Term Sheet vs SHA in India: What Indian Founders Negotiate Away Without Knowing
The term sheet is where founders focus. The SHA (Shareholders' Agreement) is where the deal actually lives. Most Indian founders don't realize how much has already been decided by the time the SHA arrives.
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“Anti-dilution provisions in Indian SHAs come in two main flavors: full ratchet (devastating for founders) and weighted average (standard). Most first-time founders don't distinguish between them until a down-round forces the calculation.”
“Information rights and board composition are the two SHA provisions that most affect day-to-day founder control. A well-negotiated information rights clause protects founder privacy; a poorly negotiated board composition clause can remove a founder from operational control without a formal ouster.”
“The drag-along clause is the most dangerous provision for founders in Indian SHAs — it can force all shareholders (including founders) to sell if a majority of investors agree to a sale, regardless of the founder's preference. The threshold at which drag-along triggers is the most important number to negotiate.”
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Amit Tyagi
Founder, AletheiaAI & GP, Fitoor Capital
Veteran of India's startup ecosystem. Writing about fundraising, investor psychology, and what it takes to build fundable startups in India.
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