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Mr. Sanjaya Kulkarni IDEA

TIECON INDIA 2000. October 30 -31, 2000. Negotiating and Structuring Deals. Mr. Sanjaya Kulkarni IDEA. VC PROCESS. * Business Plans * Initial Price Indication. Initial Stage. * Basic Conditions * Exclusivity. Term Sheet. * Projections * Detailed Business Plan * Pricing

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Mr. Sanjaya Kulkarni IDEA

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  1. TIECON INDIA 2000 October 30 -31, 2000 Negotiating and Structuring Deals Mr. Sanjaya Kulkarni IDEA

  2. VC PROCESS * Business Plans * Initial Price Indication Initial Stage * Basic Conditions * Exclusivity Term Sheet * Projections * Detailed Business Plan * Pricing * All other terms Due Diligence Documentation * Negotiation of documents

  3. CONDITIONS TO BE NEGOTIATED... * Representations & Warranties - Generally Statements of fact * Negative Covenants - Financial - borrowing - capital expenditure - investments/loans - diversification - anti dilution/equity increase - conflicts of interest / other businesses of sponsors - related party transactions - Others * Asset Ownership - Physical - IPR Contd...

  4. ...CONDITIONS TO BE NEGOTIATED... * Board Representation/ Committees - Number & Role - Who will be appointed - Approval Process - Compensation - Difficult but crucial part of the negotiation * Pricing * Management - Changes - Audits - Value Addition Contd...

  5. ...CONDITIONS TO BE NEGOTIATED * Exit Provisions - Drag along/Take along rights - Issue timing and pricing - Who can trigger IPO - Put/Call options * Problem Solving - Jurisdiction - Arbitration

  6. APPROACH TO NEGOTIATION -SUGGESTIONS FOR ENTREPRENEURS * Know the facts of the company i.e. be prepared * Know the industry * Don’t lie * Negotiate directly or control your intermediaries * Don’t take rigid stands and have an open mind * Don’t hesitate to rely on professional help * Be upfront with conditions which can be deal breakers * Work to time deadlines * Ask for written commitments from VC’s

  7. APPROACHES TO NEGOTIATION * Negotiation is in an Indian perspective * Don’t let lawyers/intermediaries take over * Don’t negotiate to death * Be fair - Be Pricey but not Greedy * Remember - the VC has to make money

  8. STRUCTURING * Equity - Rate of interest - Conversion period - Basis of conversion * Convertible Debentures - Rate of interest - tax implications - Conversion period - Basis of conversion * Convertible Preference * Equity with performance linked warrants

  9. ISSUES IN STRUCTURING * Legal Structure - Investment in India, US or a third country - Investment in an holding company/operating company - Parent/subsidiary - shareholding, conflicts - Parent - branches * Effect of structure on exit options * Structuring of the fund * ESOP

  10. THANK YOU Email: ideas@ideaequity.com

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