True to the Bangalore’s image as the Silicon Valley of India, LetsVenture’s Founders’ Roundtable with Pankaj Jain of 500 Startups yesterday morning received a good response from startup founders. The session was attended by 13 selected startups. We have collated the key takeaways from the session for the benefit of startups who couldn’t be a part of this session
True to the Bangalore’s image as the Silicon Valley of India, LetsVenture’s Founders’ Roundtable with Pankaj Jain of 500 Startups yesterday morning received a good response from startup founders. The session was attended by 13 selected startups. We have collated the key takeaways from the session for the benefit of startups who couldn’t be a part of this session.
Dilution in India
At an early stage funding round, aim to dilute not more than 15-20%. Ensure that you are negotiating well because if you are not careful, you could end up owning a very small amount of equity (all the founders combined) in the company or may have to go thru a complicated and difficult recapitalization process.
Option pool
Founders can set aside 10% for an option (ESOP) pool to hire the right talent. It is a pool of gold that is meant for people who are helping the startup to grow. Don’t give options away frivolously. Use it to award great talent and advisers and make sure to have a vesting cycle in-line with market practices tied to the options granted.
Liquidation preference
If your potential investors are asking for a participating liquidation preference, push back hard and refused to accept it. Non-participating liquidation preferences are more common and should be well understood. Good investors will be reasonable.
Redemption Rights
If your potential investors are asking for redemption rights in an early/seed round, founders should push back. Many series A and B investors have moved away from this provision and seed investors should also. If you are building a great company, investors will chase you and you can negotiate reasonable terms.
If you want more details around the early stage investment terms, you can go through the below mentioned presentation by Pankaj.
Early-Stage Investment Terms in India at LetsVenture from Pankaj Jain
About 500 Startups
500 Startups is a seed fund and accelerator program based out of Mountain View, San Francisco and Mexico city. Community building lies in the core of 500 startups. It has got 200+ mentor pool. 500 Startups organizes conferences and events, Geeks on a plane, Premoney, and many others. Some notable Indian portfolio companies of 500 Startups include PriceBaba, ZipDial, KartRocket, CultureAlley, Instamojo and so on.
500 startups looks not only at the traction of the product, but also looks for passion in the founders while selecting a startup for their accelerator program. 500 Startups mainly focuses on the business aspects of a startup. 500 Startups provides a structured program during the accelerator and encourages founders to ask for help when they need it. The application for the 13th batch of accelerator program is open now, one can apply through Angelist.
If you have any further questions regarding 500 Startups or early stage investment for Pankaj, you can comment your questions here or you can directly tweet to Pankaj :)
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