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STARTUP SPINE SPECIAL
ASSISTANCE FOR GETTING READY FOR FUNDING
Raising funds is the crucial step while incorporating any organisation. Funds are raised either through equity or debts. Once funds are ready and investors are ready to invest on your ideas, then the organisation is done with the initial process.
Funds encourage organisation to incorporate at faster phase and work more effectively in order to achieve the desired targets.
In an organisation funds can be easily raised if the organisation have complete documentation with past compliances, record of all the transactions, area of interest, distribution of funding to create trust and transparency.
Advisory for mergers and acquisition should also seek for the assistance for getting ready for funding before starting business with companies.
Advisory for Mergers and Acquisitions
- A merger basically is a deal to unite two existing companies into one new company. Both the companies usually have their consent in mergers, and both of them combine to become a new independent company, different from the existing companies before mergers.
- An acquisition is a form of corporate action in which a company buys most, if not all, of the target company’s ownership stakes in order to assume control of the target firm. An acquisition may not be by the consent of both the firms, and sometimes the acquiring company acquires the acquired company against their consent as well.
- Startup Spine also has solutions for Employee Stock Options.
- Reasons for entering into Mergers and Acquisitions
Increased value generation
Reduction in the cost of capital for organisations
Employee Stock Option
- Employee stock option is the option which is granted to the employees where they are allowed to hold shares of the company. It is not an obligation for them to hold share. It is the choice of employees whether they want to hold share or not.
- An employee is offered shares at a specific price. The employee is given the fixed time period to apply for the share for specific time period. This policy encourages employees to work as if they themselves are the owner of the company and hence promote loyalty in them.
Valuations of Business
- It’s commonly said that business valuation is more art than science. If this is true, then the practice of valuing a startup business is squarely in the domain of the artist.
- Nevertheless, entrepreneurs need to put a value on their startups in order to raise money, and investors need to put a value on their investments to generate liquidity. Since neither entrepreneurs nor investors are known for right-brain artistic thinking, this article aims to provide some tips for left-brain thinkers to make sense of startup valuation.
- It is extremely hard to determine the accurate value of a company while it is in its infancy stages as its success or failure remains uncertain. There’s a saying that startup valuation is more of an art than a science. There is a lot of truth to that. And also for any start-up, documentation has its own importance.
- Approaches for Valuation
Cost to Duplicate
Discounted Cash Flow
Valuation by Development Stage
- Documentation is a process of Preparation of a set of commercial and financial documents that record or support a business transaction.
- Documentation is a set of documents provided on paper, or online, or on digital or analog media, such as audio tape or CDs.
- Professionals are appointed to prepare documents necessary for the company and it is extremely essential for every organisation to properly prepare all the documents in order to present truthful and correct information to the users. For a Start-up, documentation has its own role to play. There are basically 4 types of documents that need to be prepared:
- Term Sheet
- Going by the definition term sheet is a document representing all material information regarding terms and conditions of a business agreement. The terms and conditions contained in this document are not binding to any of the parties, as they are subject to modification through further negotiations before the final agreement is actually prepared and signed. Starters’ CFO can also help you in preparation of Shareholders Agreement.
- The different categories of term sheets have varying structures and features. For example a term sheet prepared for funding will contain the following:
- Term sheets are non-binding and merely acts as a comprehensive agenda for further negotiations and a template for drafting the actual agreement.
- Components included in Term sheet
- Term sheet highlights the following:
- Shareholders Agreement
- Shareholders Agreement is a contract between the owners /shareholders of a firm, defining their mutual obligations, privileges, protections, and rights, and usually it comprises of the firm’s articles of association or bylaws. The shareholders’ agreement is intended to make sure that shareholders are treated fairly and that their rights are protected.
- A shareholders’ agreement basically is an arrangement among a company’s shareholders describing how the company should be operated and the shareholders’ rights and obligations are also described in it. It also includes information on the regulation of the shareholders’ relationship, the management of the company, ownership of shares and privileges and protection of shareholders. For any information about Non-Disclosure Agreement, Contact us.
- Reasons for Shareholders Agreement
- Basic functions of Shareholders agreement are:
- Essentials of Shareholders Agreement
- Non Disclosure Document
- A nondisclosure agreement is a legally enforceable contract that creates a confidential relationship between a person who holds some kind of trade secret and a person to whom the secret will be disclosed. NDAs are fairly common in many business settings, as they offer one of the most sure-fire ways to protect trade secrets and other confidential information meant to be kept under wraps. However, the confidential relationship often will refer to information that is to be shared between the parties but should not be made available to the general public. Starters’ CFO can also help you with co-founders agreement.
- Elements of Non Disclosure agreements
- Basic elements of Non-Disclosure agreements are:
- Functions of Non-Disclosure Agreements
- Confidential Information
- Every nondisclosure agreement provides a list of the types or categories of confidential information to be protected in the agreement. The purpose is to establish the boundaries, or subject matter, of the disclosure, without actually disclosing the secrets.
- Co-Founders Agreements
- Whenever you are launching a new enterprise, there is nothing more important than having a clear agreement amongst the founders around a handful of key issues that are critical to your ability to safeguard the future viability of your new enterprise and to raise venture money. The basic key issues cover three really important areas:
- During the initial stages of a start-up, everyone seems to be doing everything but before long, different team members become in charge of different departments and hence it is at this stage where conflict of interest arises. So here the co-founders agreement has a role to play which highlights the information regarding who will solve the conflict, who will decide the policies etc. Hence Documentation such as term sheet has its own importance in any organization.
- Components of a Co-founders AgreementComponents of a Co-founders Agreement
- Disclosure of Roles and Responsibilities
- This is one of the most important topics to cover, but is one that may seem unnecessary at an early stage, when all the co-founders may be wearing multiple hats. The priority is identifying the areas of responsibility for each co-founder, both to avoid miscommunication and so that each person can be held accountable for their respective areas. What you want to avoid is a situation in which all three co-founders see themselves as the future CEO and the issue goes unaddressed.
- Another potential issue is when one co-founder will be more involved in the company than the other(s). It is important to make clear whether each co-founder will devote him/herself to the company full-time, or if the co-founders will be involved to different degrees.
Non Disclosure Agreements
Proposed timing and process
Conditions to closing
Confidentiality, exclusivity and other key terms and conditions, if applicable
The valuation of the company
Form of investment by investors
The amount and timing of investment
Price-based anti-dilution protection in connection with future sales of the company’s stock
The number of directors the investors can elect
Vesting of the founders’ stock
setting out the shareholders’ rights and obligations;
regulating the sale of shares in the company;
describing how the company is going to be run;
providing an element of protection for minority shareholders and the company;
defining how important decisions are to be made
The agreement works in conjunction with a company’s articles of association
A shareholders’ agreement can contain any arrangement agreed between the shareholders and can vary what would otherwise be the legal position without it.
The shareholders agreement will remain private and confidential and will not be open to view by others such as creditors or non-member employees
The existence of a shareholder agreement can assist in raising finance from banks or creditors and also demonstrates the stability of the business to other potential partners.
Definition of confidential information
Exclusions from confidential information
Obligations of receiving party
Time periods, and
NDAs protect sensitive information.
In the case of new product or concept development, a confidentiality agreement can help the inventor keep patent rights.
Confidentiality agreements and NDAs expressly outline what information is private and what’s fair game.
The roles and responsibilities of the founding team,
Equity ownership and vesting
Intellectual Property Ownership
Equity breakdown and initial capital contributions;
Roles and responsibilities of each Co-Founder;
Management and approval rights;
Non-compete, confidentiality and intellectual property; and
Resignation, dissolution and removal of directors.