Negotiating Early-Stage Investments In India

SUMMARY

In early-stage funding rounds, investors usually insist the company reserves a certain percentage of shares as a notional ESOP for the benefit of the employees

Investors usually obtain a pre-emption right requiring the company to first offer any future shares to the investors before offering to any third party

Anti-dilution rights deal with dilutive events which otherwise reduce the value of the shares held by the investors

The best way to predict your future is to create it. The journey of a startup is fraught with challenges, but mastering the skill of negotiation can turn the challenges into the opportunities. Almost all the current high valued startups had negotiated aggressively in the past, to protect their rights and interest. 

Imagine the conversation in the 1980s between Microsoft, a fledgling software company without a ready-made operating system, and IBM, a dominant player in the hardware industry wherein IBM struck a deal with Microsoft to provide an operating system to IBM for their new personal computers.

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