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Early-Stage Investment Terms
Hosted By LetsVenture
11TH FEBRUARY 2015
Who Am I
12+ years on Wall Street (technology & operations in hedge funds)

Moved to India in 2007. 

Started a marketplace for domestic services. 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
LETSVENTURE ROUNDTABLE
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 950 companies, 2000+ founders in 51+ 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
LETSVENTURE ROUNDTABLE
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%
LETSVENTURE ROUNDTABLE
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%
LETSVENTURE ROUNDTABLE
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
LETSVENTURE ROUNDTABLE
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
LETSVENTURE ROUNDTABLE
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)
LETSVENTURE ROUNDTABLE
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.
LETSVENTURE ROUNDTABLE
Information Rights
Monthly, quarterly and yearly financials

Minutes of meetings of Board of Directors and
copies of materials distributed to the Board
LETSVENTURE ROUNDTABLE
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)
LETSVENTURE ROUNDTABLE
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
LETSVENTURE ROUNDTABLE
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
LETSVENTURE ROUNDTABLE
Thanks!PANKAJ JAIN
PANKAJ AT 500 DOT CO
@PJAIN
14

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Early-Stage Investment Terms in India at LetsVenture

  • 1. Early-Stage Investment Terms Hosted By LetsVenture 11TH FEBRUARY 2015
  • 2. Who Am I 12+ years on Wall Street (technology & operations in hedge funds) Moved to India in 2007. Started a marketplace for domestic services. 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 LETSVENTURE ROUNDTABLE
  • 3. 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 950 companies, 2000+ founders in 51+ 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 LETSVENTURE ROUNDTABLE
  • 4. 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% LETSVENTURE ROUNDTABLE
  • 5. 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% LETSVENTURE ROUNDTABLE
  • 6. 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 LETSVENTURE ROUNDTABLE
  • 7. 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 LETSVENTURE ROUNDTABLE
  • 8. 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) LETSVENTURE ROUNDTABLE
  • 9. 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. LETSVENTURE ROUNDTABLE
  • 10. Information Rights Monthly, quarterly and yearly financials Minutes of meetings of Board of Directors and copies of materials distributed to the Board LETSVENTURE ROUNDTABLE
  • 11. 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) LETSVENTURE ROUNDTABLE
  • 12. 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 LETSVENTURE ROUNDTABLE
  • 14. Thanks!PANKAJ JAIN PANKAJ AT 500 DOT CO @PJAIN 14