Lesson content
Scroll through numbered sections or jump via the outline.
What you'll take away
- Pre-money valuation: company value before new money.
Economics terms
Pre-money valuation: company value before new money.
Post-money = pre-money + investment.
Liquidation preference: investors get paid first on exit — 1× is standard; participating is harsher.
Anti-dilution: protects investor if down round — weighted average broad-based is founder-friendlier than full ratchet.
Control terms
Board composition: observer vs seat vs veto rights.
Reserved matters: list requiring investor consent (sale, new share issue, debt above threshold).
Drag-along: forces minority to sell if majority/investors agree.
Tag-along: lets minorities join a sale on same terms.
India-specific add-ons
FEMA pricing for foreign investors — valuation report from CA.
RBI reporting timelines on share allotment.
Tax indemnity clauses — who pays if historical GST/IT issues surface.
What to negotiate first
Valuation band, liquidation preference type, board seat, option pool size, founder vesting restart requests.
Do not give unlimited personal guarantees — separate founder from company.
Before you sign
Lawyer review is non-optional; 48-hour turn on term sheet is normal.
Align term sheet to SHA — term sheet alone is not fully binding but sets momentum.