7 Milestone Based Investments

What is it?

Milestone based investing offers a format of structured investments for startups. The service provides a safety net for investors and startups through a given configuration of investing. Tranches shall be distributed over time or critical milestones. The format ensures shrewd usage of funds while the security of not running out is maintained.

Kofounderz Team shall prepare startups for pitching in the MBI scheme regarding investor expectations, formats, documentation, and other compliance.

Once ready, startups and investors will get a chance to discuss and decide on either milestones or periods for investment instalments. Again, the format will establish pre-agreed norms & transparency.

Who is it for?

Founders

Investors

Legal personnel

Benefits

  • Security for investors by ensuring the business they have invested in moves forward before putting up all the money upfront.
  • Milestones act as key drivers for businesses towards eventual growth and success.
  • Indirect mentoring for startups through the process of preparing for MBI pitching and deciding milestones
  • Networking
  • Self imposed discipline to ensure usage of funds are laser sharp, judicious and rich in learning every time
  • Enhanced investor confidence since transparent process provides investors the ability to help move the business forward.

FAQs

Why would founders opt for MBI if they ate getting investments upfront from other sources who are willing to put the money upfront.?

Firstly MBI is not mutually exclusive which means founders could choose to raise funds via MBI alongwith other sources. Secondly, founders are likely to view MBI as a source of funds that are accessible basis pre- agreed milestones , with a certain amount of assurance, unless of course they mess up on the usage of funds real bad.

Most Startups are in a fluid state, there is hardly any scope to know what next three months will look like, leave alone deciding the milestones. How can MBI operate in Startup world?

Its true that Startups , especially the ones that are in early stage, will be in a fluid state but that does not mean they do not know what they would like to accomplish in next three months whether it is alliances they want to strike up, grants they would like to apply, marketing programs they would like to experiment with, employees they would like to invest in or many such tangible and intangible parameters. It is a conversation with utmost transparency, practicality and candour that has to result in milestones agreement. In certain cases, not having milestones can also be part of MBI where tranches are released purely at specific time intervals say every quarter, provided Founders and Investors agree to such terms.

How does the mechanism work?

Investors agree to wire the pre agreed amount to Startups usually via debentures or equity vested at regular intervals. Alternatively , Escrow agreeements with Bank tie ups are the norm as well.

How does Kofounderz Team help with investments?

We are not an investment platform or an Investment company. We assist Startups in terms of preparing the foundation for MBI in terms of Investor expectations, formats, setting expectations, preparing for exigencies, navigating the uncertainties, connecting them with compliance agencies that can manage the paperwork for them. We also help Investors decide which Startups are appropriate for their investment priorities and mechanisms to insulate their investments from vagaries of this asset class. We do not provide Investment advice nor are we an exchange.

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