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

Thanks!PANKAJ JAIN PANKAJ AT 500
DOT CO @PJAIN 14