Simply put, it is the preference towards exit pickings for each class of shareholders in a company in the event of a strategic exit or sale for the shareholders. The Liquidation Preference clause and the waterfall it ensconces is a watershed provision in all term sheets and investment documents that usually decides who walks away grinning to the bank or otherwise.
Since a company chiefly bears exit returns to its shareholders and investors either through an IPO (which is when all private contractual agreements governing classes of securities fall away) or pre IPO sale of business, it is imperative for an investor to pre determine what component or percentage of the sale proceeds it will be entitled to when the cash is counted.
Harish Bahl, Founder & CEO of Smile talks about the four risks that any investor tries to mitigate when they look for investing in a startup business.
- A business model is an important aspect to consider. One must check for its viability and soundness. There are various examples of good companies with good ideas that had to shut shop because of an unviable business model. Continue reading
There are a few basic mistakes that entrepreneurs can avoid – while the nature of mistakes may differ depending on the type of startup.
- When you push for inorganic growth. Lot of times it is the founder that is over-rewarded and over-punished, because he is the face of it. Therefore, it’s important to build a strong backbone before hitting the paddle vis-a-vis buying growth and multiplying traction. Chances are that the company may crumble in the growth stage if in the early stage they’ve pushed for inorganic growth Continue reading
The last decade has been a watershed for global retailers; with the adoption of new age digital evolution successfully transforming shopping behaviors of buyers globally. As a matter of fact, the digital maturity of consumers has pressed the accelerator rings of retailers to reinvent buying experiences of the two worlds, one being the dynamic online multi-screen domain and other being the traditional offline space.
I recently read an article describing India’s unprecedented e-commerce growth as a “primed-up athlete finally hitting his full stride.” And indeed, digital augmentation has revolutionised the nation’s e-commerce ecosystem by unlocking India’s potential on various fronts, making it one of the most preferred destinations for global retailers. But is India sitting on the cusp of an e-commerce bubble or will the growth multiply?
As India treads the path to become the fastest growing startup economy in the world, international commercialisation offers an untapped opportunity that can change the trajectory of India’s internet entrepreneurship ecosystem. This potentially strong approach opens new horizons for Indian startups to become known as a home-grown internationally acclaimed organisation(s).