Finance for Entrepreneurs

In early-stage fundraising (pre-seed through Series B), CCPS (Compulsorily Convertible Preference Shares) are by far the more common instrument. Why CCPs rather than ordinary equity: Liquidation preference: CCPS holders sit ahead of ordinary shareholders in a liquidation or acquisition waterfall. Investors get their money back before founders see anything Anti-dilution protection: CCPS typically carry weighted average or full ratchet anti-dilution provisions - not available to ordinary equity holders Dividend preference: Usually non-cumulative, but still structurally senior. Conversion at IPO/exit: "Compulsorily convertible" means they automatically convert to ordinary equity at IPO or on a defined trigger, keeping the cap table clean for a public offering Ordinary equity situations: Founders almost always hold ordinary equity. ESOPs are typically on an ordinary equity pool. In some angel deals (especially informal ones), ordinary equity is used - but sophisticated angels...

Fresh issue - company issues new shares, capital comes in, cap table changes. The math depends entirely on whether you're raising above or below your last round's price per share. Up round You issue shares at a higher price than last time. Everyone's percentage drops, but the rupee value of their holding goes up. Founders dilute on paper, gain in value. Clean, straightforward, the outcome everyone is building toward. The tricky decision is option pool refresh - investors often ask for a top-up pre-money (which means founders bear the dilution, not the new investor ). Watch for that in the term sheet! Down round You issue shares at a lower price than last time. This is where it gets complicated. Anti-dilution kicks in. Most institutional investors in India - whether a Sequoia, Elevation, or a mid-tier fund - negotiate this into the SHA. The standard is broad-based weighted average. This simply means the prior investor's preference shares convert at an adjusted (lower) pr...

Textbooks define valuation simply: Pre-money valuation = value of the company before the investment Post-money valuation = value of the company after the investment And mathematically: Post-money = Pre-money + Investment The Better Way to Think About It - Pre-money is the price an investor pays for your past. Every customer you've acquired Every product you've shipped Every milestone you've achieved Every Rupee of revenue you've generated Think of pre-money valuation as settling the bill for work already done. Post-money is the value of the company after new capital enters the business. The investor's cheque doesn't validate what you've already built. It funds what you haven't built yet. The investor is writing a cheque because they believe the future could be much larger than the post-money valuation. Next time when a prospective investor tells you they are interested in getting 10% @ $10M post money valuation of your...

For most of the 2010s and early 2020s, US venture firms — a16z, Tiger Global, YC-affiliated investors — were structurally built to invest in Delaware C-Corps. Their fund documents, governance frameworks, and legal workflows assumed it. Investing into an Indian private limited was possible, but added legal and compliance overhead most wouldn't absorb (at least for a series A). So, founders expecting US capital flipped before Series A, often pre-emptively. A Delaware C-Corp becomes the parent; the Indian entity becomes its wholly-owned subsidiary. Delaware holds the cap table and receives investment. The Indian company continues everything operational — hiring, contracts, licenses, regulatory compliance. IP may stay in India or transfer up, depending on tax structuring. The whole thing is governed by FEMA and RBI's overseas investment framework. You may ask why Delaware specifically? Predictable corporate law, extensive case precedent, a specialized Court of Chancery, and v...

For years, venture-backed Indian startups followed a familiar structure: a Singapore or Delaware holding entity sitting above an Indian operating unit. Flipkart, Pine Labs, Groww and Zepto all used offshore holding structures at various stages of their growth.   Why Singapore? Because investors, lawyers and bankers around the world were comfortable with it. Key advantages included: Faster and more predictable commercial dispute resolution Legal documentation that global VCs had used thousands of times before Easier fundraising from international investors and a cleaner path to a NASDAQ listing Simpler employee stock option structures for global teams A neutral holding company for owning IP, subsidiaries and assets across multiple countries Greater familiarity when acquiring foreign companies or using shares as acquisition currency For a startup operating across India, Indonesia, Vietnam and the UAE, a Singapore holding company ...