Startup Professionals Musings

AUGUST 1, 2016

After many years of working with angel investors seriously trying to find new ventures worthy of their hard-earned money, I find their frustration often exceeds that of entrepreneurs sincerely looking for financial help. Ask only for the money you can justify. Naïve expectations on funding terms and process.

Due Diligence 120

Due Diligence Intellectual Property Preferred Stock Seed Stage 120

The Startup Lawyer

JUNE 22, 2010

The main feature of the convertible note is that the debt investment made by the angel investor will typically later convert into equity. For this article, let’s assume this equity is the Series A Preferred Stock purchased by a venture capital fund. As a sweetener to the angel investor (i.e.,

Pre-Money Valuation 82

Pre-Money Valuation Angel Investor Preferred Stock Valuation 82

Berkonomics

JULY 23, 2020

Especially when outside investors, venture capitalists, or angels, have put in substantial money and the sales price is less than the value of their investment. There is a time for all investors and founders to celebrate. There are some questions a distressed sale brings to mind.

Delaware 62

Delaware Liquidation Preference Preferred Stock Early Stage 62

Up and Running

DECEMBER 1, 2015

Typically, employers that offer employees equity compensation will do so in the form of common stock, preferred stock, or stock options. As opposed to stock options where the employee can decide to purchase the stock or not, restricted stock is often “granted” or given to the employee.

Equity 60

Equity Employee Stock Options Vesting 60

Business Plan Blog

NOVEMBER 13, 2013

Most startup founders do not have enough capital to launch their companies and need to raise money at some point. Raising Angel Capital. Individual investors who provide financial funding to startups are called ‘Angel Investors.’ Example: An angel investor contributes $300,000 convertible note to a startup.

Finance 93

Finance Accredited Investor Angel Investor Seed Capital 93

Gust

SEPTEMBER 29, 2011

By contrast, venture capitalists and angel investors typically make scores or even hundreds of investments over the course of their careers. It should therefore come as no surprise that an asymmetry of information exists, mostly gleaned from experience, between founders and investors in a venture financing deal.

Finance 178

Finance Term Sheet Preferred Stock Bridge Financing 178

Scott Edward Walker

SEPTEMBER 21, 2011

Indeed, the ideal investor is an experienced, sophisticated angel who can add substantial value through his or her domain expertise and/or rolodex. A sophisticated angel investor understands how the startup game is played and the role that he plays. What about issuing shares of common stock?

Preferred Stock 45

Preferred Stock Angel Investor Entrepreneur Common Stock 45

www.quora.com

JANUARY 16, 2011

looking for good samples with founder friendly terms 11 Answers Mark Suster , Venture Capitalist, Angel investor & 72 votes by Ty Danco , Brandon Wu , Jen Cheng , (more) Ty Danco , Brandon Wu , Jen Cheng , Anon User, Chris Stewart , Tristan Louis , Ravi Kannan , Vin Turk , Shane Lennon , Nicholas Swanson , Sachin Agarwal , Mircea Pa?

Term Sheet 41

Term Sheet Startup Angel Investor Wiki 41

Both Sides of the Table

AUGUST 30, 2010

Funnily enough I just answered this question yesterday on Quora when somebody asked, “Why would an early-stage investor specifically NOT prefer a convertible note structure to straight equity (e.g. a priced/valued preferred stock financing)?&#. Why many early-stage investors DO price rounds (e.g.

Equity 319

Equity Early Stage Angel Investor Valuation 319

www.mattbartus.com

SEPTEMBER 24, 2011

Perspectives on issues affecting founders, startups and investors from a veteran startup lawyer in Silicon Valley. First, you’d probably want them to receive common stock, not preferred stock (which is the likely next round). Is it atypical for founders to vest more than 25% of their equity after one year?

Equity 40

Equity Vesting Silicon Valley Intellectual Property 40

Gust

OCTOBER 5, 2011

( Investors , of course, may disagree.). In case it isn’t clear by now, angel investors aren’t in the business of making risky early stage investments in order to earn 6% interest on their money, or even 10%— the upside is all in conversion to equity—so the interest rate isn’t a major point of negotiation.

Finance 79

Finance Preferred Stock Term Sheet Early Stage 79

Startup Company Lawyer

MARCH 14, 2010

Founders Institute Plain Preferred Term Sheet (by WSGR – disclaimer, I represent the Founders Institute and was involved in drafting this document). Certain angel investors refuse to do convertible debt deals, but will be okay if there is a price cap. Investors want additional protections. Drag-along.

Finance 70

Finance Software Review Term Sheet Liquidation Preference 70

Growthink Blog

APRIL 7, 2010

million from three individual angel investors and one early-stage venture capital fund. The name "Series A" refers to the class of preferred stock that you sell to investors in return for their cash. If seeking angel funding: Download Growthink's Step-by-Step Guide to Raising Capital from Angel Investors.

Angel Investor 54

Angel Investor Preferred Stock Venture Capital Common Stock 54

Professor VC

JANUARY 17, 2008

Touched by an Angel. I think the title of this post is a TV show, but fitting as there has been much debate in the venture community as to the whether angel investors are good or bad for entrepreneurs and VCs. What would the VC corollary to Touched by an Angel, be. Thursday, January 17, 2008. return on investment after 3.5

Pre-Money Valuation 28

Pre-Money Valuation Angel Investor Angel Groups Valuation 28

Both Sides of the Table

SEPTEMBER 5, 2012

Can you imagine investing in the stock market where your price was determined at a future date and the better that company performed the HIGHER the price you paid for that investment. In fact, most early investor work hard to help their startups get to the next level so it makes no sense for the angel investor and founders to be at odds.

Ratchet 354

Ratchet Liquidation Preference Equity Stock 354

The Startup Lawyer

FEBRUARY 4, 2011

But before your startup signs up and cashes that $[XX,000] check, your startup’s co-founders should sit down and evaluate the incubator’s offer. Most incubators take common stock and sit “side-by-side&# with the founders, but some may want some (weak) preferred stock and/or dilution protection.

Incubator 105

Incubator Pre-Money Valuation Option Pool Advisory Board 105

Growthink Blog

MAY 10, 2012

Take the founder of Wrigley's chewing gum, who began selling baking powder and soap door-to-door and giving away gum as a bonus before discovering people wanted it a lot more than soap. The name is derived from the class of preferred stock investors receive in return for their capital. This video explains more.

Equity 88

Equity Mezzanine Later Stage Venture Capital 88

thestartuplawyer.com

FEBRUARY 24, 2010

He obviously never launched a startup and got shafted by a co-founder. He obviously never launched a startup and got shafted by a co-founder. He obviously never launched a startup and got shafted by a co-founder. He obviously never launched a startup and got shafted by a co-founder. And that’s a big mistake.

Cofounder 40

Cofounder Founder Preferred Stock Startup 40

Berkonomics

AUGUST 29, 2013

Most all experienced VC and angel investors have found themselves in such a situation, since it is the unfortunate truth that half of their investments fail, on average, within the first several years of the investment. There are a number of questions a distressed sale brings to mind.

Delaware 66

Delaware Liquidation Preference Liquidity Event Preferred Stock 66

Gust

OCTOBER 21, 2011

In descending order of preference from the founders’ point of view: 1. Assuming a hypothetical $100,000 investment at a 10% interest rate, this kind of payoff would yield a return of $5,000 ( 5% ) six months later – not exactly the kind of return angel investors are looking for when they make risky early stage investments.

Finance 79

Finance Pre-Money Valuation Term Sheet Liquidity Event 79

Both Sides of the Table

APRIL 14, 2010

It will usually be higher because the liquidation preference has a dividend so if the deal is long in the tooth assume that the liquidation preference might be $20-22 million. Liquidation preference is the amount of money that an investor gets paid before the common stock (e.g.

Venture Capital 289

Venture Capital Liquidation Preference Common Stock Dividend 289

Tim Keane

JANUARY 12, 2010

Startups and angels: Along the way to success. By Tim Keane, Angel Investor, Golden Angels Investors, LLC. « Power of Angel Investing in Milwaukee | Main.   Investors sometimes “present” the terms they’d like and expect the entrepreneurs to react.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

The Startup Lawyer

MARCH 11, 2010

A variety of model startup seed funding docs have been released in the past year or so: TechStars Series AA Preferred , YCombinator Series AA Preferred , and TheFunded Founder Institute’s Plain Preferred. sophisticated investors will not invest via a convertible note.

Delaware 49

Delaware Hockey Stick Preferred Stock Open Source 49

Professor VC

DECEMBER 26, 2012

From an investor standpoint, I've discovered there actually can be greater leverage with convertible debt if the appropriate protections have been included. Learn how to build a product, pitch investors, raise a small amount of angel funding, hire the early team, acquire users, sell, iterate. in seed financing?

Finance 48

Finance Angel Investor Private Equity Preferred Stock 48

The Startup Lawyer

MARCH 11, 2010

A variety of model startup seed funding docs have been released in the past year or so: TechStars Series AA Preferred , YCombinator Series AA Preferred , and TheFunded Founder Institute’s Plain Preferred. sophisticated investors will not invest via a convertible note.

Delaware 45

Delaware Hockey Stick Preferred Stock Open Source 45

www.paulgraham.com

APRIL 28, 2010

I think it would help founders to understand funding better—notjust the mechanics of it, but what investors are thinking. And if trouble withinvestors is one of the biggest threats to a startup, managing themis one of the most important skills founders need to learn. Angel Investors Angels are individual rich people.

Technical Review 76

Technical Review Startup Software Review Angel Investor 76

Up and Running

MAY 23, 2016

“If you can fix a problem for someone and do it better, quicker, and/or cheaper than your competitor, you’re off to a good start.” – Gabriel Kuperman, founder and CEO of CuePin. We created UpKeep to fill this void—a cloud-based solution that was affordable for any size business.” – Ryan Chan, founder of UpKeep.

Software Review 74

Software Review Software Delaware Forecast 74

www.paulgraham.com

APRIL 28, 2010

You give a startup money and they give you stock. Youllprobably get either preferred stock, which means stock with extrarights like getting your money back first in a sale, or convertibledebt, which means (on paper) youre lending the company money, andthe debt converts to stock at the next sufficiently big fundinground. [

Angel Investor 63

Angel Investor Syndicate Syndication Dilution 63

ReadWriteStart

JANUARY 28, 2022

These characteristics, comparable to those found in the fixed income market, can convert into common stock, call clauses, and other features. Warrants are a kind of equity that are often attached to a corporate bond issuance or preferred stock to make the transaction more appealing to investors. Equity for Co-founders.

Valuation 108

Valuation Equity Warrant Common Stock 108

Gust

OCTOBER 3, 2011

Once in, this money stays in, and is part of what makes up your Founder’s Equity (along with your work and your intellectual property.). A majority of companies that are started in the US begin and end with the first stage: the founders’ own money. From +/- $1.5m

Finance 70

Finance Venture Capital Intellectual Property Early Stage 70

techcrunch.com

SEPTEMBER 2, 2012

There has been no shortage of controversy and criticism around the convertible note, a popular investing vehicle that’s used by seed stage and angel investors. FOUNDER INSTITUTE. Company: Founder Institute. → Learn More. Sometimes these loans have a valuation cap and/or a discount. Photo Credit/ 22dollars.

Equity 87

Equity San Francisco Technical Review Angel Investor 87

www.vccafe.com

MARCH 11, 2013

.” Hackernews list of “Tools of the Trade” for startups - includes over 150 SaaS tools used by startups, and over 150 comments with interesting insights from founders. Founders Institute Plain Preferred Term Sheet â?? List of Angel/SuperAngel Investors for entrepreneurs. Founder Equity Issues.

Software Review 53

Software Review Technical Review Startup 53