I recently joined an early stage Fintech company called Qapita after a very fruitful 5-year stint at Social Alpha where I joined as a founding team member. My initial few days at Qapita have been eventful, exciting and I must admit, has got me gasping for breath at times for there’s so much happening. I am truly able to appreciate why the term rocketship is quite common in the ecosystem to describe fast growing startups. I indeed feel like being in one as we seek to hit our ‘escape velocity’. On all accounts — product (where we are releasing features every week!), sales (where we closed 50+ customers within a quarter of being in the market) and fundraising (we recently closed another strategic investment from East Ventures post our seed round led by Vulcan Capital), things seem to be racing at a breakneck speed. At Qapita, we seek to digitally transform the private capital markets in India and South East Asia by organizing equity ownership and eventually driving transactions.
Many have asked me what I do at Qapita and what does equity management mean. Here’s an attempt to declutter it and why we are excited about this ‘category creating’ opportunity!
What is Equity Management?
Equity is the most valuable asset that a startup possesses. Equity is what brings good stakeholders to partner with the startup in the first place — your investors, key employees and even strategic partners at a later stage. Equity is what enables the founders, employees and investors to unlock value as the startup becomes either profitable or becomes attractive for other investors or strategic players.
Hence it’s perhaps critical for founders to manage their equity ownership effectively and communicate it transparently with their stakeholders.
So you may ask how we might help you with this?
We help you create your Cap Table as a ‘Single Source of Truth’
Being an investor myself, I have lived through the pain-point of managing multiple excel files of my investee companies. At any point, there was always a doubt in my mind if this is the latest cap table? Invariably that led to an email thread, which further led to the founders emailing their CA or banker in most cases taking a couple of days for turnaround. Imagine your captable on a secure cloud platform and can be accessed by your stakeholders — 24x7x365. And all updates will seamlessly reflect to everyone as there is a single source of truth.
So no more multiple excel versions and follow-ups on emails!
Run Scenarios — Dilution Modelling and Exit Waterfall
Digitizing the cap table results in compounding benefits to all stakeholders. For starters, we can configure information about your investment instruments & investor rights and help you run scenarios by programming properties from that 100-page SHA that you signed! Configuring the various terms and clauses of your SHA means founders, CFOs or their service providers are empowered to run all kinds of future scenarios at the click of a button. Further you can save these scenarios, share it with your investors, mentors, advisors and decide on your strategy well-informed of the implications. Currently we support two scenarios:
Exit Waterfall Modelling — which plays out liquidation preferences across share classes, other senior liabilities etc. to help founders ascertain the payouts for shareholders based on their seniority.
Dilution modelling — which empowers the founders to simulate future fundraising scenarios and view the pro-forma cap tables and analyse dilution of existing shareholders etc.
You can use this feature to also compare two or more termsheets and decide on which option is the most optimal for the company.
At Qapita our endeavour is to minimize the transaction closure timelines from weeks and months to a few days. One initiative in that regard is Due-Diligence readiness. Our approach to building a start-up’s captable is through it’s underlying transactions. Along with the transactions founders can also collate all transaction and round related documents in once place making it as a realtime Virtual Data Room for cap table transactions. This makes the startups DD-Ready at all times. We are also building a feature which indicates a readiness index to the founder so that they can resolve the gaps in advance.
Automating Employee Stock Option Pool (ESOP)
Our product also helps Founders or HR managers to automate the entire process of ESOP creation, administration and management through a single platform in a paperless manner. You can also use our product to engage with your employees and regularly communicate the accrued value of their ESOPs.
Like you have monthly cash pay slip for salaries, at Qapita we are evangelizing something we call — Equity Pay Slip.
We also help founders structure their ESOPs and strategies to allocate ESOPs to key employees through our in-house experts as well as well-known ecosystem partners that we have partnered with. Further, other than communicating the value, we also look to unlock value for employees through ESOP liquidity programs. While we have seen a few marquee startups doing that in the last few weeks, we believe there is a wider market opportunity of matching the demand and supply through founder-led secondary transactions.
What’s brewing in our lab right now?
Digital Shares — Integrate with investor’s Demat accounts!
In our quest to reduce transaction timelines and getting the money in bank in a matter of a few days, we are looking to seamlessly integrate digital shares issuance as a service by plugging into the right stakeholders through APIs and directly issuing shares to the investor’s demat account. Imagine a scenario where the founder uploads the SHA, approvals and relevant board resolutions and all subsequent steps are automated resulting in digital shares issued to the investor. It would remove the hassle of maintaining paper shares.
India has been a pioneer in mandating demat shares in public markets and we believe it’s just a matter of time when it would hold true of private markets as well.
QapMatch — Roadmap to Transactions
Like payments, we believe Indian vibrant startup ecosystem would soon have a digital layer of equity ownership information. While this would be an eventual reality, we at Qapita seek to catalyse this process and reach that equilibrium fairly quickly through our product-first approach and bringing together an ecosystem of network partners who seek to gain by participating in this new normal. So just like UPI and India-Stack catalyzed the payments function and provided tailwinds to the entire financial services sector, we are keen to chase our ‘UPI moment’ in the context of equity ownership.
We believe this would elevate the overall equilibrium of our startup ecosystem to becoming more #transparent, #vibrant and of-course #liquid.
And as you know today’s ESOP holders are tomorrow’s angel investors and we hope the cycle goes on! More on this and many other interesting things we are building at Qapita in my subsequent posts. Stay tuned. :)
Meanwhile, we invite startups, investors, angels, service providers like law firms, CA/CS etc. to join us in our mission. Please reach me at firstname.lastname@example.org for a quick demo of our product.