SECRETS of STARTUP FUNDING | Equity Dilution | By CA Rajat Agrawal

Important Terms to understand before Starting-up

00:26 What are the Prerequisites for Startup Company ?

01:29 Pre-Money Valuation 03:30 Startup Funding Rounds

04:30 Equity Dilution and Post Money Valuation

08:30 Convertible Debt

09:30 Preferential Liquidation

Who will fund you?

Startups don’t get money from bankers (lending), So, only option is from shareholders (equity).

Banks won’t lend money to finance projects with no short term revenue generation .

So let’s focus on shareholders (Equity = long-term financing needs in uncertain corporate investment).

When do Investors earn money?

The objective of a startup is to grow the business and its value as fast as possible to realize the greatest ROI possible on exit .

So all the profits get reinvested rather than paying dividend .

Shareholders get paid ONLY when they sell the company.

“Avoid investors till you decide to raise money, and then when you do, talk to them all in parallel, prioritized by expected value, and accept offers greedily. That’s fundraising in one sentence. Don’t introduce complicated optimizations, and don’t let investors introduce complications either. Fundraising is not what will make you successful. It’s just a means to an end. Your primary goal should be to get it over with and get back to what will make you successful—making things and talking to users—and the path I’ve described will for most startups be the surest way to that destination. Be good, take care of yourselves, and don’t leave the path.“

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