Frequently Asked Questions?
A Secondary Transaction is when an Investor buys shares in a Startup directly from an existing Shareholder (i.e an existing investor or employee or founder).
The funds paid by the new Investor/Buyer go to the Seller not to the Startup.
To be an accredited investor who can invest in start-ups, you should fulfil one of the below conditions:
- Annual income of at least Rs 2 crore;
- Or, a net-worth of at least Rs 7.5 crore or more, with at least Rs 3.75 crore in financial assets;
- Or, an annual income of at least Rs 1 crore, and networth must at least be Rs 5 crore, with investments in financial assets worth at least Rs 2.5 crore.
There are no restrictions on listing shares for sale on KapTable nor Investing in pre-IPO shares
KapTable charges 5% the transaction value as fees to the Seller, however these can be higher especially in cases where the total block being sold is below INR 10,00,000/- (INR 10 Lakhs).
If there is a SPV formed to own the shares, there may additional governmental taxes/duties along with a management fee associated with the administration of the entity which will be communicated on a case by case basis.
You can find details of KapTable fees under the MarketPlace Terms and Conditions
The following is the highlight of steps of a sale transaction through KapTable
- KapTable negotiates with the Buyer and Seller to agree on a price and number of shares
- KapTable coordinates with the company and the Company confirms that the deal is acceptable and they will do the required transfer
- The Share Transfer form is executed by the Buyer and Seller
- Simultaneously, the Buyer pays the Seller the total transaction value and Seller settles KapTable fees.
- KapTable works with Startup to file the requisite change in shareholding with Registrar of Companies and issues the share certificates to the Buyer
The following is the highlight steps of a sale transaction when shares are in demat format.
- Seller lists the shares on KapTable after executing the seller agreement
- KapTable designates an Escrow account for this transaction. The account is provided by 3rd party independent Escrow provider
- KapTable coordinates with the company and the Company confirms that the deal is acceptable
- Once Buyer confirms intent to purchase a set number of shares, the Buyer transfers the purchase price into a designated Escrow account
- KapTable confirms to the seller the receipt of funds in Escrow account
- Seller transfers the shares from his/her Demat account to buyers Demat Account and notifies KapTable
- Upon confirmation by KapTable, the funds are released by the Escrow Provider to the Seller less KapTable fees
Given the private nature of these Startups, there is no central repository for share prices and we rely on a mix of qualitative and quantitative signals. Qualitatively, we leverage our deep expertise, our network relationships and knowledge to arrive at reasonable estimates of valuation per share. Furthermore we use the following quantifiable signals including
- Last available primary fund raising of the Startup in question
- Valuation of relevant peers globally
- Total Available Market of the problem the Startup is solving
- Progress and execution of the Startup compared to projections
In case of startups who are incorporated outside India, the process for investing will depend upon the jurisdiction of incorporation and the process will be informed by KapTable at the time of your expression of interest.
Broadly, these terms refer to the different stages of equity funding that a Startup receives from investors in exchange for partial ownership in the startup.
Pre-Seed/ Seed Stage: The term Seed suggests that this is a very early investment, meant to support the business until it is ready for further investments or is cash flow generating on its own. Seed money normally comes from own sources, friends and family and early stage VC funding.
Startups in this phase of life are riskiest for an investor as the business model remains unproven; hence qualitative signals such as background and experience of the founders are typically more important factors to investors.
Pre-Series A/ Series A Funding: Once a startup has developed a track record in form of consistent revenue, user base or another similar metrics and wants to grow its business more rapidly the startup may opt for Series A funding. Funds raised typically are used to refine the product offerings, hire more staff, IT infrastructure and to optimize business models.
This round has traditionally been the first round where institutional investors invest in startups and is comparatively less riskier than Seed stage investing. The business model, growth strategy, exit opportunity for investors and scalability take a precedence in these rounds in evaluating the startup. Typically, pre-seed investors start taking some of their money off the table post a successful Series A round.
Series B/Series C funding: these happen when the Startup has proven themselves capable of executing on their business plans, has demonstrated the ability to handle growth pangs and now requires funding for further growth.
This is typically a stage also where the consolidation of the existing Capital Table starts happening, with exits of earliest investors.
Later stage funding/Pre-IPO rounds: As the startup has proven itself and become an established player in its industry, later stage investors come on board as the company solidifies its position and looks to scale even greater heights.
Given the private nature of the companies, information is usually scarce to non shareholders. However, given KapTable’s relationships with both companies and shareholders, all listings on KapTable are verified with respect to Shareholding and financial reports.
Furthermore, depending upon the company and the size of the transaction, we will be in a position to coordinate between the seller, buyer and the company the execution on Non Disclosure Agreements and proprietary details including monthly MIS.
KapTable Holdings Private Limited is a Private Limited with a CIN of U65990HR2021PTC096638 and having its registered address at Flat no 122, Tower-E, Raheja Atlantis, Sec-31, 32A, Gurugram, Gurgaon, Haryana, India, 122002.