galatime.com - Kaushik Gala

Note: The views & opinions expressed in these essays are strictly my own, and not those of any entity I may be associated with as an employee, consultant, promoter, investor, etc.

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Pune

Technology Venture Investors in Pune

 

Technology Entrepreneurship in India - Teams

Entrepreneurial traits

Picking cofounders

 

Technology Entrepreneurship in India - Generating Revenue

Is your business model well-defined?

Your industry's value chain

What is your value proposition?

Which distribution channels will you use?

Who will drive business development?

 

Technology Entrepreneurship in India - Raising Capital

Venture capital & venture capitalists (VCs)

Corporate venture capital

Angels & angel networks in India

Government support for Indian startups

Proof-of-concept funding

Do you need a business plan?

How much money should you raise?

Startup valuation

Pitching to investors

Figure out the term sheet

Negotiating with investors

Due diligence - A necessary evil

Time to sign the investment agreements

 

Equities, ETFs, F&O

› Oct 2011: Equity Risk Premium for India

› Jun 2011: Investing in Indian equities

 

Technology Enterprises in India

› Nov 2010: Technology investment in India - WATER

› Aug 2010: Technology enterprises in India - 3 avatars

 

Risk Capital for MSMEs

› Mar 2010: Risk mitigation for investors in MSMEs

› Mar 2010: Why don't (Indian) MSMEs get risk capital?

› Feb 2010: Angel investing - Will it work for Indian MSMEs?

› Feb 2010: What's so special about innovative MSMEs?

› Feb 2010: Where do Indian/NRI (V)HNIs invest?

› Feb 2010: Funding options for innovative MSMEs in India

› Jan 2010: Innovative MSMEs in India

Due diligence - A necessary evil

(Last revised Mar-2012, Send comments to galatime@gmail.com)

The broader definition of due diligence ('DD') in venture capital includes the analysis of all aspects of a venture - technology, team, market, finance, governance, legal affairs, etc. Each investor has their own unique set of items in their DD check-list - usually a result of their cumulative investing experience and judgment.

Entrepreneurs usually underestimate the time required for the DD process; they tend to get frustrated with the various demands for documents, legal/financial paperwork, references, etc. Another common source of grief is the entrepreneurs' belief that the investor doesn't understand their technology.

To close an investment round in time, founders must manage the DD process well:

  1. Keep your financial accounts and corporate compliance up-to-date and squeaky clean; clearly delineate founders' expenses vs. company expenses
  2. Keep soft copies of all legal agreements that your venture has ever entered into (IP, HR, investment, loans, leases, ESOPs, etc.)
  3. Complete all (relevant) formalities for India: Shops & establishment, professional tax, TDS, import-export code, etc.
  4. Maintain a list of expert technologists whom the investors could talk to during tech DD
  5. Maintain a list of all relevant scientific papers, presentations, publications, patents, etc. that the investors can use during tech DD
  6. Keep your bankers informed of the possible need for signature attestation, account statements, fund transfers, etc.
  7. Figure out where to buy stamp papers, get agreements franked, and documents notarized
  8. For each founder/executive/shareholder, maintain a list of references, and confirm that they are willing to talk with investors during background checks
Murphy's law is ever present in the DD process, but it shouldn't deter you from accelerating the DD pace.

Perspectives