Typical seed/angel deal documents in India are overloaded with provisions that are more suited to Series A investments or even much larger PE deals. However, providing standardised deal terms reduces the friction that typically occurs during deal closure, and allows both angels and founders to have conversations that are more substantive and product-focused.
Chennai-based TermSheet claims to be addressing this by providing a smooth service to startups seeking seed/angel funding. An online platform for startups to connect with accredited investors, TermSheet claims to have already processed a high-profile deal involving Flipkart co-founders Sachin Bansal and Binny Bansal (not related).
"TermSheet is a curated fundraising platform that helps seed and pre-seed startups raise funds rapidly and with zero friction," said Vivek Durai, founder of Humble Paper Inc., the company behind TermSheet.
"Our platform does away with the need for founders to run after multiple angel investors, spend considerable time and effort getting valuations & term sheets, and engaging in extended negotiations with investors," he said.
The platform was launched early this year by Durai, a lawyer by profession. According to him, TermSheet allows angel investors to easily join a round, review confidential information about a company and quickly determine whether they wish to participate in the round or not. It had made its debut with an investment round led by Flipkart co-founders in Chennai-based Ather Energy Pvt Ltd, a vehicle startup focused on designing high-speed electric two-wheelers for the Indian market.
How it works?
TermSheet connects startups signing up on its platform with angel investors (it claims to have an exclusive list of lead investors). It then sets up a phone call with the startup, and conducts a preliminary screening during the call. If the startup is a good fit, it asks them to share detailed information about their product, team, financials, legal, etc. The platform then conducts a mini due diligence on the startup that takes up to three days.
A lead investor may request a video call or a meeting with the startup, and the fastest ones to commit get to participate in the round. Only one investor can be a lead, for whom the minimum ticket size is Rs 25 lakh to Rs 3 crore, depending on the size of the round.
Once it gets commitment from a lead investor, it sends out a separate communication to other investors (minimum ticket size is Rs 5 lakh). To secure the commitment, the investor needs to respond and remit the money. Once the startup's round size is reached, TermSheet will get the required documents signed, complete filings and allot the shares.
According to the founder, TermSheet is more of a self-serve platform than other funding platforms like LetsVenture. This is because it does not filter startups while onboarding; instead, the platform allows founders to prepare the data for a round at their own pace and allows them to notify it when they are ready to launch a round.
"Founders and investors can work to close a round on the platform, while our team works in the background to make necessary filings with the authorities. TermSheet automatically builds a complete ready-to-sign set for transaction documents once a minimum number of investors commit. The platform also automatically sends the documents to all parties involved in the transaction, and then tracks and notifies everyone," he said.
TermSheet works closely with consultants (lawyers, CAs and company secretaries) to get the deals completed. While the platform currently charges startups a percentage of the money they raise, it also plans to charge angel investors for deal flow. Going forward, it will monetise through on-platform transactions (one-off payments and subscription plans) for both startups and investors.
Durai said TermSheet is currently processing five deals, including three Indian and two international deals, and will announce the second deal in the coming weeks.
(Edited by Joby Puthuparampil Johnson)