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.ARCHIVES
Technology Entrepreneurship in India - Teams
Technology Entrepreneurship in India - Generating Revenue
Technology Entrepreneurship in India - Raising Capital
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
Time to sign the investment agreements
(Last revised Mar-2012, Send comments to firstname.lastname@example.org)
Investment agreements are a set of legal documents to be executed once the key terms are agreed upon between founders, company and investors. This includes:
Lawyers and/or CAs have standardized versions of these agreements. Usually, it is the investors who provide the first versions - these then get negotiated over a period of several weeks.
As a founder, you need to do two things: read every word of the agreements, and engage a trusted advisor to help you understand & negotiate the agreements. The money, effort and time spent on this is worth it. You also need to know who at the investors' firm and their lawyers' firm is working on the agreements - if it is junior associates, expect negotiations/decisions to take longer!
As a private limited company in India, compliance rules require you to hold board and shareholder meetings before signing these agreements. It is important to schedule these meetings to conform to the notice period requirements, and to ensure they do not hold up the investment closing formalities.
These agreements are subject to Murphy's Law - terms suddenly become open for re-negotiation, lawyers go on vacation, co-investors get cold feet, entrepreneurs are torn between running the company vs. reading the 17th version, etc.
Even after the agreements are signed, there are forms to be submitted to the RoC, MCA, fees to be paid, AoA to be modified, BoD changes, etc. - these are well-known formalities, but must be promptly addressed to avoid delays in getting the funds.
Enjoy the ride!