Manage episode 300271168 series 2769558
Siddharth Mody is a Partner at Desai & Diwanji, one of India's leading law firms focusing on core areas of commercial and finance activity across PE and Venture capital among other asset classes. Siddharth has spent over 17 years in the industry and has had the unique experience of watching the startup ecosystem evolve to where it is today.
Glossary:1. Double-dipping: A liquidation event where the VC receives their money back and then gets a share of the remaining proceeds.
2. Promoters: Founders / entrepreneurs.
3. ESOP: An employee stock ownership plan (ESOP) is an employee benefit plan that gives workers ownership interest in the company.
4. ROFR: Also known as first right of refusal, is a contractual right to enter into a business transaction (in this case rights to participate in a deal) with an entity before anyone else can. If the party with this right declines to enter into a transaction, the obligor is free to entertain other offers.
5. ROFO: Also known as right of first offer, requires an owner of an asset (in this case the startup who is providing equity in exchange for capital) to negotiate the sale of an asset (equity sale) with the holder of the ROFO before offering the asset for sale or lease to a third party.
In this episode we will cover:
1. Why startup law (3:49)
2. Why do startups need a lawyer from Day 1 (8:54)
3. When should a startup first engage with a lawyer (19:49)
4. What to look for in a lawyer (25:02)
5. Should you compensate your lawyer with equity? (31:06)
6. Red flags associated with your first term sheet (36:18)
7. Template for an awkward conversation (42:35)
8. When do deals fall through wrt valuations (49:54)
9. Where can deals go wrong with ESOP construction (58:30)
10. How do you negotiate predatory behavior from VCs? (1:06:42)
11. Red flags wrt to deal negotiations – experiences from Siddharth’s career (1:15:12)
12. How to request exits from your investors (1:22:40)
13. Advisors to Emerging Fund Managers / first time fund managers (1:26:28)