Professional Documents
Culture Documents
Startups, Quasi Capital, VCF, Fund
Startups, Quasi Capital, VCF, Fund
STARTUPS IN INDIA
AN OVERVIEW
DIPP Approval
Incubator
established in a
postgraduate
college in India
Incubator
funded (for the
project) from
GOI or State
Govt under
scheme to
promote
innovation
Recommendati
on of
innovation from
Incubator
recognized by
GOI
Letter of
funding of not
less than 20% in
equity by any
Incubation
Fund/Angel
Fund/Private
Equity
Fund/Accelerat
or/Angel
Network
registered with
SEBI endorsing
innovation
Letter of
funding by GOI
or State Govt
under scheme
to promote
innovation
National Credit
Guarantee Trust
Company
No Income Tax
for three years
Tax exemption
for investments
of higher value
Building
entrepreneurs
Atal Innovation
Mission
Research parks
Entrepreneurship
in biotechnology
Dedicated
programmes in
schools
Legal support
Rebate
Public
Procurement
Faster exit
Self certification
No Capital Gains
Tax
Setting up
incubators
Patent protection
Start-up India
hub
START UPS
STRUCTURE, MANAGEMENT & FOREIGN INVESTMENT
Category
Company
Prevailing Law
Companies
Act, 2013
INCORPORATION
& MANAGEMENT
Capital
LLP
Limited Liability Partnership Act, 2008
No
Yes
Yes
Requirement
Perpetual
Succession
Charter Document Memorandum and Article of Association, LLP Agreement
Shareholders Agreement
Number
Members
Dividend
Distribution Tax
Category
Company
LLP
Designated Partners
requirement;
as
per
LLP
Agreement
Maintenance of Statutory Books of accounts, statutory registers, Only books of accounts.
Records
minutes etc.
Audit of accounts
Accounting Standards
Mandatory
Merger / Amalgamation
Yes
Yes
Oppression &
Mismanagement
FOREIGN INVESTMENT
Entity
Type
Approval
Route
Automatic
Company
DIPP Approval
Foreign
Investment
No track
record
No Fixed
Assets
Verification
of Financial
Projections
Commercial
Viability of
idea
Managerial
skills of
entrepreneur
How much
control?
QUASI CAPITAL
REGULATORY & COMMERCIAL ASPECTS
Equity Shares
QUASI
CAPITAL /
MEZZANINE
DEBT OR
CAPITAL
FEATURES
Debt
Mezzanine
Equity
Security
Secured
Subordinated
None
Ranking
First
Second
Third
Covenants
Tight
Flexible
None
Term
Demand
Term/ Patient
Patient
Coupon
Floating
Fixed
Dividend
Rate
Prime
Risk Adjusted
Market Adjusted
Conversion
No
Convertible
Shares
Prepayment
penalty
Yes
No- fixed
return
No
Liquidity
High
Low
Right to sell
STAGES OF FUNDING
Stage of
Development
Financing Need
Risk Level
Seed
Very High
Start-ups
Very High
1st Stage
Moderately
High
2nd Stage
Moderate
Bridge
Moderately
High
Leveraged
Buyouts (LBOs)
Moderately
High
DEBENTURES
Definition
S. 2(30) of
Companies Act, 2013
Debenture stock,
bonds or any other
instruments
Evidencing a debt
May or may not
constitute a charge
on the assets of the
company
Redemption
Creation of
Debenture
Redemption Reserve
Account
Out of profits
available for dividend
distribution
SECURED DEBENTURES
OTHER PROVISIONS
Debenture Trustee
Redemption
within 10 years
from date of issue
(except
infrastructure
companies)
Create charge on
assets of company
sufficient for
repayment of
debentures and
interest
Offer or invitation
to subscribe to
public or more than
500 persons
Secured by Trust
Deed
Liable to show
degree of care and
diligence to protect
interest of
debenture holders
Not related party of
company (Rule 18
Sh. Cp. & Deb Rules)
Default
Tribunal (Presently
CLB)
Debenture TrusteeOrder imposing
restrictions on
incurring further
liabilities
Other debenturesOrder to redeem
with interest and
principal
Enforceable by a
decree of specific
performance
PREFERENCE SHARES
Meaning
Dividend
PREFERENCE SHARES
Issue
Redemption
In lieu of share in
revenue/profits/sales
Term of agreement
Securitization Trusts
Trusts of Asset Reconstruction
Companies (ARC)
CLASSIFICATION
Category I AIF
Category II AIF
Invests in start-up, early stage ventures, Does not fall in Category I and
social ventures, SMEs, infrastructure or III
other sectors which government/
regulators consider socially/
economically desirable
Venture capital funds, SME Funds, social Does not undertake leverage
venture funds, infrastructure funds and or borrowing other than to
angel investment funds
meet day-to-day operational
requirements and as permitted
Features
Risk
Involved
Long-term commitment
Difficulty in business valuation
Entrepreneurial/management mismatches
Lack of knowledge of competitors
Macro economic & Market demand considerations
STAGES OF FUNDING
Stage of
Development
Financing Need
Risk Level
Seed
Very High
Start-ups
Very High
1st Stage
Moderately
High
2nd Stage
Moderate
Bridge
Moderately
High
Leveraged
Buyouts (LBOs)
Moderately
High
FUND OF FUNDS
AN OVERVIEW
CHARACTERISTICS
No direct
investment
Allows
diversification
Target return
Life cycle & Extension option
Everyday examples:
FoF in mutual
funds, Pension
funds, endowment
funds
Focus on sector,
geography, end
result
DOWNSIDE
Requires detailed evaluation and due diligence
Based on past performance which does not always
guarantee future projections
Requires intensive monitoring
Fund requires managers with
extreme efficiency and
experience
Too manager centric
Diversification
may reduce
returns
QUESTIONS
Anuroop Omkar
omkaranuroop@gmail.com
+91-9560439503
Kritika Krishnamurthy
kritikris@gmail.com
+91-8586074575