The structuring of the Indian drone startup Detect Technologies’ Series A fundraise was challenging as it involved securing legal protection for the company’s intellectual property (IP) while ensuring its successful commercialization.
“A key aspect in such deep-tech industries is the legal protection challenges that exist in ensuring the essential technology is ‘housed’ and is capable of exploitation in the right entity,” said Siddharth Raja, a partner at Argus Partners, legal adviser to Detect and its promoters.
“Apart from assignment of IP clauses, from both promoters and other developers internally and externally, it was important to ensure that parties, investors in particular, are not granted carte blanche to invest or deal in similar, competitor technology,” said Raja, adding that the softer aspect of IP protection in terms of know-how, confidentiality and non-use provisions were also critical.
The Chennai-based company raised US$3.5 million in a round led by SAIF Partners and others, including existing investors Bharat Innovation Fund, and Axilor Ventures. The deal involved a combination of primary and secondary investments.
“Ensuring the two limbs of the transaction close simultaneously, or as simultaneously as possible, was a huge challenge given the bureaucracy created in terms of secretarial actions and procedures under the 2013 Companies Act,” Raja told the India Business Law Journal.
The most substantive challenge, he said, was managing the expectations of different sets of investors, each with their own views. These tend to manifest themselves into the need for certain rights on the one hand, and on the other, the exercise or putative exercise of blocking or veto provisions around transfer rights/restrictions and board composition and related governance points.
The biggest takeaway from the deal was to keep the documentation simple. “It is easier said than done,” he said.
The Argus team was led by Raja, along with associate Monica Umesh. SAIF was advised by Shardul Amarchand Mangaldas & Co.