Significant  non  performance  rights   •  Promoter  lock  in   •  Tag  along  rights  :  protec;on  of  minority  share  holder   •  Drag  along  rights  :     –  Drag  Along  :  majority  share  holder  Scenario  (Protec;on  to   Majority)   –  Drag  along  :  minority  share  Scenario    (Protec;on  to  Minority)
  9. 9. <seedfund> •  Don’t raise VC / PE Money Don’t  like  external  players  in  BoD  /  Strategy   •  Do  not  plan  and  exit  in  4-­‐5  years   •  Comfortable  with  Old  accoun;ng  prac;ces   •  Prefer  Cash  as  a  value  creator  than  stock   •  Be^er  Op;on   –  Bank  loan   –  Family  assets  /  Mortgage   –  Non  formal  markets  
  10. 10. <seedfund> Questions?

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