Question 1

What does a venture capital lawyer do for a startup?

Accepted Answer

A venture capital lawyer protects a startup's interests through a funding round — reviewing the term sheet, negotiating the shareholders agreement, managing due diligence and ensuring regulatory filings are completed correctly. In practice, the role is part translator and part negotiator. Investor documents are drafted to protect investors; a VC lawyer explains what each clause — liquidation preference, anti-dilution, drag-along, board consent rights — will cost the founders in dilution and control, and negotiates the terms that the market allows founders to push back on. At Nilaya Legal, the same senior lawyer handles your round from term sheet to fund flow.

Question 2

What legal services do startups need when raising PE or VC funding?

Accepted Answer

Startups raising PE or VC funding need legal services including term sheet review, shareholders agreement negotiation, CCPS or CCD documentation, ESOP structuring, FEMA and FDI compliance, legal due diligence support, and cap table advisory. A startup legal services firm also helps founders understand investor rights — anti-dilution, information rights, drag-along provisions — before signing any binding documents. Getting this right at the seed or Series A stage prevents costly problems in later rounds.

Question 3

Is a term sheet legally binding in India?

Accepted Answer

Most of a term sheet is not legally binding in India — but specific clauses within it usually are. The commercial terms (valuation, investment amount, board seats, liquidation preference) are typically expressed as non-binding intentions. However, clauses on confidentiality, exclusivity or "no-shop" obligations, costs and governing law are normally drafted as binding, and Indian courts have enforced them. There is a second, practical reality: terms agreed in the term sheet are very hard to renegotiate in the definitive documents. Treat the term sheet as the real negotiation, and take legal advice before signing it — not after.

Question 4

What is the difference between an SSA and an SHA?

Accepted Answer

A share subscription agreement (SSA) governs the investment transaction itself — how many shares, at what price, and the conditions to be met before money moves. A shareholders agreement (SHA) governs the ongoing relationship after the money is in — board composition, voting and veto rights, transfer restrictions, anti-dilution and exit rights. The SSA is largely spent once the round closes; the SHA governs the company for years. Both are signed together at closing, and in Indian practice the key SHA protections are also written into the company's articles of association to make them enforceable against the company.

Question 5

What should founders negotiate in a term sheet?

Accepted Answer

Founders should concentrate on five things: liquidation preference (push for 1x non-participating, the Indian market standard), anti-dilution (broad-based weighted average, never full ratchet), board composition and the investor veto list (keep it short and genuinely material), founder vesting and lock-in terms, and exit obligations such as drag-along thresholds and buyback timelines. Valuation gets the attention, but these structural terms decide who controls the company and who gets paid first if things go sideways. A term sheet review by a startup fundraising lawyer typically takes days, and it is the cheapest legal spend of the entire round.

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