(This post is not about clauses that need to be negotiated or not negotiated. It just tries to analyse how (and whether) past round documents have an impact on future round document clauses).

….before signing on the dotted line, founders need to have full conviction with regards to an incoming investor that – this is a great team that is backing us and onus is on us as founders to be able to work towards having their vote on our side when it matters. And from an investor's perspective the ideal thought needs to be – we are happy to assign this part of our capital to this startup team led by their founders who are best at what they do and shall always have our vote when needed…

During the course of round structuring and documentation process, it's quite common for advisors acting in good faith guiding the company / founders / investors alike to negotiate with their counter parties that a certain set of rights / provisions should or shouldn't be there in the documents. And the reason they cite for this advocacy or pushback is – it will set a precedent for subsequent rounds investors asking for similar rights or we will be able to hold these to our advantage if we have captured them here. Rarity but once in a while – the advisor be it a not so savvy lawyer or any other person is using this as an simple excuse to get his client to toe his line

With the right INTENT (at the end of the day – it's intent that matters), this is a reasonable argument and should be discussed. To enable a transparent discussion and thought process, I have tried to summarise below our experience during follow on funding rounds (Series A and beyond) by Blume portfolio companies. I have counted experiences of only those follow on rounds that Blume companies have gone through, across both of our funds and where we have not been lead investors in that follow on round. The number of such follow on rounds in the portfolio have been high enough to count as a good sample size in making these observations. The follow on lead investors include a wide range of investors including Indian and foreign financial investors / VCs, strategic investors as well as larger family office (funds) and angel investors.

When an investor is evaluating a company and has nearly made up his mind, he would talk about the commercial terms with the founder(s). Amongst the terms discussed, round size, % stake expected by the investor and his / her cheque size are the most common terms agreed. This means that by and large even valuation is a derived number basis the quantum to be invested by the incoming investor and his expected stake %. For example – if a VC (let's call him Lead VC) is inclined to invest ₹20 Cr in a startup and their desired % stake to be held is 25%, the POST MONEY VALUATION is implied at ₹80 Cr. I repeat – This factors only the amount that will be brought in by Lead VC and his % stake.

Now, if the founder has other existing investors (let's call them Seed round investors) and they have their Pro rata rights to invest at similar terms, founder may get them and dilute over and above the 25% to Lead VC under the same Post money valuation. So if Seed round investors have a pro rata right of 20% of the round they are entitled to contribute upto ₹5 Cr in this round. This makes it a ₹25 Cr round on a valuation of ₹80 Cr post money which results in a dilution of around 30%.

Broadly, let me try and answer the question – how far do previous round agreements shape the subsequent round documentation?

Before I give the short answer, here's the long answer.

There are lot of nuances in structuring these and initially bandwidth of most parties is spent mostly on commercial discussions around round size and dilution. At this juncture no one has actually discussed legal terms nor diligenced the documentation of the previous rounds. Yes, Lead investors may opt for discussions of the past terms agreed but by and large the same comes up at a later point in time.

Another equally important point is that if an incoming investor has a certain set of opening terms at which they want to invest, they will put it in their opening term sheet regardless of past round structures. To hope or expect that they will be considerate and not put out certain terms merely because founders have succeeded in not having it on their seed round documents is a myth. Or even vice versa – in terms of future investors putting some liberal terms favouring existing shareholders just because they have been already captured in their past documents.

The best of investors don't need an excuse of a precedent to act or not act in a certain manner – at least in terms of structuring a legal document. So to have or not have clauses in a particular document is best dictated by the needs of the parties comprising that particular round of funding. While most blue chip investors may endeavour to honour the past commitments, the same may at times not be practicable given the size and shape of company and its cap table are now going through a sea change.

Then why did I admit that this is a reasonable argument in the first part of this write up??

Position explained above holds true for most contractual rights between investors and founders as shareholders like ROFR, Tag, Exit, Vesting etc.

Discussions and intent to act becomes crucial when it comes to commercial rights like valuation adjustments or bump up or penal factors leading to share price change due to some events, or clauses that draw out relationship between founders, affirmative rights, right to drag along etc.

Here it becomes critical to discuss threadbare and document with caution not because it becomes a precedent or you will succeed in creating a situation to your advantage. But largely because – the above rights would be those where an incoming investor may have a view and sometimes if the company doesn't need to raise capital soon, it is these set of rights that will pretty much drive the relationships of various sets of shareholders (founders amongst themselves or investors vis a vis founders or investor inter se). How to structure these rights is a separate topic and requires a post which I will work towards and soon post.

The limited point of this short note is to just highlight the point that discussions and negotiation during any round of funding should be driven by needs of the Parties to the document. It's important to set the right precedents early but to have fear of precedents as a guiding post for structuring a relationship amongst people who are ideally expected to work in the same direction, is a bit of a stretch.

Past round documentation gets over ridden during subsequent fund raises anyway. The intent is that – all privileges and obligations of earlier round investors would also get restated in a fresh document which is also going to contain the rights and privileges of the newer investors. So that there should only exist one document that guides all shareholders. Besides it is also a common practice that as larger round investors set in, rights of investors or prior rounds do suffer some dilution but not when it comes to their ability to get an exit, dividends, M&A, liquidation preference on a waterfall basis, etc. Some privilege like affirmative rights, right to appoint board directors and a few others are reserved only for investor shareholders with a certain % of shareholding or clout on the cap table.

In such circumstances, just because the older version of documentation has a right or doesn't have may not make a big difference. If company has diluted in favour of some HNI who doesn't have much of a track record as an angel investor or a quasi strategic investor with certain vested privileges – due care needs to be taken in offering certain category of rights. Reason being – at the time of future rounds, founders need their consent and if these shareholders choose not to cooperate with founders at such occasions, it could easily become an opportunity loss.

Every stage at which the company raises capital is different. Investors coming in at each stage have a different role to play and even different time horizons and return expectations which lead them to make an investment in the company. Pricing is a function of the perceived risk that the company in question poses. Therefore, rights and obligations also should be function of these factors and depend from the nature of investors who are going to hold the right and their track record in such situations in the past.

So while it's not real that investors won't have rights and restrictions – but the best Founders should see to it that rights and privileges are in hands of 1-2 responsible hands (certainly not across a fragmented group) and that there is a fair mechanism laid down on how and when these get exercised such that it is binding on all. You don't need litigation after having built a nice company and at the time of the exit or the M&A.

At the end of the day, before signing on the dotted line, founders need to have full conviction with regards to an incoming investor that – this is a great team that is backing us and onus is on us as founders to be able to work towards having their vote on our side when it matters. And from an investor's perspective the ideal thought needs to be – we are happy to assign this part of our capital to this startup team led by their founders who are best at what they do and shall always have our vote when needed.

If all parties have this representation in their documentation on a best effort basis – guess negotiations will be easier if not extinct.

Managing Angel Tax Issues – Clarifications on Tax on Share Premium in the hands of Start ups

A.   Context

When any startup raises money from an equity investor, legally they have attributed a much higher value to the company's shares when allotting the deserving stake to the investors.  Quite a few companies in the portfolio and beyond have had inquiries from the Income Tax Dept (IT) when they issues shares at fancy premiums to investors.  There is nothing wrong in this practice though the IT is trying to go after such cases because there is a provision in the IT Act that allows them do so.  That said, there are some legally provided exceptions and this post intends to just state the obvious with relevant background.

B.   The provision that lays down the tax (not the exact language)

Section 56(2)(viib) of IT Act – where a company receives from any person being a resident, any consideration for issue of shares that exceeds the face value as well as fair market value (FMV) of such shares, the excess over and above such FMV shall be counted as the Income of the company and company shall be liable to pay tax on the same as applicable.

C.   Implications of the above in Para B

Suppose the start up raises Rs. 5 Cr at a valuation of Rs. 20 Cr.  Definitely the shares will be allotted to the investors at a price above their respective par value which could be Re.1 per share or Rs.10 or Rs. 100 per share or whatever the amount be.  At this juncture the onus is on the start to ensure that the 'share price per share' at which they have allotted the shares to the incoming investor(s) are at a price that is lower or equivalent to the FMV.  Suppose the FMV is Rs. 50,000 and shares have been allotted at Rs. 50,000 per share so that the valuation comes to Rs. 20 Cr at an aggregate enterprise level..

in such a case, there shall be ZERO income.  However for some reason, the FMV was certified at only Rs. 10,000 as against Rs. 50,000.  Then Rs. 40,000 per share would be the tax.  This when multiplied by number of shares issued and allotted may come to an astronomical number of Rs. 4 Cr in the current case.  In such a case, the start up will be obliged to pay tax @ 30% on 4 Cr – ie Rs. 1.2 Cr.

D.   Carve outs / Circumstances in which above tax shall not be levied

The following are the 3 specific circumstances where the above tax shall not be payable:

1.   Where money has been received from a NON RESIDENT investor regardless of the quantum of the premium – it wont be subject to taxation under this provision

2.   Where the FMV of the shares of the company has been greater or equal to the price at which the investor has been allotted shares, there is no tax payable

3.  The capital has been received from a domestic entity that operates as a SEBI registered Fund.  There are some Terms and conditions to be complied by the Fund here to ensure that the company in which they invest can get the benefit of this exemptions

This means where  start ups that have taken capital from non resident investors (non resident as defined under Income Tax law) or raised it from a SEBI registered fund or the investment from their domestic investors is at a price lower or equal to certified FMV are out of the scope of this tax.

E.  Certified FMV

If investment is coming into a company from parties other than the above (ie from Indian resident persons including corporate, individuals or firms) a certified valuation certificate report should ideally help justify the FMV of the company.  What constitutes FMV or the method of arriving at FMV is not prescribed in great detail.  Per se, the intent of the law is to ensure that unscrupulous money invested to siphon off taxes.  The spirit of the law should ideally be counted as well adhered to if, a start gets it valuation for FMV certified from a Chartered Accountant in practice for over 10 years using DCF (Discounted Cash Flow) method along with a note that details out the assumptions made to arrive at the value along with a rationale for the assumptions.

F.   So whats the problem then

In case of quite a few start ups, Tax department has been reaching out and attempting to tax or taxing companies for this premium.  If companies are covered by the above exemption, the tax department shouldn't go after and tax these share premiums.  The advisors / CFO of the cos should be able to represent the case in the light of the above.  There will hardly be a case where the inspite the above exemptions applicable the assessing officer will win the case against the company.

Besides, there are also instances where the tax officers are challenging the valuation report.  The rationale behind the same is – the certified valuation report is not realistic.  It is interesting to note why they are doing that.  Valuation reports are drawn up basis a projection of next 4-6 years.  The assessments of Income Tax happen sometimes good 2 years after the end of the year and if the Scrutiny is going on, 3-4 years post the end of the year.  By then the company would have actual data of the projections for the period for which earlier projections were drawn.  In most start ups (including some that are doing well), the revenue numbers are off and therefore even profits are far away.  There are genuine reasons for the same but the officer is reluctant to accept or acknowledge these.  He therefore ends up challenging the valuation report's authenticity and sets aside the report.

G.   That said..

There are a few cases where inspite of applicable exemptions and representations the same have been attempted to be taxed and orders have been passed refusing the exemption.  On top of it, there have also been a freak case or two where penal proceedings have been carried out saying that the amount has been withheld by the company to circumvent tax.  These type of cases may win at the appellate levels and even CIT (Commissioner of Income Tax) levels if company and its advisors are convinced that they have complied with all of their obligations under the law.

And this is not a very complex matter to represent and advisors typically shouldn't charge much.  But the implications of not doing it or losing out the battle are huge.  So please do take this seriously and sort it out with competent advice on this.

(Blume portfolio cos may reach out to for further help and queries on addressing this issue.  She has put up a detailed clarification letter for IT department for the portfolio cos)

Part 1: Journey to Jakarta Chronicling a visit of Blume and our founders, exploring the South-East Asia tech ecosystem

Selamat Datang!

In Jakarta with Tim Draper, Gabe Turner (of Draper Venture Network) & visiting Blumiers!

This warm welcome that greets you the minute you arrive in Jakarta is at once genuine and infectious.  Just like India, it makes visitors immediately feel at ease and indeed, welcome!

A special thanks here to our hosts, the Draper Venture Network (DVN), Wavemaker Ventures and also Sudhir Syal of BMS Indonesia, who gave us an opportunity to engage more deeply with the South-East Asia tech ecosystem.

In a course of a week – our inaugural trip to Jakarta – we interacted with peer VCs, start-up founders, and early to mid-stage investors from different corners of Asia.  A key highlight was meeting Indonesia’s largest internet unicorns like GO-JEK and Tokopedia, and hearing their growth stories, the challenges they face, and where they’re headed.

GO-JEKs everywhere! Logistics a huge opportunity.

This blog post chronicles key learnings and observations from Jakarta, preceded by a trip (amongst many earlier visits) to Singapore.  This trip follows on the heels of our inaugural, larger China trip that the Blume core team and a much larger contingent of both Blume founders (as well others) made earlier this spring.

Our “Journey to Jakarta” culminated in an evening fireside chat with Tim Draper (founder of Draper Associates, Draper University and DVN), bringing together the Indonesian ecosystem along with a number of visitors from Singapore, Japan and China.

Accompanying Blume on this trip were 6 of our portfolio companies:

We met different actors on the Indonesian (and Singaporean) start-up ecosystem stage:

Outlined in these next few sections are an account from the eyes of one Indian VC and also from our founders, exploring first-hand the ecosystem and sharing on-the-ground observations and learnings from this very important South-East Asian market – the third largest in Asia outside China and India, and an anchor for expansion beyond the Strait of Malacca.

Please join us on this journey as we dive deep into the South-East Asian tech ecosystem. We welcome your feedback and thoughts.

Sanjay Nath
Managing Partner
Blume Ventures

Final Infographic


South-East Asia (SEA) – from the eyes of an Indian VC and founders

With traffic 3x that of India, LOGISTICS, a huge pain point = opportunity!

Nishith Rastogi, Locus


  • Manila, Jakarta, Singapore, Ho Chi Minh City, Bangkok and Kuala Lumpur are six key cities of SEA representing a combined 2.4x volume of users than entire India, who transact online. Each city is broadly less than two hours (less than a Delhi-Mumbai flight) apart.
  • Thinking of SEA as one large country with six metros makes it an attractive target.
  • Jakarta, contrary to what one may feel due to its heavy traffic conditions, has one of the highest percentages of organised retail (80%) compared to anywhere else in the world.
  • In Jakarta, interestingly, e-commerce and fulfilment are not linked at all, unlike in India where Flipkart, Amazon, Myntra, BigBasket all have own in house captive logistics fleets. Tokopedia is an example of a notable e-commerce unicorn – it relies solely on third party logistics (= the opportunity)
  • Jakarta as a city of 12-15 Mln itself, is a sizeable domestic market as well.


  • Singapore is like clockwork (not surprisingly, these exact same words are echoed again and again). One can easily do eight different face-to-face meetings in downtown within the same day.
  • Is a small domestic market, but a big reference market like Dubai (important for a founder expanding into SE Asia when he/she is asked “do you have any kind of presence in / linkages to Singapore?)
  • Is similar to Tokyo, in two aspects – a) internal processes and b) secondly, the value of real estate. For example, Uber exists but isn’t particularly huge in either market, as both existing public transport and cab systems are efficient. Similarly, these countries have supermarkets stocked with folding racks, which allows clever ways of maximising space utilisation.


Shachin Bharadwaj, Sminq


  • Super-efficient country that works by the clock. “I was able to do six meetings in a day (across the city) and could make it on time for each place (traffic, parking, lifts, everything is aligned to reduce friction) – with time to spare!”
  • The government is pushing entrepreneurship in a substantial way. I was told that for every $ invested as foreign direct investment (FDI) in Singapore, the government will back it with $4 (off-course T&C apply).
  • The ease of doing business is amongst the best in the world.
  • People here are willing to pay for convenience. So, you don’t have to worry about “free deliveries” (i.e. the impact on your margins as a startup founder)
  • Local cabs and GrabTaxi are more loved than Uber – “I personally got very attractive deals on Uber (hence, only used that), but Grab and others were running well even without the subsidized coupons”.
  • For startups, Singapore is a great place to be located to attract capital, with the advantage of IP protection, tax benefits (with Govt leverage) and so on.


  • You need to understand and speak Bahasa to do business with locals.
  • Post GO-JEK, it seems that Indonesia as a market has been “suddenly” discovered by VCs.
  • The government and VCs want businesses to be set up here and are very welcoming with money and any help, to get things started
  • Cost of living is very reasonable [“I found many daily use items cheaper than India (eg Pune)].
  • Public transport is broken (hence Go-JEK and others) and Jakarta has a daily floating population of 2-3 mln who travel in and out of the city every day for work. Once again, an opportunity for logistics.


Shivkumar Ganesan, Exotel

  • While companies in South-East Asia have a general idea on some start-up brands in India, the awareness levels are low. This means that many of us have to approach these countries as though we are starting from scratch (“on the flip side, once you’re in, switching costs are higher and you can establishe and maintain mindshare”).
  • There is a need to establish credibility and trust apart from proposing value. If you are already working with large brands in India, that certainly helps to hit the ground running.


Mausmi Ambastha, Threadsol


  • People are technically aware and there are a lot of expats in positions of leadeship and influence from South-East Asian countries.
  • The expat community is strong and helpful, if you approach them well.
  • The laws are fluid and keep changing very often. You need to mandatorily use a consultant who can guide you through the maze of paperwork and laws that may seem confusing.
  • Visa norms are very strict for Indian passports. If you travel for business or leisure often, more than 3-4 times, they do not give you a visa.  You can get a long-term visa if a company in Indonesia invites or sponsors your visit. More than a letter, the company has to take responsibility and submit documents to the Ministry of External Affairs in Indonesia and only then the Indian Embassy awards a visa.
  • Digitization process of government agencies is not yet in place, so a lot of work is still done on paper.
  • All the paperwork in Indonesia is done in the local language, Bahasa.
  • Hiring and firing norms are pretty strict.


  • You can do multiple meetings in a day and metro is the easiest mode of transportation.
  • The corporate banking sector has solutions for all. However, you need to have a big ticket to get preferred banking services.
  • The personal banking sector is a lot more painful and difficult. It’s not as easy and simple as it is in India.
  • The city is very safe for women and the implementation of laws are very strict.  Its one of the safest cities in the world, likely THE safest.


Dr Zainul Charbiwala, Tricog


  • Very expensive to get anything done, but when it gets done, it is quick.
  • Very easy to do meetings there. In the two days I was there, each meeting ran on time and that were 10 of them spread over the city. Since there is no traffic, getting from once place to another is a breeze.
  • Because it’s a small market, if you sell anything to Singapore, it doesn’t count for much. This is a primary reason why many of the convenience services that we take for granted just don’t exist there, like BigBasket, 1MG.
  • The healthcare space is highly regulated and in the hands of a few large players. Getting into those markets is hard but possible with the right connections.
  • Living costs for one person in the country is about 150,000 USD per annum. Getting permanent residence is not an easy task but again, if you have the right contacts, it gets done quickly.
  • The Economic Development Board (EDB) in Singapore is the leading government agency for business activities. Their mandate is to do more business and encourage employment in the country instead of getting people from outside. Getting experts from outside is fine.
  • Tax and IP advantages are big advantages pulling startups to Singapore.



  • Indonesia is just like India, in almost every aspect.
  • Their smartphone penetration is higher than India.
  • Because of a large market size and opportunity, a lot of Indian companies and startups are considering opening centres there.
  • I spoke to a few people about what it takes to do business in Indonesia. First, it has to be co-owned with an Indonesian national, so a joint venture (JV) is probably the best entry point. Second, you need to hire a minimum of 5 people to start a business – a country manager, an accounts person, an operations manager and two sales people. The first three can be expats but the sales professionals must be local.
  • The above formula is pretty much the only formula that has been known to work for external companies trying to set up businesses there.
  • The country as a whole lacks tech expertise. Tokopedia, one of the largest e-commerce players there has the CTO and tech team brought in from Indian startups (Paytm, etc). Similarly, GO-JEK has a fairly large development team in Bangalore.
  • Setting up a business there and running it is just as hard, if not harder than India. Their land mass is spread out over 17,000 islands which makes logistics a nightmare. Much of the logistical activity gravitates towards Jakarta and the other larger cities.
  • “Tech people are treated at the top of totem pole – so all you CTOs aspiring for a leadership position and an interest in SE Asia, consider migrating!”


Prashant Dixit, Dataweave

Traffic 3x worse than Bangalore


  • Jakarta – City with nightmarish traffic and friendly people. Relationship selling is key to set a foothold in this market.
  • I see Indonesia as a land of immense opportunities primarily driven by domestic consumption.
  • The use of technology is evolving and I see a lot of potential for SaaS based companies.
  • I had some good interactions with the likes of Tokopedia, Blibli, Zilingo and others. The DVN event, the informal mixer for Blume founders hosted by Sudhir Syal (of BookMyShow Indonesia – thanks Sudhir!) helped me in building some good connects. A lot of investment is flowing into Indonesia and this could be the next big land of opportunities.
  • Overall the trip was quite fruitful and I believe we should have more of these events.


Sanjay Nath, Blume Ventures

“When most founders think of expanding into South-East Asia, they usually think of Singapore. Founders should tap the capital and network effect strengths of Singapore, at the same time venturing out into Indonesia and accompanying regions, both via direct sales and strategic partnerships.  The real growth is out there – think of Singapore as a beachhead, a launching pad…. to go out and penetrate the surrounding frontier markets”.


Singapore, with a population of just 5-6 mln, is actually more a “mothership”, the key node in a hub-and-spoke network for the broad SEA region.  It is a rich capital and network base that houses the Asia Pacific region’s largest corporate headquarters, banks, corporate entities and investors. Moreover it is also a business and tax-friendly, IP innovation-led hub; but a very small market in and of itself (and a high cost base for startups).  The real growth then is in the adjacent “frontier markets” surrounding Singapore.  On this particular visit, we dove into Indonesia, the largest of the ASEAN countries.

I’d advise founders to understand and recognize the relative benefits of each region before embarking on their expansion plans. At a fast growing population of 225 mln and counting, Indonesia represents a lower cost, not-to-ignore market opportunity for Indian founders targeting SE Asia as a serious expansion outpost”.  In Part 2 of this blogpost, we’ll discuss the backgrounds of some of the local VCs and leading unicorn founders, areas of success they’ve found so far, and uncover potential synergies between India and Indonesia, two of the largest Asian internet economies [outside China].


  • With a population of 250 mln and a staggering 200 mln mobile non smartphones with active data, Indonesia represents a massive mobile-first opportunity. Half of Indonesia, around 130 mln, are internet users with ~ 94 mln smartphone users
  • The evolution of the Internet leaders’ B2C and C2C marketplaces has been quite sophisticated.  Their strategy to dominate and capture market share has been driven by building trusted and transparent platforms, and around perfecting customer adoption and satisfaction. Some instances
  1. All mobile-first, smartphone-first strategies
  2. Driving stickiness – comes from a variety of tactics including strategic promotions – “99% off” or “free shipping up to 30,000 IDR [Indonesian Rupiah]”
  3. An emphasis on “Education Seller Programs”
  4. Ability to compete comes from their ability to grow both the base of sellers and SKUs
  • The angel and VC ecosystem is small and fairly close knit.  Many VCs have a Chinese/Japanese heritage and also LP bases.  Most early stage VCs invest from seed, angel and through A rounds, and some also have on-the-ground incubator/spaces to house and co-locate startups
  • The cost of living and doing business is fairly reasonable, with many daily use FMCG items cheaper than even India; explaining why startups and VCs often have their HQ in Singapore, but keep their larger teams and ops in Jakarta
  • Investor interest in India is driven both by B2C and in the case of B2B, “taking India to Indonesia markets” [more on this in Part 2 of the blog next month]


Note: This blog post is based on our personal observations and supported with data wherever possible. Part II of this blog post will delve further into South-East Asia’s tech ecosystem and also explore the synergies between India and Indonesia.

To dos for Founders wishing to raise Foreign Capital (Part 1 of 2) – FCGPR Compliance and issues around it


A significant quantum of capital fuelling startups is from overseas sources through the Foreign Direct Investment (FDI) route.  When a company obtains capital through the FDI route, several compliances under the Foreign Exchange Management Act, 1999 (FEMA) become critical and failure to do so may lead to heavy penalties.  FEMA consists of Regulations issued by the RBI from time-to-time.  This post (including Part II of this series) is intended to achieve the following:

  1. Give early stage founders a high level overview of FCGPR and related compliances to be carried out post receiving investment by way of FDI in their companies (Part 1 of 2 being covered herein below)
  2. Issues and challenges we (Blume portfolio cos and Blume per se) have faced with possible solutions to avoid problems with the filing process (Part 2 of 2)

FC-GPR Stands for Foreign Collaboration – General Permission Route

Meaning of FDI – Foreign Direct Investment – means investment by a person / entity that is resident outside India in an Indian company.  The instruments which are considered for FDI are as follows:

(a) Equity Shares

(b) Compulsorily Convertible Preference Shares (CCPS)

(c) Compulsorily Convertible Debentures (CCDs).

(d) Warrants and Partly paid-up shares – However, these require the prior permission of the FIPB.

Shares and convertible instruments to incoming investors have to be issued at a price NO lesser than fair value of shares determined by a SEBI registered Merchant Banker or a Practicing Chartered Accountant (“PCA”) as per any Internationally Accepted Pricing Methodology in the case of unlisted companies.  Upon receiving the capital, the Company will need to give a letter of declaration stating the following alongside the Form FC- GPR:

(a)The price/conversion formula of convertible capital instruments should be determined  upfront at the time of issue of the instruments.

(b) The price at the time of conversion should not in any case be lower than the fair value worked out, at the time of issuance of such instruments, in accordance with the FEMA regulations.

Reporting / Advance Reporting

(a) All the FDI reporting need to be done through portal.

(b) Company will require to register before the above-mentioned portal for intimating the RBI for receipt of FDI.

(c) On receipt of the funds from the foreign investor, the Company will be required to file Advance Reporting before RBI within 30 days of the receipt.

(d) While filing of an Advance reporting before the RBI, Annexure VI with KYC of remitter and FIRC certificate needs to be filed (Advance Reporting form)

The following are the key stakeholders in the FC-GPR process:

  1. Authorized Dealer (“AD”) (Recipient Bank ):

AD bank is a regular scheduled bank with whom we operate and maintain our regular current and saving account for day to day transactions.

Role of AD:

  • Acts as a liaising entity between the Company and RBI
  • All the forms (i.e. Advance Reporting and Form FC-GPR) will be vetted by AD before forwarding to the RBI for their confirmation.
  • Any communication with RBI needs to be routed through AD only.
  • In exceptional cases, RBI will request the Company to revert directly whilst keeping AD on cc on these email exchanges.
  • To intimate to the Company for receipt of foreign fund in their account and sharing necessary paper work before crediting the amount in to the Company’s account.

(Note: some of the above may defer  fromBank to Bank)

2.     Company Secretary ( For Issuance of CS Certificate) :

Practicing Company Secretary is required to certify the following with form FC-GPR:

  • While doing an Allotment to foreign national / entity the Company has complied with all regulations applicable under the Companies Act, 2013
  • Company is eligible to issue the shares under the FEMA regulations
  • Company has complied with all applicable FEMA regulations.

In nutshell, CS certificate validates that the Company’s allotment is under the compliances of all the applicable laws

3.     SEBI registered Merchant Banker or a Chartered Accountant ( For issuance of Valuation Report)

A valuation report shall be required to be filed before the RBI.  This shares that are to be allotted to the investor shall be at a price that is NOT lower than the valuation accorded by the valuer.  The valuer may choose to adopt any internationally accepted methodology whilst arriving at the valuation and furnish a report.

4.     RBI ( Final Regulatory authority)

Advance Reporting and Form FCGPR – On receipt of Advance reporting form from the AD bank, RBI scans through the application and issue the Unique Identification Number (UIN) to the transaction.

On receipt of form FC-GPR and other supporting documents, RBI scans through all the documents and issues the acknowledgment letter to the Company.

RBI may usually take upto a period of 30 days in issuing the acknowledgment letter to the Company if the application is in order and RBI doesn’t have any objections / concerns on the form filed.

Recommendation and Quick Summary to all the Start –ups Company:

Sr.No Particulars Timeline
a) On receipt of FDI, follow up with AD bank for KYC and FIRC copy and start preparing the documentations for Advance Reporting. T + 30
b) On filing of Advance Reporting before the e-biz portal follow up with AD bank for UIN. After completion of 7 days of filings.
c) On completion of allotment file the form FC-GPR before the e-biz portal

(Company is not required to wait for UIN while filing of Form FC-GPR before the RBI on completion of allotment)

T +30
d) After filing of form FC-GPR do follow up with AD bank for the acknowledgment copy. After completion of 10 days of filings.

In the next piece, will take help of Constellation team and will narrate with a list of key issues that we have faced on FCGPR with their implications and possible ways to avoid these.  Stay tuned 🙂

PS – Jointly written in collaboration with Latesh Shah of Constellation Blu (  Readers interested to learn more about this could reach out to this email id with your questions and Latesh and / or I are happy to organize a concall for all interested on this topic


I first heard it as we passed a Buddhist temple en route to the Forbidden Palace in Beijing. The guide was a very talkative cherubic lady, named Ta-ta. She was well informed about most things Indian, including her namesake Ratan. And amongst various statistics and facts that she rolled out, she mentioned that a little over 90% of Chinese don’t have a religion. The others are split between Taoism, Buddhism, Islam, Christianity and even Maoism. Most of the atheists do go to pray – largely at Buddhist temples – when they are afraid or need hope – exams, relationships, and business success but there is no doctrine that guides them in the name of one religion or the other.


[It’s the second time in a year that I had heard the shunning of religion by a rebooted economy. The last was in Estonia, where similarly, Signe, a friendly startup evangelist had a meal with my family over summer. She said young Estonians didn’t see how religion helped at all, when the Russians ruled them – it seemed futile to them. The only religion they wanted to have was ‘enterprise’. A segment of young Estonians actually think software is the way for them to make a dent in the world – and their role models are emerging – I’m predicting that they will continue to create many more beyond the clichéd Skype example. 

The significant difference is of course size! Estonia has all of 1.3 million people, a good chunk of them in the capital Tallinn whereas China is India plus some more]

Then, I heard it again and then a third time in Shanghai – the 90%+ (statistic) of the population who cited no religious preference. Coupled with this was the oft-repeated and fabled work ethic of the average Chinese – we had witnessed it even back in India – day of the week and time of the day have no boundaries for them – they are ever-ready to take a meeting that furthers business.

And then, that Sunday afternoon bus ride in Shanghai suddenly built on this theme. I said it aloud to a few of my fellow India tech-trekkers over a bus ride or two and it became very clear suddenly!

The single-minded purpose and FOCUS towards income generation, wealth creation, prosperity, quality of life – all as a surrogate to achieving “happiness” is the core driver of the nation.

It’s much easier when one is stripped off of all “distractions”. And that’s what the Chinese have gradually moved towards.  Here you go:

(The word “No” below is intended for dramatic effect and not for debate on what is the scale and % of each of the deviances from “No”)

–       No religion – they’ve just make it redundant and irrelevant at scale

–       No politics – at least not of the divisive kind – the people have ceded control to the state, even more over the past 25-30 years, the tradeoff between democracy and the state delivering the promised improvements in quality of life seems like a compromise that the Chinese have (somewhat) happily made. As someone put it, they’ve learnt to trust the single party government to take care of their well being as a people.


–       No organized crime and limited or reducing petty crime / corruption – fear of the government and its scrutiny keeps them at check

–       No Bollywood or other such ‘woods – film-making is driven by a cultural or political agenda or simple action stuff or import of foreign films without an agenda. There is not much need or room for silly romancing or silly ideals.

–       No cricket – I’m simplifying the notion to contrast it with a nation obsessed by cricket. India has many other emerging sporting passions and the Chinese follow international sport and play to win in many others but there is no comparison in how many man-days we would spend/waste on cricket as a nation compared to all their sports fandoms.

–       No language barriers – the state has directed the centralization of Mandarin gradually to drive out the differences of multiple language variants

–       No chaotic large families – Two week-long breaks in the year mean that families throng to reunions from across the country and shut the country down in more ways than one. So, there is chaos – but it’s somehow incredibly packed into those half-year windows. The single child policy (now relaxed back after 40+ years) has also meant cousins and families are somewhat controlled in size. Family roles across generations are fine-tuned to meet the economic purpose and stability of a household. Mothers earn, grandmothers take care of children and parents take care of the grandparents economic well-being.

–       No biases towards domestic products – unlike most Indians, who would happily pay for overseas products but undermine local brands, the Chinese are proud champions of their own products

–       No infra bottlenecks – of course, they have massive traffic jams, but everytime they see a bottleneck, they ruthlessly keep eliminating them with newer spends.


–       No fear of new cities – India needs to build large long corridors of rail and road infra and build a handful of mega cities alongside each of them – there is no way to rebuild our large cities or expand them effectively much more. “New” is the answer as the Chinese keep finding for themselves – not adding to creaking older infrastructure.

One can debate state intervention and control of people’s lives for weeks together. One shouldn’t forget that China has been obsessed about this level of discipline and single mindedness for much longer than almost anyone else in the world. One just had to take a glimpse of a km stretch of the Great Wall, be told that it was 10000’s of kms long, and your heart instinctively feels the weight of the deep rootedness of this obsessive alignment between a 1.3 billion population. This is very different from the large set of fragmented princely states that was the basis of modern day India during the same 2000+ years.

I’m not going to explicitly spell out the differences on each of the above points relative to India. The differences scream out of the unwritten sentences.

This FOCUS, seldom seen in most other countries, added to their fearless forays into the rest of the world means that they can become a world power like none other. They are unafraid of winning over political ground with business and economics as the primary driver and have no baggage in terms of biases. They will, in my opinion, overtake American capital in a very short period of time in Indian tech and startups. They see the opportunity with far more clarity than most others in the western world.


The Chinese are very proud and jingoistic and have been pronouncing the one country, one people mantra for millennia. It’s not a new found post-1947, post-independence phenomenon such as modern India. Coupled with the above characteristics, despite being a nation of its size, the conditions suddenly create an unparalleled juggernaut.  They are going to be driving a lot of the world economy across our lifetimes at least.


This piece is featured in the The Little Blu Omnibus – a compilations of articles and notes authored by the team and our founders. To read the rest of the articles, go ahead and download the e-book via this link.


In March, Blume Ventures along with 40 portfolio founders took a 10 day trip to China, as part of the ChIndia TMT Dialogue 2017, to interact with internet giants, government officials, and some of the best startup minds in the country. Hence, we thought it would be a great idea to share some of our learnings and key observations that could be helpful to our ecosystem. We are pleased to offer you the e-book here

A day in the life of the people who make a startup

By Rohan Paranjpey, Principal, Blume Ventures

The Blume team went on an interesting expedition while we were in Bangalore. Though we travel almost on a weekly basis to our portfolio company offices in Bangalore, Mumbai and NCR, this was the first instance when all of us took some time out to take on the role of an employee of some of our startups.

The investment space gives you a lot of exposure to data points, analogies and shared experiences. But nothing gives you a better perspective than experiencing what it’s like on the ground, not just as a founder but as the employee the founder relies on to make the wheels turn (literally sometimes).

Here is what we did and how we fared:

First Task – Dunzo, an on-demand concierge service

Six of us from the Blume team took a shot at completing daily tasks for Dunzo users. Karthik and I accompanied two experienced Dunzo runners, while four others – Arpit and Dhanasree on one scooter, Avantika and Ashish on another, took matters into their own hands.

Report Card

Karthik – 3 tasks initiated, 1 cancelled

  • Task 1 : Deliver laundry
  • Task 2: Deliver masala dosa with extra chutney
  • Task 3: Deliver 3 kgs of chicken from Nature’s Basket

Rohan – 2 tasks completed. 

  •  Task 1: pick up dry cleaning. Completed with no hiccups, but the customer looked pretty shocked to see 2           people deliver his clothes
  • Task 2: pick up Starbucks coffee. Interestingly here, Starbucks staff made the runner wait while they cleared the orders of everyone else there – don’t blame Dunzo if your Starbucks coffee is a bit late!

Ashish + Avantika – Mission Aborted (bike ran out of fuel, phone ran out of battery)

Arpit + Dhanasree – 2 tasks completed  

  • Task 1: Pick up envelope in Indiranagar, deliver to UB city. Completed with no hiccups
  • Task 2: Pick up a huge set of photo frames from Richmond Town, deliver to Nagarpethe. That’s the last we saw of Arpit and Dhanasree that day!

Next stop –  iService – Expert Gadget Repair

We spent the afternoon with Ankit and team at the iService office, and then some time at their service center close-by.

Did you know that more than 50% requests for phone/tablet repair are screen related? In fact, 15% of iPhone users use an iPhone with a broken screen. This statistic might have been lifted off our team – 1 out of the 6 of us who own an iPhone has a broken screen!

Ankit walked us through how a phone screen is fixed, using the best parts from China and the best machines available, and also showed us how easy it is for repair shops to just use fake parts and take advantage of unsuspecting customers. There’s definitely a space for a trustworthy brand for unauthorized repair of personal gadgets, and we’re glad iService is miles ahead of its competition here.  

P.S. Some of us (most of us) took advantage of this opportunity and walked out with new screens, batteries and microphones.

MonkeyBox – Not Quite Nostalgia

Last stop, we spent time with Sanjay and Sandeep of MonkeyBox at their kitchen where they prepare healthy, nutritious food for a whole bunch of school-going children in Bangalore.

They’re getting the best chefs from 5-star hotels and the best nutritionists who, in a daily tug-of-war, push out the best tasting healthy food even adults can’t get enough of. And they do it with a strong focus on getting the freshest ingredients daily.

What’s great about MonkeyBox is the complete transparency in the process. They frequently call parents over to their kitchen so parents can see for themselves the care that goes into ensuring that the whole process is hygienic

Pictures are worth a thousand words here –

Where was MonkeyBox when we were in school??

All in all, an epic 3 days to say the least!


Tech-enabled rental brokerage company raises 30 crore

In April, Home rental startup  raised 30 crore rupees in a Series A funding round from Lightspeed India Partners, Blume Ventures and CyberAgent Ventures. Sajid Fazalbhoy of Blume Ventures and Pallav Pandey, Founder & CEO of talk about how the latest investment round benefits the company.

  1. What is your thesis behind this investment?

Sajid Fazalbhoy: is working in a massive multi-billion dollar opportunity. Home rentals is a big share of the annual expenses of an Indian Household. In spite of that there is no major brand in the market which provides people rental homes with a reliable experience. is the right solution with the right mix of technology and process rigor to offer efficient home rental solution at scale. We strongly believe that with FastFox there is a credible opportunity to build a major pan-India Home Rental solutions brand.

  1. How does this round benefit

SF: The company has attracted funds from some very tactical investors. We have CyberAgent Ventures that has invested in a real estate Chinese unicorn. We have a leading data science investor from the Valley also. These investors along with LSVP provide very key insights into comparing markets. The company will use this money to build a better tech layer that will provide homeowners more relevant data for their needs. The company has for now captured the Gurgaon market and will expand their reach to other cities too. The funds will used to ensure FastFox’s brand recall as the go to site for a consumer s rental needs

  1. How does plan to utilise the funds?

Pallav Pandey – We plan to invest the funds to improve our technology solution, service delivery models and expand the team across engineering, sales and operations.

  1. What are your expansion plans?

PP – We will continue to focus on rental business which is a huge opportunity. We will spend on improving our systems, and plan to expand to Noida and Pune in the next six months, and then eventually, expand to Bangalore and Mumbai

  1. How does Fastfox help overcome the challenges in the rental space?

PP – The real estate business is fragmented and dominated by small local players which makes the experience of house hunting time-consuming and painful. is focused on making the home renting experience quick, convenient and transparent. Customers can check authentic property related information including photographs from the convenience of their home/office. Shortlist the one they like and do assisted home visits with We also help them negotiate best terms with the home owners and do the complete paperwork.


  1. How does model work?

PP – leverages its network of brokers to procure updated information on rental homes in near real time. is able to source 1000s of houses through this network. This makes the largest destination for ready rental homes in the city. Customers coming on can not only check and discover best rental options but also schedule home visits and finalize homes.

  1. Could you share some key metrics?

We have more than 2,500 property listings in the city posted on our website. Customers typically shortlist 6-7 properties for themselves. The median time that a customer takes to select a property from the time they reach is less than 6 days.