Loading presentation...

Present Remotely

Send the link below via email or IM


Present to your audience

Start remote presentation

  • Invited audience members will follow you as you navigate and present
  • People invited to a presentation do not need a Prezi account
  • This link expires 10 minutes after you close the presentation
  • A maximum of 30 users can follow your presentation
  • Learn more about this feature in our knowledge base article

Do you really want to delete this prezi?

Neither you, nor the coeditors you shared it with will be able to recover it again.


Venture Capital, Private Equity Investments, Startup Funding and Indian Laws - The Ultimate Guide

No description

Dev Academy

on 4 August 2013

Comments (0)

Please log in to add your comment.

Report abuse

Transcript of Venture Capital, Private Equity Investments, Startup Funding and Indian Laws - The Ultimate Guide

The Ultimate Guide

Venture Capital, Private Equity Investments
Indian Laws
Startup Funding: Deal Structure, Legal & Tax Issues

The Idea Phase to Co-founder Phase
Angel Investment Round
Venture Capital Funding
Series A, B, C Rounds
1. Founder's Original Ownership - 100%

2. Company Incorporation not mandatory

3. Co-founder required to convert idea into prototype

4. Equity offered to co-founder ~ 50%

5. Business Incorporation highly advisable

Avoid misunderstandings between founders

IP (Intellectual Property) should be owned by Company
Friends & Family Investment Round
For example, assume investment by friend: $30000
Equity given to friend: 10%
Option pool created for future employees: 20%
Founder's share after dilution: 35%
Value of Company: $500,000
Angel Investment: $100,000
Equity given to investor: 16.67%
Post-investment Valuation: $500,000 + $100,000
= $600,000
Equity given = $100,000/$600,000 = 1/6 = 16.67%

Everyone's share diluted by 1/6 or 16.67%
First version of product ready & initial traction exists
Value of Company: $2 million
VC Investment: $500,000, Equity given to VC: 20%
Everyone's share diluted by 1/5 or 20%
Employees now own small % of Option Stock
Venture Capital Laws in India
Term Sheet / Letter of Intent
Memorandum of Understanding
Legal & Financial Due Diligence
Accounting & Taxation
Capital Structuring - Guidelines
FDI (Foreign Direct Investment) governed by DIPP (Department of Industrial Policy & Promotion)

Exchange control governed by FEMA (Foreign Exchange Management Act, 1999)

FEMA confers power on RBI (Reserve Bank of India) to frame regulations

Life-cycle of a Deal: Legal + Tax Issues
Commercial Terms agreed upon after Negotiations

Term Sheet, LOI & MOU generally non-binding

Except for specific provisions: Confidentiality, Expenses etc.

Required to be substantiated by incorporating specific language
Valuation of Company

Status of Regulatory Compliance

Representations & Indemnities to be taken from company & founders

Consideration of corporate, exchange, securities & taxation laws
Capital Structure = Debt Level : Equity

More Debt = More Risk

Factors to be considered while finalizing capital structure:
Funds Required for Assets (fixed + working)
Fund Raising ability (internal + external)
Fund Raising Costs
Inflow of Funds
Type of Ownership
Account Books to Manage Business

Evidence to substantiate financial figures to VC's and PE's

Taxation = Direct + Indirect

Direct Taxes
Income, Wealth, Security Transaction etc.

Indirect Taxes
Customs, Service Tax, Excise,
Sales, VAT etc.
Full transcript