- 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.




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

Startup valuation

(Last revised Mar-2012, Send comments to

Amongst the many painful aspects of raising risk capital is agreeing with investors on the valuation of your company. Despite various attempts at calculation (DCF, P/S multiples, market comparables, etc.), early-stage valuation is guesswork at best, and largely determined by the bargaining power (i.e. desperation) of each party involved.

Startup valuation can change quite a bit due to the various terms and conditions baked into the investment agreement. If you are unfamiliar with these terms, you must understand their impact on your company's valuation, e.g.:

  • The option pool shuffle - how the option pool dilutes common stockholders (esp. the founders), lowers your pre-money valuation, and favors preferred stockholders if un-issued & un-vested options get cancelled in the next round.
  • VC math differs from entrepreneur math; beware of 'participating preferred' stock with 2x+ liquidation preference.
  • Investors may ask for 'full ratchet' (instead of weighted-average) anti-dilution protection; this does not impact current valuation and insures the investor against the possibility of over-valuation. However, it will wipe you out in the future, if a recessionary fund-raising environment leads to a down-round.

How Much Is My Company Worth?

Typical equity stakes and funding amounts are a function of stage (pre-seed, seed, Series A/B, etc.). To determine valuation, match your funding needs to a stage (say Rs 1 to 1.5 crore for seed-stage), and pick the equity stake that you and the investors are OK with(say 20 - 25%). That gives a range of Rs 3 to 6 crore - admittedly broad, but nonetheless a useful starting point for discussion.

Anand Lunia's article on valuation benchmarks for angel investing provides useful data-points on typical amounts and stakes for Indian startups.

It is also useful to keep track of VC deals in India, especially those in your sector & industry. Subscribe to sites like VC Circle, PluggdIn, Venture Intelligence, etc. Invariably, you will run into 'market' data on valuation, e.g.:



  • A note on valuation for venture capital

  • A note on valuation of venture capital deals