A discussion of early-stage investment terms discussed at a LetsVenture.com roundtable.

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
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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
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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%
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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%
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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
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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
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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)
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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.
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10. Information Rights
Monthly, quarterly and yearly financials
Minutes of meetings of Board of Directors and
copies of materials distributed to the Board
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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)
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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
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13. 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
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14. Thanks!PANKAJ JAIN
PANKAJ AT 500 DOT CO
@PJAIN
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