Paisa Wise and $$$ Foolish

Founder Udham (or “Fudhu”, as his friends called him) had recently incorporated his start-up “Dream Labs”. It was early days, and he was consciously keeping his costs low.?

Fudhu needed help with bookkeeping and ROC filing. He asked another Founder friend for a reference. He got to know of someone who had handled finance and accounts for a well-funded start-up…and had recently started out on his own, to offer services to start-ups. His name was Chaman Aadmi (CA). Best part of Chaman was that he came cheap… less than INR 15K per month.?

Fudhu was very happy to have found Chaman. He would delegate almost all finance and compliance related matters to Chaman.

Once, Fudhu had the option of receiving investment from a non-resident-indian (NRI), Amir. Amir used to transfer money to India through a non-banking-route; it was cheap and effective for him. Amir asked Fudhu if he could use the same route to transfer money to his start-up.?

Fudhu asked Chaman about it… and Chaman said “no problem”.

And so, Amir invested in Dream Labs through a non-banking-channel.

When it came to paperwork regarding the investment, Fudhu realized that Chaman had committed a major blunder. Such a route was not at all approved. There was a mess to be dealt with…involving RBI, the bank, CA, CS, et al. It was a slow and painful process, with multiple complications at each step.

In the meantime, Dream Labs was growing, and an investment firm called Vella Capital (VC) showed interest in investing in them. A term sheet was shared, and due diligence was in progress. As the legal firm went through the papers, this NRI-investment-compliance became almost a deal-breaker. This was a topic that scared the legal team as well as the VC. Later on, when Fudhu asked a few other start-ups, he came to know that almost everyone was paranoid about the topic…except, of course, Chaman.

A multi-million-$$$ investment opportunity was at risk, because Fudhu had decided to rely on a cheap CA.

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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}