Mumbai | 15 Jul, 2016 (3 years, 6 months ago)

Startup Funding and Finances

Different terms for different angel investors

Is it possible (and advisable) to give two different investors different terms in the same round of funding? Some details: investor A giving 1cr for 10%; investor B giving 10lac for 1%. I would like to give investor A a board seat and some affirmative voting rights and not give a board seat to investor B. What are the pros and cons of such a structure? What is the most common route for structuring this?
Answers
18 Jul, 2016 | 00:09

The manner and method of investing would determine the modalities and the rights which you can give to the investors. Often the first angel investor is taking a risk, so he can be awarded with a board seat however, it would require a review of your Incorporation Documents or Articles and Memorandum as well as the rights of other existing investors who invested at pre-seed stage. Further, as the founder, it remains to be seen whether you want to nominate yourself or any other person to the board, number of persons you want on the board, etc. Since the share holders (later on) generally would also have right to nominate persons to the Board (excluding the difference between legalities and practicality) you need to see how much you want to dilute your board control. It is often best to have the same terms or nearly same terms for angel investors to ensure future inflow but should not preclude you from different terms.


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