This may continue for a while till there is a reversal in the sentiment, said Manish Kheterpal, founder and managing director of WaterBridge Ventures, an early-stage venture capital firm. It is easier to get ‘senior liquidation preference’ or add to the list of ‘reserved matters: that require investor consent," said Sudip Mahapatra, a partner at law firm S&R Associates. “We are able to get better covenants on agreements which allows investors more protection. Getting approval from investors on minor business decisions can be challenging for a founder. Typically, it includes strategic items such as a decision on an IPO or an acquisition or a sale of a particular business but sometimes, investors also seek to sign off on new business lines, borrowing or commercial business transactions, or related-party transactions. Reserved matters refer to a list of items in a shareholder’s agreement that need a sign-off from the majority of the board, including investors. Sometimes, even if it was in the agreement (as reserved matters), it was not enforced, but today, investors want a greater say," the founder of a unicorn said, also requesting anonymity. “Some of us had a few things that could be done without going to the board. In some cases, terms in the share purchase agreements are being enforced more rigorously, especially in the case of ‘reserved matters’. An investor with senior liquidation preference would get priority over some other classes of securities.Ī second startup founder said that investors could also negotiate a higher sum-around 1.15 to 1.25 times the principal investment-in their liquidation preference agreements. The longer it takes to raise the next round, the higher the valuation discount.Ī growth-stage private equity investor said he had secured senior liquidation preference rights on his most recent transaction, which was hard to get last year.Ī liquidation preference right allows investors to get paid first in the event of an exit or a liquidation. In this case, the investor gets shares at a discount to the valuation in subsequent rounds. Some investors, founders said, are putting in an IRR based clause, which makes the convertible securities they hold less risky in case of a tepid market or if the next round of fundraising takes longer than estimated. They are in no mood to humour founders any more," he added. “Investors are no longer doling out largesse. How NBFCs are taking on gold loan companiesįor instance, the founders of a health-tech company that recently raised a seed round were told a part of their stake would be clawed back should they leave the company, one of the founders said, requesting anonymity. Why rising interest rates don't make FDs attractive In Adani's NDTV bid hangs a cautionary taleĬentre mulls cutting tax rates in new income tax regime
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