Gyaan Sutra On entrepreneurship and technology

It’s time to link again.

VentureHacks, a blog run by Nivi and Naval Ravikant, brings out a descriptive post about how to save yourself from VC’s when raising convertible debt. This is what inspired the post

[Our existing investors] had put in a right of first refusal. Since I was a young entrepreneur at the time, I didn’t understand that this basically meant that you couldn’t go to any other VC… We could not get a higher valuation because [our existing investors] wanted to put more money in the company themselves. So any time we would talk to another VC, they would talk him out of it: “This is not a good company, don’t worry about it.” So we were really stuck with [our existing investors] for the next round.”

And this is what they suggest you do

“If you have a right to buy equity in our next round, shouldn’t we have a reciprocal right to sell you equity in the next round? In other words, why should you have a call option to buy the company’s equity if we don’t have a put option to sell you the company’s equity?

Why are we negotiating the next round of financing now? If we’re going to negotiate the next round now, we should negotiate all of the next round, not just your right to invest in it. I don’t want to do the next deal now, I want to do this deal now.”

The venture hack idea is quite interesting, but I’m not sure how valid it is in the Indian context.

Any interesting stories about VC’s here in India?

Venture Hacks

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