Raising Equity for Start-Ups by Rajesh Shukla Montage Capital

Rajesh Shukla of Montage Capital talks on Raising Equity for Start-ups ?

              Mr. Rajesh Shukla (Montage Capital)

We are in an entrepreneurial era where start-ups are mushrooming every day. While it is a good sign for the economy, let’s look at the various stages in the life cycle of a start-up.

1. The concept stage when an aspiring entrepreneur who has a business/product idea researches the feasibility, competition, scalability. An idea can make all the difference and a right idea executed at the right time could be the difference between success and failure.
2. The seed stage where initial investment comes through own resources like friends, family, mentors.
3. The growth stage where the product/idea has developed considerably, infrastructure and team size is growing; this is the stage where angel investors/promoters come in.
4. If the product has been accepted in the market successfully and there is a definite scale plan, the financing stage is next where the much needed capital infusion can be done to take the start-up to the next level.

Equity refers to the promoter’s contribution for starting any business. Equity can be in the form of technology, vision, implementation, operation and distribution. Any value which helps the project and company can be treated as Equity, but every Equity has to be converted in the value of shares and shares should be converted into money.

The government has always encouraged & supported start-ups through their various schemes and tax benefits. Similarly now with the new regulation government is ensuring that start-ups get the right valuation which in turn helps them to raise equity.  Initially, when individual chartered accountants were valuing the shares, there used to be a lot of confusion in the Investors minds.  Sometimes the company valuation was too high or sometimes it was low. Now as per the new regulation passed by the Government of India only Category One Merchant Bankers like Montage Capital who are authorised by SEBI can undertake valuation of shares. Valuation always has a lot of criteria, viz. the value of opportunity, technology, strategy &  market, but finally the most important thing is the return on investment for the investors. It is very important for investors to involve reputed & experienced merchant bankers to avoid being cheated or being a victim of fraud.

Companies like Google and Microsoft got valuation in different segments, hence start-ups in all segments with the right business plan, right valuation and the right parameters have an edge as compared to start-ups in the past.

What is Equity?

The  Promoter’s contribution is called Equity. Generally,  Equity gives the confidence to the Debt and other forms of Fund like OCD, ICD & CLN.

The amount of Equity represents the size and the value of the Company and projects.

Generally Equity comes from Promoters of the Company, relatives and friends of the promoters, high network of individuals and from various funds who are established and promoted by various Trusts and Promoters.

The valuation of the Equity will now be decided by the Merchant Bankers. Government of India has taken a very revolutionary decision in this regard.  Now the Merchant Bankers will value the shares of the Company and accordingly interested people can invest in the Company.

The start-ups and other Companies who are looking for Equity, must have the Certificate from Merchant Banker and accordingly they can prepare their CMA Data, Cash Flow and Exit Option.

For more info visit:- www.rajeshshukla.com

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