RuleZero, a technology platform that automates and manages equity ownership in venture-funded startups, has raised Rs 10 crore in funding from Zerodha’s Rainmatter Capital, IndusLaw, Reddy Futures and Kris Gopalakrishnan, according to ETtech report.
Founded in 2019 by Satish Mugulavalli and Srinivas Katta, Rulezero is a legal/fintech startup reimagining private markets by building an intelligent platform that enables stakeholder participation and capital flow in a transparent, efficient and compliant manner.
The platform manages ownership data of the company,automates share issuance processes and provides mechanisms to track and certify cap tables and manage transactions. The platform is also a marketplace connecting to other legal / fintech product and service providers.
“Shares are the building blocks of companies. Today, once you decide who you want to issue shares to, there’s a complete process that goes on and it’s entirely manual. We are automating this entire process and will make the cap table a system of intelligence”, said Katta.
In its first phase of growth, which Katta said will be for the next 12 months, RuleZero is looking to automate the processes for share issue, share transfer, ESOP plan generation and ESOP management. It will also be able to certify cap tables of startups that use its platform.
In the second phase, the company will look to build products to enable secondary transactions of unlisted securities, enabling and providing liquidity to early investors and employees of startups.
“The holy grail for an early-stage investor in a company was when the company went public, but now with companies taking 8-10 years to go public, their investment is locked in, which eventually impacts future flow of capital,” said Mugulavalli. “We’re looking at this problem of how to create liquidity in a transparent manner and have started creating the building blocks to get there.”
Mugulavalli said the platform also adds a layer of intelligence over the data it captures, making the lives of investors, investment bankers, lawyers, chartered accountants and all others involved in a private market transaction to easily and smoothly carry out the various procedures.
“By automating and standardising compliance, data flows and contracts between founders, investors and other parties, they (RuleZero) will speed up the innovation cycle,” said Kris Gopalakrishnan. “(This will result in) freeing up the founding team’s time from administration, data checks and negotiation and more time to run their business.”
The company plans to utilise the capital it has raised for product development and marketing, and is looking to focus on winning clients in India first. It claims it already has a few customers.
“Every startup manages their cap table differently, and there’s a lot of inefficiency there. RuleZero is looking to solve this first,” said Nithin Kamath, founder of Zerodha. “In the future, if they do well, this has a potential to become a marketplace for secondary transactions as well, and we (Zerodha) could have a more synergistic role to play.”
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