Saving Mantra Blogs

Author: Financial Analyst

  • Step by Step Due Diligence for Startups

    Introduction

    Due diligence is one of the most critical stages in a startup’s fundraising journey. It is the process where investors verify everything you have claimed during pitching, including financials, compliance, operations, technology, and team credibility.

    Many startups lose funding deals not because of poor ideas, but due to weak documentation, non-compliance, or lack of preparedness. This Saving Mantra guide explains a clear, step by step due diligence process to help startups pass investor scrutiny smoothly.

    Step 1: Understand the Purpose of Due Diligence

    Investor due diligence aims to:

    • Validate business claims
    • Identify financial, legal, and operational risks
    • Assess scalability and governance
    • Confirm founder credibility

    Due diligence builds trust and protects both founders and investors.

    Step 2: Identify the Types of Due Diligence

    Startups usually face multiple layers of due diligence:

    Common Types

    • Legal due diligence
    • Financial due diligence
    • Compliance due diligence
    • Business & operational due diligence
    • Technical & IP due diligence
    • Founder & background checks

    Preparation must cover all areas, not just finances.

    Step 3: Prepare Corporate & Legal Documents

    Keep these documents ready:

    • Certificate of Incorporation
    • Memorandum & Articles of Association
    • Shareholding pattern & cap table
    • Share certificates and registers
    • Board and shareholder resolutions
    • Past investment agreements

    Incomplete corporate records raise red flags immediately.

    Step 4: Organize Financial & Tax Records

    Investors closely review:

    • Audited financial statements
    • Bank statements
    • Revenue and expense details
    • GST, TDS, and income tax filings
    • Outstanding liabilities and dues

    Clean financial records reflect strong governance.

    Step 5: Verify Compliance & Regulatory Filings

    Ensure compliance with:

    • Company law filings
    • Startup registrations and licenses
    • Labor law compliances
    • Industry-specific approvals
    • Foreign investment regulations, if applicable

    Non-compliance can delay or cancel funding.

    Step 6: Review Contracts & Agreements

    Prepare:

    • Customer and vendor contracts
    • Employment agreements
    • Founder agreements
    • NDA and confidentiality agreements
    • Lease and asset contracts

    Clear, enforceable contracts reduce legal risk.

    Step 7: Validate Intellectual Property & Technology

    Investors check:

    • IP ownership and assignments
    • Trademarks, copyrights, patents
    • Source code ownership
    • Open-source software usage
    • Technology scalability and security

    IP clarity is critical for valuation and exits.

    Step 8: Evaluate Business Model & Operations

    This includes:

    • Revenue model validation
    • Unit economics
    • Customer acquisition strategy
    • Operational processes
    • Scalability readiness

    Strong execution capability increases investor confidence.

    Step 9: Assess Team & Founder Credentials

    Investors evaluate:

    • Founder background and experience
    • Key management roles
    • ESOP structure
    • Employee retention
    • Dependency on single individuals

    Teams matter as much as ideas.

    Step 10: Identify Risks & Red Flags Early

    Common red flags:

    • Unclear shareholding
    • Pending litigations
    • Tax defaults
    • Weak internal controls
    • Founder disputes

    Early disclosure is better than late discovery.

    Step 11: Create a Data Room

    A structured data room should include:

    • Categorized folders
    • Clear file naming
    • Updated documents
    • Controlled access for investors

    A professional data room speeds up due diligence.

    Step 12: Respond to Investor Queries Professionally

    During due diligence:

    • Share accurate information
    • Avoid delays
    • Clarify assumptions
    • Maintain transparency

    Professional responses build long-term trust.

    Step 13: Resolve Issues Before Final Agreements

    Before closing funding:

    • Rectify compliance gaps
    • Clear pending filings
    • Update documentation
    • Align records with term sheet terms

    Issue resolution prevents renegotiation.

    Common Due Diligence Mistakes by Startups

    • Poor documentation
    • Ignoring compliance until funding
    • Misrepresentation of numbers
    • No data room structure
    • Delayed responses

    Avoiding these increases deal closure probability.

    Why Choose Saving Mantra for Startup Due Diligence

    Saving Mantra helps startups with:

    • End-to-end due diligence preparation
    • Compliance cleanup and structuring
    • Financial and legal readiness checks
    • Investor data room setup
    • Fundraising documentation support

    We ensure startups are investor-ready, compliant, and confident.

    Conclusion

    Due diligence is not a hurdle. It is a validation process that strengthens your startup’s foundation. Well-prepared startups close funding faster, negotiate better terms, and build long-term investor relationships.

    Follow this step by step due diligence process to move from pitch to funding with clarity and confidence.

    Disclaimer

    This blog is for informational and educational purposes only and does not constitute legal, financial, or investment advice. Due diligence requirements may vary based on investor type, jurisdiction, and business model. Readers are advised to consult qualified professionals before sharing sensitive information or entering investment agreements.

  • Step by Step Term Sheet for Startups

    Introduction

    A term sheet is one of the most critical documents in a startup’s fundraising journey. While it is usually non-binding, it defines the commercial, control, and exit rights that shape the future of your company.

    Many founders focus only on valuation and ignore other clauses that can later impact control, dilution, and decision-making. This Saving Mantra guide explains a clear, step by step process to understand and handle a startup term sheet correctly.

    Step 1: Understand What a Term Sheet Is

    A term sheet is a preliminary agreement between:

    • Startup founders
    • Investors (angel, VC, or strategic)

    It outlines:

    • Investment structure
    • Key commercial terms
    • Control and governance rights
    • Exit-related clauses

    It sets the foundation for final legal agreements.

    Step 2: Identify the Type of Term Sheet

    Term sheets differ based on funding stage:

    Common Types

    • Angel investment term sheet
    • Seed funding term sheet
    • Venture capital term sheet
    • Convertible note or SAFE-based term sheet

    Each type carries different rights and risk levels.

    Step 3: Review Valuation & Investment Amount

    Key valuation components:

    • Pre-money valuation
    • Post-money valuation
    • Investment amount
    • Equity dilution percentage

    Do not judge the term sheet only on headline valuation. Focus on effective ownership after clauses.

    Step 4: Understand Equity & Shareholding Structure

    Check:

    • Class of shares issued
    • Founder shareholding post funding
    • ESOP pool size and impact
    • Fully diluted shareholding pattern

    Equity structure directly impacts founder control.

    Step 5: Analyze Control & Governance Rights

    Important clauses include:

    • Board composition
    • Voting rights
    • Reserved matters
    • Founder consent requirements

    Too much investor control at an early stage can restrict growth.

    Step 6: Review Liquidation Preference

    Liquidation preference decides payout order during:

    • Exit
    • Merger
    • Acquisition
    • Company closure

    Common types:

    • 1x non-participating
    • 1x participating
    • Multiple liquidation preferences

    This clause directly affects founder returns at exit.

    Step 7: Check Anti-Dilution Provisions

    Anti-dilution protects investors in future down rounds.

    Common mechanisms:

    • Weighted average
    • Full ratchet

    Aggressive anti-dilution terms can severely dilute founders.

    Step 8: Understand Vesting & Founder Lock-in

    Founder-related clauses may include:

    • Vesting schedules
    • Cliffs
    • Lock-in periods
    • Good leaver / bad leaver terms

    These ensure long-term founder commitment.

    Step 9: Review Exit & Drag-Along Rights

    Exit clauses define:

    • Exit timelines
    • Drag-along rights
    • Tag-along rights
    • IPO or acquisition conditions

    Founders must ensure flexibility and fair exit treatment.

    Step 10: Examine Information & Reporting Rights

    Investors may ask for:

    • Periodic financial reports
    • Operational updates
    • Audit rights
    • Inspection rights

    Ensure reporting requirements are practical and reasonable.

    Step 11: Check Non-Compete & Confidentiality Clauses

    These clauses restrict:

    • Founder activities outside the startup
    • Information sharing
    • Post-exit obligations

    Overly restrictive clauses can affect future opportunities.

    Step 12: Understand Binding vs Non-Binding Clauses

    Typically binding:

    • Confidentiality
    • Exclusivity
    • Governing law
    • Cost-sharing

    Non-binding:

    • Valuation
    • Investment structure (until final agreements)

    Never assume everything is non-binding.

    Step 13: Negotiate, Don’t Just Accept

    Founders should:

    • Compare multiple term sheets if possible
    • Seek professional advice
    • Negotiate critical clauses, not just valuation
    • Think long-term, not short-term funding

    A well-negotiated term sheet prevents future conflicts.

    Common Term Sheet Mistakes by Startups

    • Ignoring liquidation preference
    • Accepting excessive control rights
    • Overlooking anti-dilution impact
    • Not consulting professionals
    • Focusing only on valuation

    Avoiding these mistakes protects founder interests.

    Why Choose Saving Mantra for Term Sheet Advisory

    Saving Mantra supports startups with:

    • Term sheet review & negotiation
    • Founder-friendly structuring
    • Dilution and control analysis
    • End-to-end fundraising compliance
    • Investor documentation coordination

    We protect founder value while enabling funding success.

    Conclusion

    A term sheet is not just paperwork. It defines the power balance, economics, and exit outcomes of your startup. Understanding every clause before signing is essential for sustainable growth and founder protection.

    Follow this step by step process to approach term sheets with clarity and confidence.

    Disclaimer

    This blog is for informational and educational purposes only and does not constitute legal, financial, or investment advice. Term sheet structures vary based on investor type, jurisdiction, and business stage. Readers are advised to consult qualified legal and financial professionals before signing or negotiating any investment documents.

  • Step by Step Investor Pitch for Startups

    Introduction

    An investor pitch is where ideas turn into funding opportunities. Even a strong business can fail to raise capital if the pitch lacks clarity, confidence, or structure. Investors evaluate not only the idea, but also the founder’s mindset, execution ability, and vision.

    This Saving Mantra guide explains a step by step, investor-ready process to deliver a powerful investor pitch that improves funding success and long-term partnerships.

    Step 1: Understand the Objective of Your Investor Pitch

    Before pitching, define:

    • Purpose of the pitch (intro, follow-up, or final round)
    • Funding amount required
    • Type of investor (angel, seed, VC, strategic)
    • Expected outcome (next meeting, due diligence, term sheet)

    A clear objective keeps the pitch focused and effective.

    Step 2: Research the Investor Thoroughly

    Never pitch blindly.

    Research:

    • Investor’s industry focus
    • Investment stage preference
    • Ticket size
    • Past portfolio companies
    • Investment philosophy

    Customized pitches always outperform generic ones.

    Step 3: Prepare an Investor-Ready Pitch Deck

    Your pitch deck should:

    • Tell a clear story
    • Be concise and data-backed
    • Highlight traction and scalability
    • Clearly state the funding ask

    Avoid overloading slides. Simplicity builds trust.

    Step 4: Start with a Strong Opening

    The first 2 minutes matter most.

    Begin with:

    • A strong problem statement
    • A relatable real-world scenario
    • A bold but realistic vision

    Your opening should instantly answer: Why should I care?

    Step 5: Explain the Problem Clearly

    Describe:

    • The pain point
    • Who faces the problem
    • Frequency and intensity of the problem
    • Limitations of existing solutions

    Investors fund solutions to real, painful problems.

    Step 6: Present Your Solution with Confidence

    Show how your startup:

    • Solves the problem better
    • Is scalable and defensible
    • Delivers measurable value

    Focus on benefits, outcomes, and differentiation.

    Step 7: Show Market Opportunity

    Explain:

    • Target customer segment
    • Market size and growth
    • Industry trends supporting expansion

    Large markets justify long-term investor interest.

    Step 8: Highlight Traction and Validation

    Traction reduces risk.

    Include:

    • Revenue growth
    • Active users or customers
    • Partnerships or pilots
    • Testimonials or early wins

    Even small traction builds strong credibility.

    Step 9: Explain the Business Model

    Clearly communicate:

    • How you make money
    • Pricing strategy
    • Customer acquisition cost
    • Long-term profitability potential

    Investors invest in sustainable models, not assumptions.

    Step 10: Showcase the Founding Team

    Investors back people first.

    Highlight:

    • Founder experience
    • Domain knowledge
    • Execution capability
    • Advisory or mentor support

    A strong team can overcome challenges.

    Step 11: Present Financials & Projections

    Share:

    • 3 to 5 year projections
    • Key revenue drivers
    • Cost structure
    • Break-even timeline

    Be realistic and transparent with numbers.

    Step 12: Clearly State the Funding Ask

    Mention:

    • Funding amount required
    • Use of funds
    • Expected runway
    • Key milestones post funding

    Clarity speeds up investor decisions.

    Step 13: Handle Investor Questions Smartly

    During Q&A:

    • Answer honestly
    • Admit what you don’t know
    • Explain risk mitigation
    • Stay calm and confident

    Strong founders welcome tough questions.

    Step 14: Close with Vision and Next Steps

    End your pitch by:

    • Reiterating long-term vision
    • Explaining scale potential
    • Proposing clear next steps

    A confident close keeps momentum alive.

    Common Investor Pitch Mistakes to Avoid

    • Overconfidence without data
    • Weak storytelling
    • Ignoring competition
    • Unrealistic valuation
    • Poor preparation

    Avoiding these improves conversion significantly.

    Why Choose Saving Mantra for Investor Pitch Support

    Saving Mantra helps startups with:

    • Investor pitch preparation
    • Pitch deck structuring
    • Financial modeling & valuation
    • Investor readiness assessment
    • End-to-end fundraising advisory

    We help founders pitch with clarity, confidence, and credibility.

    Conclusion

    A successful investor pitch is a balance of storytelling, data, confidence, and execution. Following this step by step process helps startups communicate value effectively, build investor trust, and increase funding success.

    Pitch not just for money, but for long-term partnership.

    Disclaimer

    This blog is for informational and educational purposes only and does not constitute legal, financial, or investment advice. Investor decisions depend on market conditions, business performance, and individual discretion. Readers are advised to consult qualified professionals before raising funds.

  • Step by Step Pitch Deck for Startups

    Introduction

    A pitch deck is the most critical fundraising document for any startup. It is not just a presentation. It is a story of vision, execution, and scale. Investors decide within minutes whether to continue discussions, making a strong pitch deck essential.

    This Saving Mantra guide explains a clear, investor-ready, step by step process to create a pitch deck that ranks well, converts better, and supports real funding outcomes.

    Step 1: Understand the Purpose of Your Pitch Deck

    Before creating slides, define:

    • Who you are pitching to (angel, VC, strategic investor)
    • Stage of your startup (idea, MVP, revenue, scale)
    • Funding amount and objective
    • Expected outcome (meeting, due diligence, term sheet)

    A focused purpose ensures a sharp and relevant deck.

    Step 2: Keep the Pitch Deck Short & Structured

    An ideal pitch deck contains 10 to 14 slides.
    Avoid unnecessary design clutter. Investors value clarity over creativity.

    Basic structure:

    • Problem
    • Solution
    • Market
    • Product
    • Traction
    • Business Model
    • Competition
    • Go-To-Market
    • Team
    • Financials
    • Funding Ask

    Step 3: Define the Problem Clearly

    Explain:

    • What real problem exists
    • Who faces this problem
    • Why current solutions fail
    • Impact of the problem at scale

    Investors fund painkillers, not vitamins.

    Step 4: Present Your Solution

    Show how your product or service:

    • Solves the problem effectively
    • Is simple, scalable, and defensible
    • Creates measurable value for users

    Use visuals, not paragraphs.

    Step 5: Explain the Market Opportunity

    Include:

    • Target customer segment
    • Total Addressable Market (TAM)
    • Serviceable Market (SAM)
    • Growth potential and trends

    Big problems in big markets attract serious investors.

    Step 6: Showcase Your Product

    Highlight:

    • Key features
    • User journey
    • Technology advantage
    • Screenshots or workflow visuals

    Focus on benefits, not technical jargon.

    Step 7: Show Traction & Validation

    Traction builds trust.

    Examples:

    • Revenue growth
    • Active users
    • Customer retention
    • Partnerships
    • Pilot results

    Even early traction beats assumptions.

    Step 8: Explain Your Business Model

    Clarify:

    • How you make money
    • Pricing strategy
    • Customer lifetime value
    • Cost structure

    Investors want visibility on profit potential.

    Step 9: Analyze Competition

    Show:

    • Direct and indirect competitors
    • Competitive advantage
    • Differentiation matrix

    Never say “no competition”. That’s a red flag.

    Step 10: Define Go-To-Market Strategy

    Explain:

    • Customer acquisition channels
    • Sales cycle
    • Marketing approach
    • Scalability plan

    Execution strategy matters more than ideas.

    Step 11: Introduce the Founding Team

    Highlight:

    • Founder experience
    • Domain expertise
    • Execution capability
    • Advisory support

    Strong teams can pivot. Weak teams cannot.

    Step 12: Present Financial Projections

    Include:

    • 3 to 5 year projections
    • Revenue assumptions
    • Key cost drivers
    • Break-even timeline

    Keep numbers realistic and defensible.

    Step 13: Clearly State the Funding Ask

    Mention:

    • Amount required
    • Use of funds
    • Runway coverage
    • Expected milestones post funding

    Clear asks get clear responses.

    Step 14: End with Vision & Exit Potential

    Close with:

    • Long-term vision
    • Market leadership goal
    • Possible exit scenarios

    Investors invest in scale and returns.

    Common Pitch Deck Mistakes to Avoid

    • Overloaded slides
    • No traction proof
    • Weak storytelling
    • Unrealistic projections
    • Ignoring risks

    Avoiding these improves investor confidence.

    Why Choose Saving Mantra for Pitch Deck Support

    Saving Mantra offers:

    • Investor-ready pitch deck creation
    • Financial modeling & projections
    • Startup valuation guidance
    • Compliance-aligned fundraising support
    • End-to-end investor advisory

    We align your pitch with real investor expectations.

    Conclusion

    A strong pitch deck combines clarity, data, vision, and execution. Following this step by step process helps startups attract the right investors, communicate value effectively, and close funding faster.

    Build your pitch deck as a strategic asset, not just a presentation.

    Disclaimer

    This blog is for informational and educational purposes only and does not constitute legal, financial, or investment advice. Startup funding decisions depend on business viability, market conditions, and investor discretion. Readers should consult qualified professionals before making fundraising decisions.

  • How to Find the Right Investor for Your Startup

    Introduction

    Finding the right investor is more important than just raising money. The wrong investor can slow growth, create conflicts, or dilute control. The right investor brings capital, mentorship, networks, and strategic direction.

    This Saving Mantra guide explains a step by step, practical, and startup-tested process to identify, approach, and close the right investor for your business.

    Step 1: Define Why You Need an Investor

    Before searching for investors, clearly define:

    • How much capital you need
    • What stage your startup is at (idea, MVP, revenue, scale-up)
    • What the money will be used for (product, marketing, hiring, expansion)
    • Whether you need smart money (mentorship + network) or only funding

    Clarity attracts serious investors and filters out mismatches.

    Step 2: Identify the Type of Investor You Need

    Different investors invest at different stages:

    Common Investor Types

    • Angel Investors – Early-stage, mentorship-driven
    • Seed Investors – Validation and early growth
    • Venture Capitalists – Rapid scale and market dominance
    • Strategic Investors – Industry players adding synergy
    • Family Offices & HNIs – Long-term capital with flexibility

    Match your startup stage with the right investor category.

    Step 3: Build a Strong Investment-Ready Foundation

    Investors evaluate startups quickly. Prepare:

    • Clear business model
    • Revenue or traction metrics
    • Scalable growth plan
    • Strong founding team profile
    • Clean compliance structure (company, cap table, filings)

    A prepared startup raises faster and at better valuation.

    Step 4: Create a Powerful Pitch Deck

    Your pitch deck should include:

    • Problem & solution
    • Market size & opportunity
    • Product or service overview
    • Traction & key metrics
    • Business model
    • Competitive advantage
    • Team strength
    • Funding requirement & use of funds
    • Exit vision

    Keep it clear, data-backed, and story-driven.

    Step 5: Research & Shortlist Investors

    Do not pitch everyone.

    Shortlist investors based on:

    • Industry focus
    • Investment stage preference
    • Ticket size
    • Past portfolio companies
    • Geographic preference

    Targeted pitching increases conversion and saves time.

    Step 6: Use the Right Channels to Reach Investors

    Effective investor discovery channels:

    • Startup networking events & demo days
    • Angel networks & syndicates
    • Founder referrals & warm introductions
    • Accelerators & incubators
    • Professional advisory platforms

    Warm introductions work far better than cold pitching.

    Step 7: Pitch, Engage & Answer Due Diligence

    During investor discussions:

    • Be honest and transparent
    • Back claims with data
    • Clearly explain risks and mitigation
    • Show founder commitment and vision

    Strong founders sell confidence, clarity, and execution ability.

    Step 8: Evaluate Investor Fit (Not Just Valuation)

    Ask yourself:

    • Do they add strategic value?
    • Do they respect founder vision?
    • Are expectations aligned?
    • Do they have a reputation for supporting founders?

    The right investor becomes a long-term partner, not just a shareholder.

    Step 9: Negotiate Terms & Close the Deal

    Key points to review:

    • Valuation and dilution
    • Board rights and voting powers
    • Exit clauses
    • Founder protection terms
    • Future funding flexibility

    Professional documentation avoids future disputes.

    Step 10: Build a Long-Term Investor Relationship

    After funding:

    • Share regular updates
    • Use investor expertise
    • Maintain transparency
    • Align growth goals

    Strong investor relations unlock future funding rounds.

    Common Mistakes Startups Should Avoid

    • Chasing money without strategy
    • Ignoring investor background checks
    • Overvaluing too early
    • Weak compliance and documentation
    • Pitching without preparation

    Avoiding these mistakes significantly improves funding success.

    Why Choose Saving Mantra for Startup Fundraising Support

    Saving Mantra helps startups with:

    • Investor readiness assessment
    • Pitch deck structuring
    • Investor shortlisting
    • Fundraising strategy & compliance
    • End-to-end advisory support

    We focus on right investor fit, not random funding.

    Conclusion

    Finding the right investor is a strategic process, not luck. With clear planning, targeted outreach, strong compliance, and smart negotiation, startups can raise capital that accelerates growth without compromising control.

    Follow this step by step process to attract investors who truly believe in your startup’s vision.

    Disclaimer

    This blog is for informational and educational purposes only and does not constitute legal, financial, or investment advice. Startup funding outcomes depend on business viability, market conditions, and investor discretion. Readers are advised to consult professional advisors before making funding or investment decisions.

  • Startup Budget Sheet: Step-by-Step Planning Guide

    What is a Startup Budget Sheet?

    A startup budget sheet is a structured financial document that estimates:

    • Expected income
    • Fixed and variable expenses
    • Capital requirements
    • Cash flow needs

    It acts as a financial roadmap for decision-making and growth planning.

    Why is a Budget Sheet Important for Startups?

    A well-prepared budget sheet helps startups:

    • Avoid cash shortages
    • Control unnecessary expenses
    • Plan funding requirements
    • Track financial performance
    • Build investor confidence

    Step-by-Step Process to Prepare a Budget Sheet for Startups

    Step 1: Define the Budget Period

    Decide the timeline for budgeting:

    • Monthly budget (early-stage startups)
    • Quarterly budget
    • Annual budget

    Most startups begin with monthly and annual budgets.

    Step 2: Estimate Startup Costs

    List one-time setup expenses such as:

    • Company incorporation costs
    • Legal and professional fees
    • Office setup or co-working space
    • Technology and software setup
    • Branding and website development

    These are usually non-recurring costs.

    Step 3: Identify Fixed Operating Expenses

    Fixed expenses remain constant every month, including:

    • Office rent
    • Salaries and founder remuneration
    • Internet and utilities
    • Software subscriptions
    • Insurance and compliance costs

    These expenses form the base of your budget.

    Step 4: Estimate Variable Expenses

    Variable expenses change based on operations and growth:

    • Marketing and advertising
    • Logistics and delivery costs
    • Sales commissions
    • Freelancers or consultants
    • Cloud usage and hosting

    Plan these conservatively to avoid overspending.

    Step 5: Forecast Revenue

    Estimate realistic income based on:

    • Pricing strategy
    • Expected sales volume
    • Customer acquisition plans
    • Market demand

    Avoid aggressive assumptions; conservative revenue forecasting improves budget accuracy.

    Step 6: Plan Cash Flow

    Prepare a cash flow projection showing:

    • Monthly inflows
    • Monthly outflows
    • Opening and closing balances

    This ensures the startup can meet obligations even during low-revenue months.

    Step 7: Allocate Emergency and Contingency Funds

    Set aside funds for:

    • Unexpected expenses
    • Delayed payments
    • Market fluctuations

    A contingency reserve of 10–15% of total expenses is recommended.

    Step 8: Match Budget with Funding Sources

    Align your budget with:

    • Founder capital
    • Angel or VC funding
    • Loans or grants

    This helps identify funding gaps early and plan fundraising accordingly.

    Step 9: Review and Monitor Monthly

    Budgeting is not a one-time activity. Review the budget:

    • Monthly variance analysis
    • Expense vs revenue comparison
    • Adjust allocations as business grows

    Regular tracking improves financial discipline.

    Key Components of a Startup Budget Sheet

    A standard startup budget sheet includes:

    • Income forecast
    • Fixed costs
    • Variable costs
    • Capital expenditure
    • Cash flow statement
    • Contingency allocation

    Common Budgeting Mistakes by Startups

    • Overestimating revenue
    • Ignoring small recurring expenses
    • No contingency planning
    • Not updating the budget regularly
    • Mixing personal and business expenses

    Best Practices for Startup Budgeting

    • Use simple spreadsheet formats
    • Keep assumptions realistic
    • Track actual vs budget monthly
    • Involve founders and finance advisors
    • Integrate budget with accounting system

    Why Choose Saving Mantra?

    Saving Mantra helps startups with financial planning and budgeting, including:

    • Startup budget sheet preparation
    • Cash flow forecasting
    • Financial dashboards
    • Investor-ready financial models
    • Ongoing accounting and advisory

    Disclaimer

    This blog is for informational purposes only and does not constitute financial, tax, or professional advice. Budget requirements may vary based on business model and industry. Readers are advised to consult Saving Mantra professionals before making financial decisions.

  • Startup Incorporation in India: Step-by-Step Guide

    What is Startup Incorporation?

    Startup incorporation is the legal process of registering a business entity under Indian law, giving it a separate legal identity distinct from its founders.

    Once incorporated, the startup can:

    • Enter into contracts
    • Open bank accounts
    • Raise funding
    • Apply for government benefits
    • Protect founders from personal liability

    Types of Startup Structures in India

    Before incorporation, choose the right business structure:

    • Private Limited Company (most preferred for startups)
    • Limited Liability Partnership (LLP)
    • One Person Company (OPC)

    Most investors and accelerators prefer Private Limited Companies.

    Step-by-Step Startup Incorporation Process

    Step 1: Decide Business Structure

    Choose the structure based on:

    • Number of founders
    • Funding plans
    • Compliance flexibility
    • Taxation requirements

    Step 2: Obtain Digital Signature Certificate (DSC)

    DSC is required for:

    • Directors
    • Subscribers to Memorandum of Association (MOA)

    DSC is used for online filings with the Ministry of Corporate Affairs (MCA).

    Step 3: Apply for Director Identification Number (DIN)

    DIN is mandatory for anyone becoming a director in a company.
    DIN application is included in the incorporation form itself.

    Step 4: Name Reservation

    Apply for company name approval through MCA:

    • Ensure name is unique and not trademarked
    • Should reflect business activity
    • Follow naming guidelines under Companies Act

    Step 5: Draft MOA & AOA

    Prepare:

    • Memorandum of Association (MOA) – defines company objectives
    • Articles of Association (AOA) – governs internal management

    These documents form the legal foundation of the startup.

    Step 6: File Incorporation Application

    Submit the integrated incorporation form with MCA including:

    • Company details
    • Director and shareholder information
    • Registered office address
    • MOA and AOA

    Once approved, the Registrar of Companies (ROC) issues the Certificate of Incorporation.

    Step 7: Receive Certificate of Incorporation

    After approval:

    • Company receives Corporate Identification Number (CIN)
    • Legal existence of startup begins from this date

    Step 8: PAN, TAN & Bank Account

    Upon incorporation:

    • PAN and TAN are auto-generated
    • Open a current bank account in company name

    Step 9: Apply for Startup India Recognition (Optional but Recommended)

    Register under Startup India to get:

    • DPIIT recognition
    • Tax exemptions
    • Funding and incubation benefits
    • Fast-track IPR services

    Documents Required for Startup Incorporation

    For Directors & Shareholders

    • PAN Card
    • Aadhaar Card / Passport
    • Address proof
    • Passport-size photograph

    For Registered Office

    • Utility bill (electricity/water)
    • Rent agreement or ownership proof
    • NOC from owner

    Post-Incorporation Compliance Checklist

    • Appointment of auditor
    • Opening statutory registers
    • Issuing share certificates
    • GST registration (if applicable)
    • Bank account activation
    • Annual ROC and tax filings

    Common Mistakes to Avoid

    • Choosing incorrect business structure
    • Poorly drafted MOA objectives
    • Ignoring post-incorporation compliance
    • Not planning for future funding
    • Delayed registrations (GST, Startup India)

    Why Choose Saving Mantra for Startup Incorporation?

    Saving Mantra offers end-to-end startup incorporation and compliance support, including:

    • Structure advisory
    • MCA filings
    • Startup India registration
    • Tax and GST setup
    • Ongoing compliance and advisory

    Disclaimer

    This blog is for informational purposes only and does not constitute legal, tax, or professional advice. Laws and procedures may change from time to time. Readers are advised to consult Saving Mantra professionals before starting or incorporating a business.

  • ESOP Issuance for Startups: Step-by-Step Process

    What is ESOP?

    ESOP (Employee Stock Option Plan) is a scheme under which a company grants employees the right to purchase shares at a predetermined price after a specified vesting period, subject to terms and conditions.

    Who Can Issue ESOP?

    A company can issue ESOPs if it:

    • Is incorporated under the Companies Act
    • Has provisions for ESOP in its Articles of Association (AOA)
    • Is a startup or private limited company
    • Is not a listed public company (separate SEBI rules apply)

    Eligible Employees for ESOP

    ESOPs can be issued to:

    • Permanent employees of the company
    • Directors (excluding independent directors)
    • Employees or directors of holding/subsidiary companies

    Not Eligible:

    • Promoters holding more than 10% equity (unless DPIIT-recognized startup)
    • Independent directors

    Step-by-Step Process to Issue ESOP to Employees

    Step 1: Check and Amend Articles of Association (AOA)

    Ensure that the AOA authorizes the issuance of ESOPs.
    If not, amend the AOA through a special resolution before proceeding.

    Step 2: Draft ESOP Scheme

    Prepare a detailed ESOP scheme covering:

    • Total number of options
    • Eligibility criteria
    • Vesting period and schedule
    • Exercise price
    • Lock-in period (if any)
    • Exit and termination clauses

    Step 3: Convene Board Meeting

    Hold a Board Meeting to:

    • Approve the ESOP scheme
    • Fix the number of options
    • Decide exercise price and vesting terms
    • Approve calling of Extraordinary General Meeting (EGM)

    Step 4: Shareholder Approval (EGM)

    Pass a Special Resolution in EGM approving:

    • ESOP scheme
    • Total number of options
    • Class of employees eligible
    • Pricing and vesting terms

    Step 5: File MGT-14 with ROC

    File Form MGT-14 within 30 days of passing the special resolution along with:

    • Certified shareholder resolution
    • Explanatory statement
    • ESOP scheme document

    Step 6: Grant of ESOP to Employees

    After approval:

    • Issue grant letters to eligible employees
    • Maintain ESOP grant register
    • Obtain employee acceptance

    Step 7: Vesting of ESOP

    • Minimum 1-year vesting period is mandatory
    • Vesting can be performance-based or time-based
    • Vesting schedule must follow the approved scheme

    Step 8: Exercise of ESOP

    Once vested, employees can:

    • Exercise options by paying the exercise price
    • Shares are allotted after exercise

    Board approval is required for share allotment.

    Step 9: Allotment of Shares & ROC Filing

    • Issue shares upon exercise
    • File PAS-3 (Return of Allotment) with ROC within 30 days
    • Issue share certificates to employees

    Limits on ESOP Issuance for Startups

    For DPIIT-recognized startups:

    • ESOPs can be issued to promoters holding more than 10%
    • No upper cap prescribed under Companies Act
    • Allowed for up to 10 years from incorporation

    Taxation of ESOPs

    At Exercise Stage

    • Taxed as perquisite income
    • Difference between FMV and exercise price is taxable
    • TDS applicable

    At Sale Stage

    • Capital gains tax applicable
    • Holding period determines short-term or long-term gains

    Key Compliance Requirements

    • Maintain ESOP Register
    • Proper disclosure in Directors’ Report
    • Accurate valuation by registered valuer
    • Timely ROC filings

    Common Mistakes to Avoid

    • Issuing ESOP without AOA authorization
    • Missing shareholder approval
    • Improper valuation
    • Non-compliance with vesting rules
    • Ignoring employee tax impact

    Why Choose Saving Mantra?

    Saving Mantra offers end-to-end ESOP structuring and compliance, including:

    • ESOP scheme drafting
    • Valuation coordination
    • ROC filings
    • Startup advisory
    • Employee tax planning support

    Disclaimer

    This blog is for informational purposes only and does not constitute legal, tax, or financial advice. Laws and regulations may change, and applicability depends on specific circumstances. Readers are advised to consult Saving Mantra professionals before implementing any ESOP plan.

  • Sweat Equity Shares for Startups: Step-by-Step Guide

    What Are Sweat Equity Shares?

    Sweat equity shares are equity shares issued by a company to its employees or directors at a discount or for consideration other than cash, in recognition of:

    • Intellectual Property Rights (IPR)
    • Technical or professional expertise
    • Value additions contributing to business growth

    Who Can Issue Sweat Equity Shares?

    A company can issue sweat equity shares if it:

    • Is incorporated under the Companies Act
    • Has completed at least one year since incorporation
    • Is a startup recognized by DPIIT (for relaxed limits)

    Eligible Recipients

    Sweat equity shares can be issued to:

    • Permanent employees of the company
    • Directors of the company (executive or non-executive)
    • Employees or directors of holding/subsidiary companies

    Step-by-Step Process to Issue Sweat Equity Shares

    Step 1: Check Articles of Association (AOA)

    Ensure that the company’s AOA authorizes the issue of sweat equity shares.
    If not, amend the AOA before proceeding.

    Step 2: Identify Eligible Employees or Directors

    Finalize the list of employees or directors who have provided:

    • Intellectual property
    • Technical knowledge
    • Significant business value addition

    Step 3: Determine Valuation

    Obtain a fair market valuation from a registered valuer for:

    • Equity shares
    • Intellectual property or value addition being exchanged

    Valuation must be justified and documented properly.

    Step 4: Convene Board Meeting

    Pass a Board Resolution to:

    • Approve sweat equity issuance
    • Fix number of shares
    • Approve valuation report
    • Decide date of Extraordinary General Meeting (EGM)

    Step 5: Issue Notice for EGM

    Send EGM notice to shareholders with an explanatory statement disclosing:

    • Number of shares to be issued
    • Class of shares
    • Pricing and valuation basis
    • Details of recipients
    • Consideration involved

    Step 6: Pass Special Resolution in EGM

    Obtain shareholders’ approval by passing a Special Resolution authorizing the issue of sweat equity shares.

    Step 7: File MGT-14 with ROC

    File Form MGT-14 within 30 days of passing the special resolution along with:

    • Certified resolution
    • Explanatory statement
    • Valuation report

    Step 8: Issue Sweat Equity Shares

    Issue sweat equity shares to approved employees or directors:

    • Update Register of Members
    • Update Register of Sweat Equity Shares
    • Issue share certificates within prescribed time

    Step 9: File PAS-3 (Return of Allotment)

    File PAS-3 with ROC within 30 days of allotment, attaching:

    • List of allottees
    • Valuation report
    • Board and shareholder resolutions

    Limits on Sweat Equity for Startups

    For DPIIT-recognized startups:

    • Up to 50% of paid-up capital can be issued as sweat equity
    • Allowed for up to 10 years from incorporation

    For non-startups:

    • Maximum 15% in a year
    • Overall cap of 25% of paid-up capital

    Tax Implications

    • Sweat equity is taxed as perquisite income in the hands of employees/directors
    • Valuation on allotment date is considered for tax purposes
    • Capital gains apply when shares are sold later

    Common Mistakes to Avoid

    • Issuing without proper valuation
    • Missing ROC filings
    • Not updating statutory registers
    • Issuing beyond permitted limits
    • Ignoring tax planning for employees

    Why Choose Saving Mantra?

    Saving Mantra provides end-to-end sweat equity advisory, including:

    • Legal structuring
    • Valuation coordination
    • ROC filings
    • Startup compliance support
    • Tax impact planning

    Disclaimer

    This blog is for informational purposes only and does not constitute legal, tax, or financial advice. Regulations may change, and applicability depends on specific facts and circumstances. Readers are advised to consult Saving Mantra professionals before implementing any equity issuance strategy.

  • Guide: Liberalized Remittance Scheme (LRS) India

    Saving Mantra Blog: Step-by-Step Advisory on Liberalized Remittance Scheme (LRS) in India

    The Liberalized Remittance Scheme (LRS) allows Indian residents and NRIs to remit money abroad for investments, education, travel, or family maintenance. Understanding LRS guidelines ensures compliance with RBI rules, tax laws, and repatriation limits.

    This guide provides a step-by-step advisory on using LRS in India efficiently and legally.

    ✔ Step 1: Understand the LRS Framework

    • Purpose: Enables residents and NRIs to remit funds abroad for permissible transactions
    • Governing authority: Reserve Bank of India (RBI)
    • Annual limit: USD 1 million per financial year per individual
    • Permissible uses:
      • Investment in shares, bonds, and property abroad
      • Education and medical expenses
      • Travel, gifts, and donations

    ✔ Step 2: Check Eligibility

    • Indian residents holding a valid PAN
    • NRIs can remit money from their NRO/NRE accounts
    • Individuals below 18 years require guardian authorization

    ✔ Step 3: Determine Purpose of Remittance

    • Investment Abroad: Stocks, mutual funds, or real estate
    • Education/Medical Expenses: Tuition, fees, or treatment abroad
    • Travel/Personal Maintenance: Tourism, gifts, or family support
    • Gifts/Donations: Donations to eligible charitable organizations

    Note: RBI may require declaration of purpose during remittance.

    ✔ Step 4: Ensure FEMA Compliance

    • LRS transactions must comply with Foreign Exchange Management Act (FEMA)
    • Funds can be remitted only through authorized dealer banks
    • Keep proper documentation for audit and RBI reporting

    ✔ Step 5: Documentation Required

    • PAN card
    • Passport or identity proof
    • Bank account details (NRE/NRO/FEMA-compliant bank accounts)
    • Form A2 declaration for RBI
    • Supporting documents based on purpose:
      • Admission letter or fee invoice for education
      • Investment contract for financial transactions

    ✔ Step 6: Submit Remittance Request via Bank

    • Visit an authorized bank branch or use online banking
    • Provide:
      • Remittance purpose
      • Beneficiary bank details abroad
      • Form A2 and supporting documents
    • Bank verifies and forwards request to RBI/SWIFT network

    ✔ Step 7: Monitor Compliance Limits

    • Ensure total remittance does not exceed USD 1 million per financial year
    • Aggregate remittances by family members do not combine to bypass limits
    • Banks may reject or hold transactions exceeding limits

    ✔ Step 8: Tax Implications

    • Remittances are not taxed per se, but:
      • Income being remitted (e.g., salary, capital gains) may attract Indian tax liability
      • NRIs must ensure TDS compliance on income earned in India prior to remittance
    • Maintain records for Income Tax filing

    ✔ Step 9: Maintain Records

    • Keep records of all LRS transactions:
      • Bank statements
      • Form A2 copies
      • Invoices, receipts, or investment contracts
    • Retain for 6 years for RBI or Income Tax compliance

    ✔ Step 10: Review Annually

    • Review remittance limits at the start of each financial year
    • Track cumulative remittance to avoid exceeding USD 1 million cap
    • Adjust future transactions based on investment, education, or family requirements

    FAQs – Liberalized Remittance Scheme (LRS) India

    Q1: Who can use the LRS?
    A: Resident Indians and NRIs can remit funds abroad under LRS for permissible purposes within the USD 1 million annual limit.

    Q2: What purposes are allowed under LRS?
    A: Investments, education, medical expenses, travel, gifts, and donations.

    Q3: What is the annual limit for remittance?
    A: USD 1 million per financial year per individual.

    Q4: Are there tax implications for LRS remittances?
    A: Remittance itself is not taxed, but underlying income may be taxable in India.

    Q5: What documents are required for LRS remittance?
    A: PAN card, passport, bank account details, Form A2, and purpose-specific supporting documents.

    Conclusion

    The Liberalized Remittance Scheme (LRS) allows NRIs and residents to transfer funds abroad efficiently while staying compliant with RBI and FEMA regulations. Following this step-by-step advisory ensures smooth transactions, legal compliance, and proper documentation for all remittances.

    Disclaimer

    This blog is for informational purposes only and does not constitute legal, tax, or financial advice. RBI regulations, FEMA rules, and tax laws may change. Individuals should consult qualified professionals before using LRS for remittance.