VENTURE DEBT
Venture debt presents an important source of non-dilutive capital for high growth startups (with prior venture equity funding) as it minimizes dilution and extends runway, while the company achieves near term (significant) milestones creating better value in subsequent rounds
The lender in this form of non-dilutive capital typically looks for companies that have gained certain traction, prior venture equity funding and are more likely to raise future rounds of funding
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ESOP and Equity Fund Raising Accord
ESOP is now a common phenomenon with the most of the growth start-ups given its importance in attracting, retaining and incentivizing critical talent and hence is a vital part of corporate strategy of a high growth startup
While it is important to communicate to employees’ various terms of grant – vesting period, cliff, exercise price and exercise window, acceleration clauses etc, there are certain important aspects to be considered while contemplating ESOP strategy for a company and its accord with overall corporate strategy (including harmony with future rounds of equity funding)
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Pre Series A/ Series A: Guiding parameters for valuations
In the absence of standard valuation methodology typical in the case of early stage equity investments, valuations are largely driven by indicative business parameters guiding such valuations. These broad guiding business parameters are of much importance especially in early stage venture funding, as arbitrarily deciding on valuations in such rounds (very high/low with respect to the current stage of business) can do more harm than good as it impacts the ease of future rounds of growth funding and sustenance of such ventures
