Legal & Finance - startups
- 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 ▸ ▸ ▸ ▸ ▸ ▸ 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. ▸ ▸ ▸ ▸ ▸
- 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
- 19. www.finlead.in www.coneyfinlead.in www.logiticks.com Kochi • Bangalore • Amsterdam • Rotterdam • Seattle THANK YOU! Certainty in Strategy [email protected] +91 98461 72879