As a pre – investment meet with the founding team came to a close, I was told – well – you are not founder friendly.
Wow, Can you elaborate please – asked in a matter of fact manner!
For one – the information rights, is not too much being asked for ?
What was being asked is – monthly P&L and Balance Sheet from the accounting software being used and not the excel which is used for internal monitoring. Also not cash basis of accounting nor multiyear sales order being recorded in the month in which order received.
This is elementary !!!
What next ?
In the data room, the data & sought is too much ?
Now, what was sought was all documents & filings pertaining since company formation, including corporate and secretarial filings…
Is it too much of a ask ? Diligence is required to be carried out. As an AIF, we have a fidicuary responsibility!
And what next – Superior rights to certain class of investors .
We agree. But not when it comes to Liquidation Preference, ROFO (Right Of First Offer), ROFR (Right Of First Refusal), change in nature of business .. to name a few … These are structural and money at all stages of investing – needs to be respected and as a fund, we look into these right at the time of Termsheet & not leave for discussion at the time of Shareholder agreement (SHA) .
More was in the offing – Founder agreement and founder exit clauses –
Well as an investor, its you – the founders who runs the enterprise and make the business. And as a provider of resource (in terms of capital), we need to be sure you run the business in an efficient manner & there are rules of engagement, when there are disagreements among the founders. The business should not be grounded on account of this.
Or say promoters salary. We opine that, as the revenue grows, the remuneration should also (fair). It cannot be a function of fresh capital raised. Capital is fuel for growth of enterprise and not for growth of self.
At this point, all agreed that all the stakeholders had only one target – growth of the enterprise.
Open communication is what is required – need of the hour! And every one in the ecosystem has a role to play!
Author,
Brijesh Damodaran
