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
Negotiating with investors
(Last revised Mar-2012, Send comments to email@example.com)
Most technology entrepreneurs assume that their leverage against investors is poor. After all, they are one of hundreds of companies that the VC is looking at - the VC might walk away if the entrepreneur starts negotiating.
This is true initially, but once you get past a term sheet, you can assume that the investors need to give you money as badly as you need to take it. This is especially so in India, where high-quality deal flow remains thin, and once investors get serious, they are unlikely to let the deal fall through.
Negotiating with investors is about making trade-offs; the key is to make the right ones:
With agreements running into 50 pages or more, it is tempting to negotiate and finalize one clause at a time. In general, this is a bad idea, since you could lose sight of the big-picture tradeoffs you are making.?? Instead, it is best to negotiate entire versions - and eventually have some long sessions with all parties to close the deal.