Slides of the Session I handled at KSIDC event at XIME College, Kakkanad. Basics of Legal & Financial matters that relevant to startup entrepreneurs.

1. Legal & Finance
Considerations
for Startups
Kannan Surendran
Co-founder & Managing Director
FinLead International

2. FORM OF
START-UP
Ltd Company
One Person Company
Limited Liability Partnership
Partnership
Proprietorship
Bootstrapping
more important

3. DEAL WITH
CO-FOUNDERS
What percentage
Vesting Conditions,
roles & responsibilities
What if they leave
Time Commitment
Salaries
What if they don’t live up
to expectations
?
?
?
?
?
?

4. EMPLOYEES
• Cost to Company
• Confidentiality
• Non-disclosure agreement
• Invention Assignment
• Previous employment
• restrictions & conditions
01 Employment Agreements
• Options Matrix - To whom?
• How much?
• Vesting Conditions
• Trial Period - Cliff
• Tax impact?
• Stock Options or RSA or RSU?
02 Stock Options

5. CUSTOMERS
01 Enter into agreements
02 Start with standard form
03 Customise it for your needs
04 Consult lawyers wherever necessary
05 Negotiation & Contract Closure
06 Terms of Use agreement & privacy policy

6. INCUBATORS •
ACCELERATORS •
ADVISORS
Consult
alumni
'Understand'
the terms of
agreement
Do your
ground
research
Costs to
Benefits
Choose advisors carefully —
know personally before engaging

7. FUNDRAISING

8. SOURCE OF FUNDS
Inherent
Working
Capital
Debt
Issue of Shares
Soft
Loans
3 F Angels
Institutional
Investors
Family
Offices

9. HOLY CAP TABLE
Equity owned by working co-founders
Equity owned by non-executive advisors
How much can you dilute in initial funding rounds
?
?
?
More than anything, a bad cap table
can make your company 'un-investible'.

10. PREPARATORY
Be ready
with:
Business Plan
in the form
of a deck
Valuation
Model
Stock Option
Pool Matrix
Financial Model
that is consistent
with your deck
?
Do you have
traction
?
How much money
do you need
?
At what valuation

11. VALUATION
Valuation of the company is not the value of your company.
It is the current value at which investors can earn their desired returns.
Do you know
what valuation
you can reach for
a Series A Round?
Valuation Basis:
Cash flow based
valuations can be
applied only at
later stages.
Early stage valuations
essentially works on a
reverse math basis.

12. UNDERSTANDING
TERM SHEET & SSHA
The terms and
conditions that
govern the future
conduct of the
company.
Liquidation preference
Share transfer & issue restrictions
Anti-dilution rights
Employment Conditions & Termination conditions
Reserved Matters
Exit rights
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Understand the
term 'CCPS'.
Other important terms:

13. COMPANY
LAW COMPLIANCE
1
Filing of required
forms for corporate
events
2
Audit of financial
statements and filing
of annual returns
3
Maintenance of
Minutes & statutory
records
Share Issue:
Routes available
for Companies
to issue shares
Rights Issue to existing members;
Renunciation of Rights Issue to third parties;
Board disposing unsubscribed rights shares;
Private Placement;
Public Issue.
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14. INCOME TAX
BENEFITS
Sec 80IAC Only for eligible start-ups
100% tax exemption for 3 years in first 7 years
Should be incorporated after 01.04.2016
Certified by Interministerial Board

15. FREQUENTLY
ASKED QUESTIONS
1
Can co-founder
stakes be reshuffled?
3 Can I borrow and provide
loan to my company?
5
Can company borrow
money from non-residents?
7
Can Board of the company
be reconstituted?
6 Can company raise money
through convertible notes?
4
Can company borrow
money from third parties?
2
Can my company receive
investment from non-residents?

16. CAN WE
RAISE MONEY
BY CROWDFUNDING?

17. CAN WE RAISE
MONEY BY ICO ?s

18. OPEN FOR
QUESTIONS!!

19. www.finlead.in www.coneyfinlead.in www.logiticks.com
Kochi • Bangalore • Amsterdam • Rotterdam • Seattle
THANK YOU!
Certainty in Strategy
kannan@finlead.in
+91 98461 72879