Series A is where a startup stops being a project and becomes a governed company. A lead VC buys 15–25% for ₹40–120 crore, installs a director, and papers the relationship in a shareholders’ agreement that will outlive several pivots. The diligence is real, the terms are real, and the closing mechanics have legal teeth. This guide covers the 2026 Series A market, what diligence opens, the CCPS term stack, board construction, and what changes at B and C – including secondaries, the first exit door for your angels.
The Series A bar and market (2026)
The post-correction bar has stabilised and it is higher than 2021’s: B2B SaaS leads want roughly ₹8–16 crore ARR growing 2.5–3x year-on-year with net revenue retention above 110%; consumer leads want demonstrated retention and a credible monetisation engine, not just growth; AI-native companies are getting faster decisions and premium pricing (AI startups took a sharply higher share of H1-2026 funding). Round sizes cluster at USD 5–15 million. The overall market backdrop – USD 16 billion deployed in 2025, volumes up 18% – means good companies get funded, but processes are evidence-driven and 8–12 weeks long.
What diligence actually opens
| Stream | What they check | What kills deals |
|---|---|---|
| Financial | Revenue recognition, GST-books reconciliation, cohort data, related-party flows | Revenue that does not reconcile to GST returns; undisclosed founder loans |
| Legal / secretarial | Every past allotment: resolutions, valuation reports, PAS-3s, registers, stamp duty | Unfiled PAS-3, missing valuation report for a past round, ESOP grants without a scheme |
| FEMA | FC-GPR/FC-TRS for every foreign rupee, pricing certificates, FLA returns | Unreported foreign allotments – must be regularised (late-submission fee / compounding) before close |
| Founder / market | References, background checks, customer calls | Misrepresented metrics – unrecoverable |
The CCPS term stack at A
The instrument is CCPS; the economics live in the SHA. The 2026 Indian norm set: 1x non-participating liquidation preference (participating preference has largely died outside distress deals); broad-based weighted-average anti-dilution (full ratchet is an aggression signal – and for foreign investors a ratchet that pushes the effective conversion price below the issue-date fair value collides with FEMA’s conversion-price floor); pro-rata rights for the lead; tag-along for minorities, drag-along typically exercisable at investor-majority plus board approval; founder reverse-vesting over 4 years (negotiate credit for time already served); and a reserved-matters list of 15–25 items. Read every term against the exit waterfall, not in isolation – the full clause-by-clause decoder is coming in this hub’s deal-playbook wave.
Board and governance
The standard A-stage board: two founders, one investor director, sometimes one independent, plus observers. What actually changes is cadence and information: monthly MIS within agreed timelines, quarterly board packs, annual budgets requiring investor consent, auditor upgrades (a Big-6 or strong mid-tier statutory auditor becomes a soft requirement), and internal financial controls that will be tested again at B. Founders who treat the investor director as a resource – hiring, later-round introductions, pricing benchmarks – extract far more value than those who manage the board defensively.
Closing mechanics (the part with legal teeth)
Sequence, with the traps bolded: registered valuer + (for foreign money) CA/merchant-banker FEMA pricing certificate → board and EGM special resolutions, MGT-14 within 30 days → PAS-4 offer, monies to a separate account → allot within 60 days or refund within 15 (else 12% p.a. interest and deposit reclassification under s.42(6)) → PAS-3 within 15 days, and the money is legally unusable until it is filed → share certificates within 2 months, 0.005% stamp duty → FC-GPR within 30 days for each foreign allottee → FLA return every 15 July thereafter. Multi-tranche closings repeat the FEMA clock per tranche. Track everything on the deadline calculator.
Series B, C and the first secondaries
B and C scale the same architecture: bigger cheques, a second investor director, tighter audit and ESG asks, and – increasingly in 2025-26 – structured secondaries where new investors buy part of the angels’ and employees’ holdings alongside the primary. Two tax facts shape secondaries: a buyer paying below fair value is taxed on the shortfall (s.92), and a seller’s consideration is deemed at fair value for unquoted shares (s.79) – so off-market discounts get taxed into line. Angels exiting after 24+ months pay 12.5% LTCG; foreign sellers layer FEMA’s exit-price cap and treaty withholding – run the repatriation tax calculator before agreeing a number.
Series A on the horizon?
My Cloud Accountant gets companies diligence-ready – secretarial clean-up, FEMA regularisation, MIS design – and runs the close alongside your counsel.
Talk to an expertFrequently Asked Questions
How much should founders own after Series A?
Healthy Indian cap tables show founders at 55–65% post-A (including the ESOP pool effect). Below ~45% at A, later investors start engineering top-ups or questioning motivation – harder to fix than to prevent. Model cumulative dilution from the angel round forward.
Can we take Series A money from foreign VCs directly?
Yes – most Indian Series A leads invest from offshore or GIFT City vehicles. The company-side additions are the FEMA pricing certificate, FC-GPR per allotment, and Press Note 3 screening where any investor’s beneficial ownership traces to a land-border country. Our foreign investment hub covers the full plumbing.
What is a down round and what does it trigger?
A round priced below the last round’s price. Legally it is permitted – but it triggers anti-dilution adjustments for existing investors (weighted-average softens the founder hit; full ratchet does not), and for foreign investors the new price must still clear the freshly certified fair value under FEMA. A dedicated down-round guide is coming in this hub’s valuation wave.
Do we still need the s.140 tax holiday if we are raising a large A?
Get it if eligible – the s.140 (old 80-IAC) holiday is worth real money once profitable, and the IMB certificate also carries the ESOP tax deferral for your team. It has no bearing on the round itself.
Last reviewed: July 2026. Market figures: Bain-IVCA 2026 and H1-2026 tracker data; legal position as at 31 July 2026.