IPO Preparation Steps

The importance of a Cofounder Agreement Back in April 2017, I started my first startup with a close friend from college. We had known each other for about 4 years and started off on a positive note, incorporating a company with an equal 50/50 split. Soon after, we got incubated at SINE, IIT Bombay’s startup incubator. As part of the process, SINE made it mandatory for us to sign a Cofounder Agreement. At that time, we were just a few months out of college and didn’t fully appreciate its value. We googled a format, customised it, and signed. One of the clauses was about a lock-in period: "The Founders hereby agree that the shares held by them in the Company shall be locked in for a period of [] years ("Lock-in Period") from the Execution Date..." We decided to put 2 years as the lock-in period, without giving it much thought. This agreement was signed on 29th July 2017. Fast forward to 6th August 2018, barely a year later, my cofounder quit. At that time, he owned ~50% of the company. The only reason I could save the company was because of that lock-in clause. Without it, half the company would have gone to someone who had already exited. That experience taught me a few lessons: 1. Legal agreements can be lifesavers when things go wrong. 2. Not everyone thinks long-term. 3. People can quit abruptly without notice. Since then, I’ve always been very particular about legal agreements, especially termination and lock-in clauses. They protect not just you, but also your team, customers, and investors. If you’re running a startup and haven’t signed a Cofounder Agreement yet, please do it now. It’s one of the best favours you can do for your future self. #startups #business #entrepreneurship

Hidden Lock-in clauses in a Contract Majority of the contracts won’t say “lock-in period.” But that doesn’t mean you would not be stuck. Here are some sneaky ways contracts lock you in, without ever using those words: 1. No termination for convenience: You can only exit if the other side messes up. If they don’t? You’re stuck till the end. 2. Auto-renewals with tight notice windows: The contract says it's valid for 1 year, but quietly auto-renews unless you give 90 days’ written notice before it ends. Miss the notice window = another year added. 3. Hefty early exit fees: You’re allowed to leave the contract in between, but only if you pay 6 months’ worth of charges. That’s a lock-in wearing a price tag. 4. Minimum commitments: The contract says you must buy 100 units every month, even if you only need 40. You’re paying for more than you actually use, with no refund or flexibility. 5. Upfront discounts that claw back: You got a benefit upfront, but leave early, and you have to return it. Basically: A "gift" that turns into a bill if you leave. 6. Notice + cure periods before termination: Even when you can exit, you have to wait. 30 days’ notice + 30 days for them to “fix” things = 2-month cooling-off before you’re free. Bottom line: Don’t search for the word ‘termination' only. Ask: Can I walk away if I need to? If not, there’s a lock-in hiding in formal language that needs to be taken care of. #contractreview #inhousecounsel

𝗖𝗮𝗻 𝘆𝗼𝘂𝗿 𝗲𝗺𝗽𝗹𝗼𝘆𝗲𝗿 𝗹𝗲𝗴𝗮𝗹𝗹𝘆 𝗰𝗵𝗮𝗶𝗻 𝘆𝗼𝘂 𝘁𝗼 𝘆𝗼𝘂𝗿 𝗱𝗲𝘀𝗸 𝗱𝘂𝗿𝗶𝗻𝗴 𝘁𝗵𝗲 𝗹𝗼𝗰𝗸-𝗶𝗻 𝗽𝗲𝗿𝗶𝗼𝗱? This question was dealt by the Delhi HC in a case involving 𝙇𝙞𝙡𝙮 𝙋𝙖𝙘𝙠𝙚𝙧𝙨 𝙋𝙫𝙩. 𝙇𝙩𝙙. and one of its employees, 𝙑𝙖𝙞𝙨𝙝𝙣𝙖𝙫𝙞 𝙑𝙞𝙟𝙖𝙮 𝙐𝙢𝙖𝙠. ➤ 𝗪𝗵𝗮𝘁 𝗛𝗮𝗽𝗽𝗲𝗻𝗲𝗱? ↳ Lily Packers, took offence when Vaishnavi decided to leave her position as a fashion designer before completing the agreed three-year lock-in period. ↳ The company, fearing breaches of confidentiality and other contractual obligations, sought arbitration to resolve the dispute. ↳ The issue of whether a lock-in period in an employment agreement is arbitrable or not was raised before the Delhi HC. ↳ The Delhi HC while affirming the arbitrability of such a clause discussed the issue of validity and enforceability of lock-in periods. ➤ 𝗧𝗵𝗲 𝗩𝗲𝗿𝗱𝗶𝗰𝘁 ↳ The court ruled that the lock-in clauses are valid contractual agreements and they do not violate fundamental rights. ↳ Such clauses are in nature of  ‘lawful and reasonable covenants’. ↳ The court also noted that these provisions are essential for employer stability, particularly when significant resources are spent on training employees. ↳ Furthermore, the court held that such provisions are like the backbone of a healthy work environment—necessary for the stability and growth of the employer while offering clarity to employees. ➤ 𝗟𝗲𝗴𝗮𝗹 𝗣𝗲𝗿𝘀𝗽𝗲𝗰𝘁𝗶𝘃𝗲 ↳ Questions often arise about whether lock-in periods infringe on the employees' freedom to work as protected by 𝘼𝙧𝙩𝙞𝙘𝙡𝙚 𝟭𝟵 𝙤𝙛 𝙩𝙝𝙚 𝙄𝙣𝙙𝙞𝙖𝙣 𝘾𝙤𝙣𝙨𝙩𝙞𝙩𝙪𝙩𝙞𝙤𝙣 and 𝙎𝙚𝙘𝙩𝙞𝙤𝙣 𝟮𝟳 𝙤𝙛 𝙩𝙝𝙚 𝙄𝙣𝙙𝙞𝙖𝙣 𝘾𝙤𝙣𝙩𝙧𝙖𝙘𝙩 𝘼𝙘𝙩, 𝟭𝟴𝟳𝟮. ↳ Section 27 generally renders agreements in restraint of trade void, but the court clarified that such restrictions during employment are not contrary to law. ↳ The court leaned on previous cases like 𝘉𝘳𝘢𝘩𝘮𝘢𝘱𝘶𝘵𝘳𝘢 𝘛𝘦𝘢 𝘊𝘰. 𝘓𝘵𝘥. v. 𝘚𝘤𝘢𝘳𝘵𝘩 (1885) and 𝘕𝘪𝘳𝘢𝘯𝘫𝘢𝘯 𝘚𝘩𝘢𝘯𝘬𝘢𝘳 𝘎𝘰𝘭𝘪𝘬𝘢𝘳𝘪 v. 𝘊𝘦𝘯𝘵𝘶𝘳𝘺 𝘚𝘱𝘪𝘯𝘯𝘪𝘯𝘨 & 𝘔𝘢𝘯𝘶𝘧𝘢𝘤𝘵𝘶𝘳𝘪𝘯𝘨 𝘊𝘰. (1967) to establish that in-employment restrictions are generally lawful, while post-employment ones can be problematic. ➤ 𝗣𝗿𝗮𝗰𝘁𝗶𝗰𝗮𝗹 𝗜𝗺𝗽𝗹𝗶𝗰𝗮𝘁𝗶𝗼𝗻𝘀 In this case, the lock-in period meant that Vaishnavi committed to staying with Lily Packers for a specific duration, ensuring that the company’s investment in her training would not be wasted. The court pointed out that such terms are typically negotiated and agreed upon voluntarily, providing clarity and protection for both parties. 𝗜𝗳 𝘆𝗼𝘂’𝗿𝗲 𝗮𝗯𝗼𝘂𝘁 𝘁𝗼 𝘀𝗶𝗴𝗻 𝗮 𝗰𝗼𝗻𝘁𝗿𝗮𝗰𝘁 𝘄𝗶𝘁𝗵 𝘀𝘂𝗰𝗵 𝗮 𝗰𝗹𝗮𝘂𝘀𝗲, 𝘁𝗮𝗸𝗲 𝗮 𝗺𝗼𝗺𝗲𝗻𝘁 𝘁𝗼 𝗿𝗲𝗮𝗱 𝗶𝘁 𝗰𝗹𝗼𝘀𝗲𝗹𝘆 𝗮𝗻𝗱 𝘂𝗻𝗱𝗲𝗿𝘀𝘁𝗮𝗻𝗱 𝘄𝗵𝗮𝘁 𝗶𝘁 𝗺𝗲𝗮𝗻𝘀 𝗳𝗼𝗿 𝘆𝗼𝘂.

Most Indians won't buy a ₹2,000 shirt without checking reviews. But they'll invest ₹2 lakh in a loss-making IPO because "everyone's talking about it." Recently saw how this played out with OLA. The buyers were largely retail investors, many of them entering with the belief that this was an opportunity to beat inflation and buy into a long-term tech story at “low” prices. Par asli picture thodi different hai. This isn’t an isolated case. It’s part of a pattern we’ve seen repeatedly across recent Indian IPOs. → Ola Electric listed at ₹76 and now trades near ₹34, down over 55%. → Paytm listed at ₹2,150 and fell to around ₹310, an 85% erosion of value. → Zomato took almost two years just to climb back to its listing price. Different companies, different narratives, but a similar outcome for retail investors. What’s actually happening is fairly straightforward. After the 2022 global rate hikes, venture capital funding slowed sharply. Easy money disappeared, and many cash-burning startups suddenly needed an alternative source of capital. The public markets became that exit door. For early investors, the IPO often turned into a liquidity event rather than a growth milestone. Retail investors, unknowingly, became the liquidity. Yahan pe sabse bada gap expectations ka hai. Most retail investors have low risk appetite and are investing money meant for retirement or their children’s education, yet they’re being sold loss-making tech stocks as “wealth creation” opportunities. When founders themselves are selling after a 78% drawdown, that’s usually not the moment for retail entry. Remember: if promoters are exiting, stay cautious. If a company needs an IPO to survive, it’s probably not meant for retail capital. IPOs should fund growth, not desperation.

🚀 Strengthening the SME IPO Market: SEBI's New Regulations 🏦 The Securities and Exchange Board of India (SEBI) has unveiled stricter regulations for SME IPOs, aiming to address concerns around transparency, governance, and misuse of funds in the SME segment. These measures are set to improve listing quality and safeguard investors. Here's a quick rundown of the key changes: ✅ Profitability Mandate: SMEs must demonstrate an operating profit (EBITDA) of ₹1 crore in at least 2 of the past 3 fiscal years before filing their DRHP. ✅ Restriction on Stake Sale: Selling shareholders cannot offload more than 50% of their stake, and the offer-for-sale portion is capped at 20% of the issue size. ✅ Tighter Fund Utilization: IPO proceeds can’t be used to settle loans with promoters or directors. Allocation for General Corporate Purposes (GCP) is capped at 15% of the issue size or ₹10 crore, whichever is lower. ✅ Enhanced Transparency: SMEs must advertise in newspapers and integrate QR codes for easy DRHP access. ✅ Unified Standards: SME firms will now follow Related Party Transaction (RPT) norms and allocation methodologies akin to main-board IPOs. In 2024 alone, over 230 SMEs raised ₹8,414 crore, with some IPOs seeing 100+ times subscription! However, recent controversies, due to inaccuracies, highlight the need for these reforms. These guidelines come alongside SEBI's broader regulatory changes, including updates for ESG rating providers, InvITs, REITs, and debenture trustees, highlighting SEBI's commitment to a robust and trustworthy financial ecosystem. 📊 These changes are a step towards ensuring financial robustness, investor trust, and a sustainable IPO ecosystem for SMEs. What do you think about SEBI’s new guidelines? Will they foster investor confidence or create barriers for SMEs? Share your thoughts below! 💬 LinkedIn Guide to Creating CA Sakshi Borikar

Yesterday, Figma filed its beautifully designed S-1. It reveals a product-led growth (PLG) business with a remarkable trajectory. Figma’s collaborative design tool platform disrupted the design market long-dominated by Adobe. Here’s how the two companies stack up on key metrics for their most recent fiscal year [see attached image]: Figma is about 3% the size of Adobe but growing 4x faster. The gross margins are identical. Figma’s 132% Net Dollar Retention is top decile. The data also shows Figma’s Research & Development spend nearly equals Sales & Marketing spend. This is the PLG model at its best. Figma’s product is its primary marketing engine. Its collaborative nature fosters viral, bottoms-up adoption, leading to a best-in-class sales efficiency of 1.0. For every dollar spent on sales & marketing in 2023, Figma generated a dollar of new gross profit in 2024. Adobe’s blended bottoms-up & sales-led model yields a more typical 0.39. The S-1 also highlights risks. The most significant is competition from AI products. While Figma is investing heavily in AI, the technology lowers the barrier for new entrants. Figma’s defense is its expanding platform—with products like FigJam, Dev Mode, & now Slides, Sites, & Make. These new product categories have driven many PLG AI software companies to tens & hundreds of millions in ARR in record time. Given its high growth & unique business model, how should the market value Figma? We can use a linear regression based on public SaaS companies to predict its forward revenue multiple. The model shows a modest correlation between revenue growth & valuation multiples (R² = 0.23). Figma, with its 48% growth, would be the fastest-growing software company in this cohort setting aside NVIDIA. A compelling case can be made that Figma should command a higher-than-predicted valuation. Its combination of hyper-growth, best-in-class sales efficiency, & a passionate, self-propagating user base is rare. Applying our model’s predicted 19.9x multiple to estimate forward revenue yields an estimated IPO valuation of approximately $21B 2 - a premium to the $20B Adobe offered for the company in 2022. The S-1 tells the story of a category-defining company that built a collaborative design product, developed a phenomenal PLG motion, & is pushing actively into AI. The $1.0 billion termination fee from Adobe was received in December 2023 and recorded as “Other income, net” in Fiscal Year 2024 (ending January 31, 2024). The large stock-based compensation charge of nearly $900 million is related to an employee tender offer in May 2024. Both of these are removed in the non-GAAP data cited above. By taking Figma’s 48.3% trailing twelve-month growth rate & discounting it by 15% (to account for a natural growth slowdown), the model produces a forward growth estimate of 41.1%. This would imply forward revenue of about $1.1b.

Figma is skipping the traditional IPO roadshow and going public via direct listing. And it's 40x oversubscribed. Most companies avoid direct listings. In a traditional IPO, investment banks buy shares at a discount and then sell them to institutional investors. The banks act as underwriters, which means they guarantee a minimum price and provide stability. Direct listings are different. No underwriters. No discount. No roadshow presentations to convince investors. Existing shares just start trading on the exchange at whatever price the market decides. This creates volatility risk as there's no price floor. But Figma doesn't need to worry about that. There's massive demand already baked in. When Spotify went direct in 2018, everyone predicted chaos. Instead, it traded relatively smoothly. Same with Slack in 2019. But why does this really matter for Figma? They capture the full market value instead of giving banks a discount. In traditional IPOs, banks often price shares 10-20% below market value to ensure a successful launch. That's money left on the table. Why give away value when you don't have to?

The market downturn continued this week, bringing with it another reminder that markets move in cycles whether we like it or not. Often these cycles have a way of separating companies with the foundations to last from those who might not. The major key difference? Fundamentals. monday.com announced 33% revenue growth AND 30% free cash flow margins for FY24 - putting us at 63% on the Rule of 40 and placing us among the highest-performing SaaS companies worldwide. But our approach to balancing growth AND profitability wasn’t accidental or overnight - far from it. When I joined monday.com just 4 months before our IPO (see my previous post), we faced a big decision that I remember debating late into the night: Follow the crowd with "growth at all costs" at the expense of efficiency, or stay true to monday.com's belief in sustainable growth (even if Wall Street might initially raise some eyebrows). While many others may have chased growth at the cost of sustainability, we: - Focused relentlessly on unit economics with "BigBrain" – our in-house business intelligence, measuring everything from ARR and customer growth to CAC, NDR, sales efficiency, marketing campaign ROI and more - Prioritized our product-led growth efforts before adding enterprise sales (i.e. held off on hiring hundreds of salespeople overnight) - Built the monday.com product suite on top of our Work OS platform — sustainability scaling our offering without building new infrastructure from scratch every time Today, our numbers validate the success of this approach. This month’s market downturn brings me back to 2008, when I was a young CFO in New York watching the financial markets crumble. I’ll never forget seeing companies with impressive growth numbers experience significant challenges while businesses with strong balance sheets, healthy cash flow, and loyal customers made it through - bruised but standing. The difference? Their fundamentals: consistent revenue growth, profitability and responsible cash flow management. These aren't just memories for me. They're lessons that have shaped our approach at monday.com, where we focus on strong unit economics, data-driven analysis and measured growth - all while continuing to invest in product innovation, AI capabilities, and most importantly, the best people. The interesting thing is - you can't build these fundamentals overnight. They require consistent focus, disciplined execution, and sometimes making unpopular decisions. But that's how we're pursuing sustainable growth at monday.com. We're not just building a successful company, but providing lasting value for our customers, employees, and shareholders. PS: Speaking of sustainable growth…this Ukrainian pole vaulter Sergey Bubka broke the world record a whopping 35 times over his career. Each centimeter was hard-earned through a relentless focus on fundamentals. That’s our monday.com approach in a nutshell.

Key Clauses in a Co-Founder Agreement: Safeguarding Your Startup If you're running a startup with a co-founder, not having a co-founder's agreement in place is a risky move. However, if you're a savvy founder entering into such an agreement, there are several critical clauses you must ensure are included. Among them, two clauses stand out for their importance: Intellectual Property (IP) Ownership Clause: This clause determines who will own the intellectual property created by the startup. Ideally, it should clearly state that the ownership of all IP resides with the company, not with any individual co-founder. This is important because, in the unfortunate event of a fallout between co-founders, IP ownership disputes can cripple the startup's operations. By vesting IP ownership in the company, you ensure that the startup’s assets remain intact, independent of individual co-founders. Lock-In Period Clause: Another critical clause is the lock-in period, which prevents co-founders from selling or transferring their shares for a specified duration, often ranging from one to three years. This restriction is vital for ensuring stability within the startup, as it prevents co-founders from abruptly leaving the venture. It also offers confidence to investors, assuring them that the core team is committed to the company's growth for the foreseeable future. Including these clauses not only protects the startup's assets but also fosters long-term stability, both internally and externally, with investors. #StartupLaw #CoFounderAgreement #IntellectualProperty #IPLaw #LockInPeriod #BusinessStability #Entrepreneurship #StartupFounders #LegalAdvice #StartupStrategy #InvestorRelations

Dual-track M&A and IPO exits sound like optionality. In practice, they're two full-time jobs running on the same management team. Great to catch up with my colleague Jemil Visram recently on how these are playing out. With London raising £2.1bn from 23 listings in 2025, PE hold periods at their longest since 2007, the UK listing regime (UKLR), reformed prospectus rules (POATRs), and three-year SDRT listing relief, the infrastructure for genuine dual-tracks has never been better. The question is whether you are ready for what that means: 𝗧𝗵𝗲 𝗰𝗼𝗿𝗲 𝗽𝗿𝗲𝗽𝗮𝗿𝗮𝘁𝗶𝗼𝗻 𝗶𝘀 𝘀𝗵𝗮𝗿𝗲𝗱. Three to five years of IFRS-audited accounts, an integrated financial model, quality of earnings, a clean data room, vendor due diligence, and change-of-control contract review. Do this work properly once, and the bulk of it feeds into both tracks. 𝗪𝗵𝗲𝗿𝗲 𝘁𝗵𝗲𝘆 𝗳𝘂𝗻𝗱𝗮𝗺𝗲𝗻𝘁𝗮𝗹𝗹𝘆 𝗱𝗶𝘃𝗲𝗿𝗴𝗲 - this is where companies get caught. 𝗠&𝗔 𝘁𝗿𝗮𝗰𝗸: → Risk is negotiated privately → Buyer does diligence, prices issues in, or takes W&I insurance → SPA allocates risk through warranties, indemnities, disclosure letter → Confidential from start to finish → Clean, full exit at closing 𝗜𝗣𝗢 𝘁𝗿𝗮𝗰𝗸: → Risk is disclosed publicly → Every material statement verified over 6–12 weeks → Directors become "persons responsible" for the prospectus under PR 5.3, with statutory liability under s.90 FSMA 2000 → Three years IFRS accounts, working capital statement, long-form report, FCA approval through multiple comment rounds → Partial exit - typically 180-day sponsor lock-ups (365 for directors), full realisation over 2–4 years *Governance divergence is total A sale buyer is acquiring control - they may not care about your board. An IPO requires re-registration as a plc, independent NED majority under the UK Corporate Governance Code, a proper NED search (3–6 months), and functioning audit, rem and nom committees. *Insurance is separate W&I for sale, POSI for IPO - different products, different underwriters, different lead times. 𝗪𝗵𝗮𝘁 𝗮𝗰𝘁𝘂𝗮𝗹𝗹𝘆 𝗺𝗮𝗸𝗲𝘀 𝗶𝘁 𝘄𝗼𝗿𝗸: 𝗕𝘂𝗶𝗹𝗱 𝘁𝗼 𝘁𝗵𝗲 𝗵𝗶𝗴𝗵𝗲𝗿 𝘀𝘁𝗮𝗻𝗱𝗮𝗿𝗱 𝗳𝗿𝗼𝗺 𝘁𝗵𝗲 𝘀𝘁𝗮𝗿𝘁 If your finance function can satisfy an IPO reporting accountant, it can satisfy any buyer's due diligence. 𝗥𝗲𝘀𝗼𝗹𝘃𝗲 𝘁𝗵𝗲 𝗵𝗼𝘂𝘀𝗲𝗸𝗲𝗲𝗽𝗶𝗻𝗴 𝗲𝗮𝗿𝗹𝘆 Every bolt-on properly integrated - contracts novated, IP assigned, regulatory authorisations confirmed. Operational discipline separates buy-and-build platforms that exit cleanly from those that don't. 𝗣𝗿𝗼𝘁𝗲𝗰𝘁 𝗺𝗮𝗻𝗮𝗴𝗲𝗺𝗲𝗻𝘁 𝗯𝗮𝗻𝗱𝘄𝗶𝗱𝘁𝗵 Both tracks eat the CEO and CFO alive. The single biggest risk isn't legal or financial - it's the business deteriorating because leadership is consumed by the process. 𝗠𝗮𝗸𝗲 𝘁𝗵𝗲 𝗱𝗲𝗰𝗶𝘀𝗶𝗼𝗻 𝗼𝗻 𝘁𝗶𝗺𝗲 A good decision made on time beats a perfect decision made too late. What's the biggest surprise you've seen derail a dual-track process?