The Founders’ Library.

An Alternative Investment Fund is a privately pooled investment vehicle registered with SEBI that raises money from investors and deploys it under a defined strategy, and it is the legal wrapper most Indian venture capital and private equity funds use. SEBI's AIF Regulations, 2012 sort them into three categories: Category I (venture capital, angel, SME, infrastructure, and social funds that back early-stage or priority sectors), Category II (private equity and debt funds, including most standard VC funds), and Category III (hedge-fund-style vehicles that use leverage and complex strategies). The minimum investment is generally Rs 1 crore per investor, with a lower Rs 25 lakh floor for angel funds, which is why AIFs pool capital from HNIs and institutions rather than retail investors. For founders, a fund's AIF category signals its mandate, typical ticket size, and how it can structure a cheque.

Bootstrapping means building and growing a startup using personal savings and revenue from customers instead of raising external investment. It keeps founders in full control of ownership and decisions, forces early discipline on unit economics, and avoids dilution, but it usually means slower growth and tighter cash. Several well-known Indian companies, such as Zoho and Zerodha, scaled largely without venture capital, showing that bootstrapping can be a deliberate long-term strategy rather than only a starting phase. Founders often bootstrap to a point of real traction, then raise on stronger terms or choose to stay independent.

CCDs are debentures, a debt instrument, that compulsorily convert into equity shares on a set date or trigger, giving investors bond-like documentation with an equity outcome. They behave like debt until conversion and like equity afterwards, which creates a useful split in India: FEMA treats CCDs as equity for foreign-investment and FDI-cap purposes, while the Income-tax Act treats them as debt until conversion, so interest paid to CCD holders is tax-deductible for the company (unlike dividends on CCPS). Founders often prefer CCPS for cleaner cap tables and use CCDs where the deductible-interest cash-flow benefit matters; foreign CCD allotments are also reported to the RBI in Form FC-GPR within 30 days.

The reduction in existing shareholders' ownership percentage when new shares are issued in a funding round.

An ESOP (Employee Stock Option Plan) gives employees the right to buy company shares at a fixed exercise price after they vest, letting them share in the upside they help build. In India ESOPs are taxed at two separate stages: first as a perquisite (salary income) at exercise, on the gap between fair market value and the exercise price, with the employer deducting TDS; and again as capital gains at sale, on the gain over the FMV taken at exercise. A common cash-flow trap is that employees can owe tax at exercise before they are able to sell any shares; to ease this, DPIIT-recognised startups holding a Section 80-IAC certificate can defer the perquisite tax until the earliest of about five years, the sale of the shares, or the employee leaving the company.

Monthly Recurring Revenue, recurring revenue normalised to a month. ARR ÷ 12.

The number of months a startup can operate before running out of cash, at the current net burn rate.

Sweat equity is shares issued to founders, employees, or directors in return for non-cash contributions such as know-how, intellectual property, or value addition, rather than for money. In India it is a formal instrument under Section 54 of the Companies Act, 2013 and Rule 8 of the Companies (Share Capital and Debentures) Rules, 2014, requiring a special resolution, a registered valuer's valuation, and a three-year lock-in. Ordinary companies can issue up to 15 percent of paid-up equity in a year (or Rs 5 crore, whichever is higher) and 25 percent overall, but DPIIT-recognised startups may issue up to 50 percent of paid-up capital within 10 years of incorporation; the shares are taxed as a perquisite in the recipient's hands, much like ESOPs.