early stage investment terms in india (seed stage)
Post on 06-May-2015
5.853 Views
Preview:
DESCRIPTION
TRANSCRIPT
Early-Stage Investment Terms
Bangalore Startups7TH MARCH 2014
In India
Who Am I12+ 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 companiesOver 650 companies, 1,400 founders in 40+ countries around the world, provide peer review and feedback on products, industry verticals, platforms, etc.
Conferences & EventsDedicated conference team has completed 50+ events w/ 300-1,000 attendees per event; total reach of over 25,000+ people
Geeks on a PlaneInvite-only tour for startups, investors, and foundersLearn 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 IndiaGeneral 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: VestingEarn 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 RightsUsually 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
top related