Ek Signature ki keemat tum kya jano

Founder Udham (or “Fudhu”, as his friends called him) was an excited man. His start-up “Dream Labs” was about to close its first VC round. Most of the checklist items had been cleared.

As the final paperwork came close, he started engaging with his Angel Investors - those who had supported him so far. He gave them the good news, that a large VC was coming on-board, which was a sign of confidence in the overall business. The chances of the Angels to get a good exit improved significantly now. He also explained that the investors would need to quickly sign the SHA (Shareholder Agreement).

One of the Angel Investors was Shakuni Sharma, and he refused to sign. He sent a weird e-mail congratulating the Founders over the fundraise, and at the same time saying something to the effect of “...hey i am just a small-time investor; you have my full support… please go ahead with the transaction without my signature”. He drove the Founders and the VCs mad. Being a lawyer, he very well knew that the deal could not go through without all the investor signatures. There was no issue of time, or bandwidth, or anything of that sort. Fudhu could fly down to his place and personally collect the signature, if needed. But time was not a constraint at all. He was just playing hardball…essentially he wanted an exit.?

Fudhu and his Co-Founder Jugaadu begged and cajoled the VC to give a confirmed exit to this investor at the completion of the VC round. While a secondary round was being considered anyways, nothing was firmed up until then. However, given the pain from Shankuni Sharma, they had no choice but to draw up a legal document which said, in effect, “...if our primary deal goes through, we will buy your shares at so-and-so price…offer valid till …”.

Jugaadu took the SHA documents + this offer letter to Shakuni. In the meantime, Fudhu consulted his legal team - how could they avoid such nasty surprises, going forth? As part of the new SHA documents, a new clause was incorporated…all the old angels gave their power of attorney to Fudhu…he could sign on any SHA (or similar documents), going forth.

It was a close call. Had the VC not been supportive, the whole deal could have collapsed simply due to the crazy stunt of one investor.?

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{Ram (https://www.dhirubhai.net/in/ramakrishnanm) has raised money for his start-up, as well as invested in other start-ups. This is part of a comical series on how the entire start-up ecosystem - Founders, Investors, LPs, Investment Bankers, Accelerators - are constantly selling dreams to each other}