1. What is Inflection Point Ventures? What is its purpose?

Inflection Point Ventures is an Angel Investors Group started by a group of CXOs. Given the interest expressed by CXOs in wanting to engage and encourage new age entrepreneurs, we decided to provide a customized platform to do just that and more. A group of very active and enthusiastic CXOs decided to come together and thus came into being, Inflection Point Ventures (IPV). This sub-group also forms the core team which carries out an initial assessment of recommended startups.

 

IPV is an independent forum with 2000+ CXOs & HNIs, created with the purpose of providing an opportunity to create wealth for its members. This platform aims to leverage and apply the distributed knowledge of the members, in a collective manner, to a given investment opportunity. Since there is no need for intermediaries in deal sourcing, evaluating and investing in startups, we expect to reduce the cost, time and effort significantly. It also allows a new investor to start with a small investment, while still making a meaningful value proposition for the startup with combined funding from various members.

2. What is unique about IPV and therefore how is this going to be different from other investing forums?

As a further elaboration of point number 1, the USP and related advantages are laid out below:

  1. Diverse network of 2000+ distinguished CXOs, HNIs & senior professionals, spanning across various geographies, industries and areas of expertise, that are available in real time to evaluate any given startup (e.g. Due diligence, Funding, Business Knowledge, Mentoring and solving various other problems)
  2. Low cost to be a part of the network, given distributed nature, which would be almost half of any other significant angel group
  3. Higher chances of success, as the evaluation is done by experts in the fields of business, investing as well as functional areas
  4. Ability to start investing with smaller sums as the funding is pooled by the group, still making it meaningful for a given startup
  5. Ability to help the startup grow and take them to the next level by providing them additional

access to customers, guidance and mentorship along with funding

  1. Ability to refer startups that are already known to this forums’ members, and giving them an opportunity to do a proprietary deal

3. How do I evaluate if I should join the forum or not? Is the forum meaningful for me?

As an extension to point number 1, you could evaluate being a part of this forum if you are serious about one or more of the following objectives:

  1. Want to learn from peers about how to evaluate startups and investing in general
  2. Want to create wealth through investing in startups
  3. Want to teach and share your knowledge, expertise and experience related to investments with other members of the forum
  4. Want to test your entrepreneurial skills while mentoring and guiding startups in various aspects like solving challenges, scaling up
  5. Want to evaluate a startup as an innovative solution provider either for your business or the investors personally

4. What privileges / services should I expect as a paid member of IPV?

IPV provides the following benefits to its members:

  1. Access to startup pitches and webinars
  2. Access to evaluation reports prepared by IPV’s in-house analyst team
  3. Access to investing in the startups
  4. Quarterly update call/status note from invested startups (one common call with founders for all the members of IPV)
  5. Membership Rewards Program – Members can earn points for investing, referring new members, helping startups, providing mentorship time etc. The points can also be redeemed to pay for the annual subscription charges. Details regarding the membership rewards program are mentioned in the membership note. For CXO Genie members, you can use your CXO Genie points for ‘IPV membership’ related costs as well

5. When and where does the group meet?

Given the scope of the activities and keeping in mind the wide geographical spread of our members, we meet virtually via our Startup Saturday Webinars every week. This would help in saving travel time as well as enable the participation of members across various geographies. However, to enable networking and to know other members personally, IPV organizes regular meetings as well, once annually in each of the three biggest regions in the Indian startup ecosystem. These meetings are held in August for Bengaluru (South Region), in April for Gurgaon (North Region) and in December for Mumbai (West Region)

6. What is the ‘Steering Committee’? How are the members selected and how does one become a part of the Steering Committee?

The steering committee is formed within the IPV investor base who are willing to:

  1. Commit a certain amount of minimum time for regular operations of the group
  2. Share expertise in required areas like due diligence, valuations, business, industry or other areas and takes up an area of responsibility either for the core group or for a given investment

The core group is intended to be a flexible group and members may come in or move out depending upon individual situation and time commitment available, while the total number of members in the group remains fixed at any given point in time.

7. What are the Dos and Don’ts on the platform?

Dos:

  1. Members enjoy the freedom to initiate & drive discussion
  2. Post related to Startups, investments and learnings
  3. Discussion related to startups
  4. We encourage members to congratulate or welcome members on a 1:1 basis only
  5. Members may choose to invest or have B2B deals or both with the start up
  6. The ultimate investment decision lies solely on the investing members’ discretion
  7. The onus of managing ‘conflict of interest’ lies with the member and not Inflection Point Ventures

Don’ts:

  1. We do not encourage using the forum for marketing or commercial purposes
  2. We strongly recommend not to seek confidential company information or share it on the forum. Other members/admins do not take the onus of non-disclosure of the same
  3. It is prohibited to share Forwards, Jokes, wishing on Birthdays, Anniversaries, Festivals, National Holiday and putting political opinions, etc. In case a member feels strongly about sharing any forward, the member must donate 200 points for each such share
  4. Discussions should be kept confidential and not be shared in public or otherwise outside the forum
  5. ‘Inflection Point Ventures’ does not proclaim or guarantee any returns, it is a collective effort with no recourse to any member/forum
  6. IPV is not liable to make good a loss, in investment made

8. Which asset classes are included in the scope of the initiative, and what are the exclusions if any?

Given the nature of the forum membership (CFOs, CHROs, CEOs etc.), the starting focus would be limited to investment in startups, while listed stocks would remain outside the purview of this group. This is also keeping in mind that many of the members themselves hold senior positions in listed companies. However, other asset classes can be added over time as required – Debt, Real estate and others.

9. What is the structure of the transaction in an investment made by an IPV Investor?

We would like to keep the process simple for everyone and therefore any member can invest directly as an individual. The transaction, terms and conditions would be directly between the member and the startup (with guidance from the core leadership team of IPV), for example: Standard Term sheet, Valuation, Evaluation Sheets etc.

10. How are startups referred to the forum? Can I refer startups I have invested in earlier or if I know the founders?

Any IPV Investor can refer a startup, provided they know the founders personally. Members can refer a startup at: ipventures.in/contact-us/startup/

The founders and the startup will then be reviewed by the core committee which will evaluate the given startup on a defined set of evaluation criteria. IPV is industry agnostic and believes in equal opportunity.

11. What are the criteria for the startup to be shortlisted for pitching their business?

When a startup is referred to IPV, a first-level evaluation is done by the in-house analysts, basis which a scorecard is released to the IPV core team. Basis the scorecard, the core team evaluates the viability of the business/investment and a voting process is conducted amongst them. If it passes the voting, the startup is then invited to pitch to the IPV members.

12. I want to refer a startup to this forum. How should I position IPV to the founders for them to raise their funding from this forum?

IPV offers multiple unique benefits to startups and the below can be your pitch to them (you can also request funding@ipventures.in for a detailed note that has been prepared, to be sent to the startup):

  1. Ability to raise funding from a set of mature and seasoned investors with diverse professional experience in handling businesses
  2. Opportunity to get advice and mentorship from experts in an area they need help in. (e.g. Scaling up, Legal advice, Advice on business operational issues, HR matters, Talent acquisition etc.)
  3. Help in early identification and solutioning for potential roadblocks and risks. Opportunity to get best practices from the industry
  4. Opportunity to get CXOs as their retail customers and make them their ambassadors
  5. Opportunity to get corporate/B2B customers as the forum represents various CXOs of businesses across industries

13. Are there certain principles of investing that this forum expects to follow?

Given that startup investing is a high-risk activity, it is important that the investments are done in a very defined manner to be able to weed out the high-risk candidates. This is proposed to be achieved by using a defined set of principles of investing. This set of principles is being developed upon the wealth of literature published (refer to the question on various items of literature) as well as leaning on the experience of the steering committee (that would comprise of investment professionals selected both internally and externally). This set of principles would be incorporated into the evaluation sheets (scorecard & valuation summary) published by the IPV analysts to investors.

14. How do we negotiate on the valuation of the startup?

The core committee along with the referring member (or Lead Member) leads the discussion basis feedback after the webinar. Please note that the valuation agreed upon will be the same for all investing members.

15. Can we still invest in the startups not taken forward by IPV?

If you are opting to be an individual investor (must have filled the feedback form on the given startup), IPV will connect you to the lead Investor who will co-ordinate information from the founders directly. However, at no point will IPV be held responsible for the confidentiality of such information or the custodian of the same. As IPV has not taken the startup forward, it will not be responsible or accountable for managing the investment process.

16. I am new to investing. Are there certain books that I should read to get myself up to speed?

Yes, we strongly advise that one gets to understand the basic tenets and principles of Investing. The following books are highly recommended for anyone wanting to learn investing concepts and evaluating startups.

  • Zero to One: Notes on Startups, or How to Build the Future by Peter Thiel (founder of PayPal)
  • Hot Seat: The Startup CEO Guidebook by Dan Shapiro
  • Buffett Beyond Value by Prem Jain
  • The Intelligent Investor by Benjamin Graham
  • The Little Book of Common Sense Investing by John C. Bogle
  • The Outsiders by William Thorndike
  • Common Stocks and Uncommon Profits by Philip A. Fisher
  • The Millionaire Next Door by Thomas J
  • The Snowball by Alice Schroeder
  • Stay Hungry, Stay Foolish by Rashmi Bansal
  • The Lean Startup by Eric Ries
  • Think and Grow Rich by Napoleon Hill
  • The Startup Playbook: Secrets of the Fastest-Growing Startups by David Kidder
  • The Millionaire Next Door by Thomas J. Stanley
  • Rich Dad Poor Dad by Robert Kiyosaki & Sharon Lechter

Members can refer other good books too, and we can add them here in the list

1. Who is Resident Outside India / Non-Resident Indian (NRI)?

A person who is not Resident in India.

2. Who is a Resident in India?

Section 2(v) of FEMA defines Person Resident In India as under:

  1. A person resident in India for more than 182 days during preceding financial year but does not include —
    1. A person who has gone out of India or who stays outside India, in either case
  2. For/ or taking up employment/ studies outside India or
  3. For carrying on business or vocation outside India or
  4. For any other purpose involving an intention to stay outside India for an uncertain period.
  5. A person who has come to or stays in India, in either case, otherwise than—
  1. For/ or on taking up employment/studies in India or
  2. For carrying on business or vocation in India or
  3. For any other purpose, in such circumstances, as would indicate his intention to stay in India for an uncertain period.
  4. Any person or body corporate registered or incorporated in India,
  • An Office, branch or agency in India owned or controlled by a person resident outside India
  1. Any office, branch or agency outside India owned or controlled by a person resident in India

3. What is Foreign Direct Investment?

‘Foreign Direct Investment’ (FDI) is the investment through capital instruments by a person resident outside India (a) in an unlisted Indian company; or (b) in 10 percent or more of the post issue paid-up equity capital on a fully diluted basis of a listed Indian company.

4. What is Foreign Investment?

‘Foreign Investment’ is any investment made by a person resident outside India on a repatriable basis in capital instruments of an Indian company or to the capital of an LLP

5. What is 'Investment on repatriation basis?

‘Investment on repatriation basis is an investment, the sale/ maturity proceeds including a gain of which are, net of taxes, eligible to be repatriated (To NRE or a Foreign Account) and the expression ‘Investment on non-repatriation basis’, will be construed accordingly.

The investments made through remittance from NRE / Foreign Bank Account are eligible for repatriation basis subject to the submission of KYC and Foreign Remittance letter as mentioned under the answer to question no. 14.

6. Can Non-Resident (NR) invest in shares (Equity, CCPS, CCD) of a company in India?

Yes, there are two entry routes for Investment by Non Residents in India:

  1. Automatic Route is the entry route through which investment by a person resident outside India does not require the prior Reserve Bank approval or Government approval.
  2. Government Route is the entry route through which investment by a person resident outside India requires prior Government approval. Foreign investment received under this route shall be in accordance with the conditions stipulated by the Government in its approval.

7. What are the requirements for Automatic Entry Route

  1. Aggregate Foreign Portfolio Investment up to 49 percent of the paid-up equity capital on a fully diluted basis or the sectoral/ statutory cap, whichever is lower
  2. Such investment does not result in the transfer of ownership and control of the resident Indian company from resident Indian citizens or transfer of ownership or control to person resident outside India.

Other investments by a person resident outside India will be subject to conditions of Government approval and compliance of sectoral conditions.

8. Are there any prohibited sectors for investment by a person resident outside India

Investment by a person resident outside India is prohibited in the following sectors:

    • Lottery Business including Government/ private lottery, online lotteries.
    • Gambling and betting including casinos.
    • Chit funds (except for investment made by NRIs and OCIs on a non-repatriation basis).
    • Nidhi company.
    • Trading in Transferable Development Rights (TDRs).
    • Real Estate Business or Construction of Farmhouses
    • Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes.
    • Activities/ sectors not open to private sector investment viz., (i) Atomic energy and (ii) Railway operations
    • Foreign technology collaboration in any form including licensing for franchise, trademark, brand name, management contract is also prohibited for Lottery Business and Gambling and Betting activities.

9. Can a foreigner set up a partnership/ proprietorship concern in India?

No. Only NRIs/PIOs are allowed to set up partnership/proprietorship concerns in India on non-repatriation basis.

10. What are the instruments for receiving Foreign Direct Investment in an Indian company?

Foreign investment is reckoned as FDI only if the investment is made in equity shares, fully and mandatorily convertible preference shares and fully and mandatorily convertible debentures with the pricing being decided upfront as a figure or based on the formula that is decided upfront.

11. What are the modes of payment allowed for receiving Foreign Direct Investment in an Indian company?

An Indian company issuing shares /convertible debentures under FDI Scheme to a person resident outside India shall receive the amount of consideration required to be paid for such shares /convertible debentures by: (Mainly)

(i) foreign inward remittance through normal banking channels, preferably through SWIFT as it helps the company to get FIRC expeditiously from its bank, required to be filed with FC GPR.

(ii) debit to NRE / FCNR account of a person concerned maintained with an AD category I bank.

12. Can NR open and maintain Bank accounts in India?

Yes, NRs can open and maintain bank accounts in India. There are mainly three types of Bank Accounts available for NRs- Non- Resident External Account (NRE), Non-Resident Rupee Account (NRO) and Foreign Currency Non-Resident Account (FCNR).

13. What should be the type of Indian bank account for the investments (Repatriable / Non-Repatriable) in India by NR?

There are two main types of accounts that serve as NR investment options in India:

Non-Resident External Account (NRE) – The account is generally maintained with funds remitted from foreign accounts and repatriable funds from India. Funds from this account can be used for investment by NR on Repatriable Basis. The money of such an account is kept in INR and is easily repatriable.

Non-Resident Ordinary Account (NRO) – This account type is generally used by NR for their Indian income. Funds from this account can be used for investment by NR on Non-Repatriable Basis.

14. Can money be transferred from NRE account to NRO account?

Yes, money can be freely transferred from NRE account to NRO account.

15. Can money be transferred from NRO account to NRE account?

No, in general money cannot be transferred from NRO account to NRE account. However, there are a few exceptions for a few specified transactions like Repatriable Funds credited to NRO Account subject to necessary compliances (Form 15 CA / CB etc).

It is clarified that the transfer of funds on account of net sale / maturity proceeds (net of all applicable taxes), of shares / debentures may be allowed by the AD Bank from NRO – PIS account (a scheme of Reserve Bank of India—enables NRIs and OCBs to purchase and sell shares and convertible debentures of Indian companies on a recognized stock exchange by routing such purchase/sale transactions through their NRI Savings Account with a designated bank branch) of an NRI to the said NRI’s NRE account, subject to the following conditions :

  1. Such transfer of funds should be within the overall ceiling of USD one million per financial year subject to payment of tax, as applicable;
  2. and AD should ensure compliance with the limit of USD one million for the transfer of funds by the NRI.

16. Can NR repatriate if invested from the NRO bank account?

If an NR makes investments from a Non-Resident Ordinary (NRO) account, then the earnings and proceeds from such investments are not repatriable, the funds will go to NRO Account

17. What documents are required for primary investment on a repatriable basis?

Additional Documents required at the time of Investment:

  • KYC Letter from remitter bank in RBI Prescribed form &
  • Foreign Remittance certificate from Remitter Bank / Bank Statement / Transaction Statement.

18. What are the additional documents / compliances required at the time of purchase of shares (Secondary investment) on a repatriable basis?

Additional Documents required at the time of Purchase:

  • KYC Letter from remitter bank in RBI Prescribed form
  • Foreign Remittance certificate from Remitter Bank / Bank Statement / Transaction Statement.
  • Share Sale Purchase Agreement.
  • CA Share Valuation report in addition to IBB Valuer Report. (Cost 20000/- to 25,000/- + GST)- This is to be obtained with Management Engagement Letter, Management Representation Letter, Financial Projections, from the investee company.
  • RBI Compliance through CS – Cost Rs. 7500/- to 10,000/-.+ GST
  • Authorized Dealer / Bank Fee – Rs. 15,000/- + GST
  • Buyer and Seller Consent letters to AD / Bank –
  • Authority letters etc.
  • Total cost is Rs. 50000/- + GST
  • RBI / FEMA Returns (FC TRS) to be filed by Indian Resident buyer within 30 days of receipt of remittance.

19. What are the documents required at the time of Sale of Shares by Non-Resident on repatriable basis?

Additional Documents required at the time of sale of shares:

  • Share Sale Purchase Agreement.
  • CA Share Valuation report (Cost 20000/- to 25,000/- + GST)- This is to be obtained with Management Engagement Letter, Management Representation Letter, Financial Projections, from the investee company.
  • RBI Compliance through CS – Cost Rs. 7500/- to 10,000/-+ GST.
  • Authorized Dealer / Bank Fee – As per Bank rules + GST
  • Buyer and Seller Consent letters to AD / Bank –
  • Authority letters etc.
  • Total cost is Rs. 40,000 to 50000/- + GST

20. In case the Indian company issues shares to a person resident outside India other than to the person resident outside India from whom the inward remittance has been received, what documents have to be filed?

The form FC-GPR has to be filed along with the following documents:

  • KYC reports of both the remitter and the beneficial owner.
  • A no-objection certificate (NOC) from the remitter for issuing capital instruments
  • To the beneficial owner mentioning their relationship.
  • A letter from the beneficial owner explaining the reason for the remitter making remittances on its behalf.
  • A copy of agreement / board resolution from the investee company for issuing capital instruments to a person other than from who the remittance has been received.

21. In case of sale of secondary shares to a person resident outside India other than to the person resident outside India from whom the inward remittance has been received, what all formalities have to be done?

The form FC-TRS has to be filed along with the following documents:

  • KYC reports of both the remitter and the beneficial owner.
  • A no-objection certificate (NOC) from the remitter for issuing capital instruments to the beneficial owner mentioning their relationship.
  • A letter from the beneficial owner explaining the reason for the remitter making remittances on its behalf.
  • Other documents as per Answer to Question no. 15 above.

22. Are RBI / FEMA Returns (FC TRS / FC GPR) required to be filed if payment from NRO Account?

RBI / FEMA Returns (FC TRS / FC GPR) – Not required to be filed if payment is remitted from NRO Account.

23. Are RBI / FEMA Returns (FC TRS) required to be filed by Indian Resident buyer when NR making the sale of shares?

Under repatriable basis, RBI / FEMA Returns (FC TRS) to be filed by Indian Resident buyer within 30 days of receipt of remittance whereas under non – repatriable basis, RBI / FEMA Returns (FC TRS) not required to be filed by Indian Resident buyer.

24. Is there any additional cost for investment in shares if funds are remitted from NRO account?

No additional cost if funds are remitted from NRO Account.

25. How NRs can remit sale proceeds?

The sale proceeds (net of taxes) of shares held on repatriation basis may be credited to NRE /FCNR (B)/NRO account/ Foreign Account, whereas sale proceeds of non-repatriable investment can be credited only to NRO accounts.

  • Payment will be subject to TDS @ as applicable to STCG / LTCG under Sec 195.
  • The Indian buyer should have TAN to deduct TDS.

26. Is Transfer of shares/ fully and mandatorily convertible debentures by way of Gift permitted:

A person resident outside India can freely transfer shares/ fully and mandatorily convertible debentures by way of gift to a person resident in India as under:

Any person resident outside India, (not being an NRI or an erstwhile OCB), can transfer by way of the gift the shares/ fully and mandatorily convertible debentures to any person resident outside India (including NRIs but excluding OCBs).

An NRI may transfer by way of gift, the shares/convertible debentures held by him to another NRI only,

Any person resident outside India may transfer share/ fully and mandatorily convertible debentures to a person resident in India by way of gift.