Exiting your startup? Liquidation Preference will determine how much money you get

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.

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What do Venture Capitalists or investors look for in a startup?

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.

  1. 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

Working for a Startup? Things that startup professionals will immediately connect with..

Ankur Nigam, Group Director – Finance and M&A, Smile in a candid chat on startup culture and the working environment that the setup offers.

Why are professionals today excited to work in startups?

For decades, young professionals have looked at their parents, grandparents and others in the family do mundane, routine, 9am-6pm jobs, which were then a norm. However, today’s generation is different. Everyone wants to make a difference, and that difference goes beyond the realms of money making business to gaining exposure and experience that their job offers. Established organizations undoubtedly provide continuity, security, travel options and average to above average compensation among other motivational benefits — satisfying as it sounds these are often coupled with ennui.

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Here’s Why India Really Does Have What It Takes To Become The World’s E-Commerce Capital

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?

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Importance of internationalization for businesses: why this can’t be ignored?

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).

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Your first pitch – What works?

Pitching to your prospective stakeholders, whether it’s the first angel investor or a potential cofounder – is one of the most crucial and the toughest phase in a startup journey. As the true propeller and a must-have element for any business growth, these stakeholders will help shape your idea into a tangible being. They will buy into your dream and help you achieve it. Basis my experience, I comprehend that almost all of the above stakeholders will raise variety of questions at the pitch desk, however, their evaluation parameters remain common at the base level. Parenthetically, it’s not just the ‘Big Idea’ that everyone is looking for, but lots more than what meets the eye.

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Does your startup need a lawyer?

In one word? Yes

Having seen a few ventures ground upwards, I can vouch for statutory compliances and requirements not featuring into the top five agendas of startup managements. Typically, Indian startups somehow have a tendency to push anything they perceive to not be of immediate importance to the back burner. By contrast, their peers in the west see the larger picture and realise the need for a solid foundation on which to build a business. Think of it as building a house, where the legal eagle you hire is your foundation and what you build from the surface level upwards is your business.

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