Both Sides of the Table

JULY 29, 2010

Mike Stern (wasn’t sure which one so leave a comment if it’s you): Q: “is it possible to sell your startup without venture investment if the company has big traction and a large user base?&# The downside is that people need to buy their stock. I also did a piece on how to think about pricing on angel deals.

Venture Capital 282

Venture Capital Term Sheet Valuation Stock Options 282

ReadWriteStart

JANUARY 28, 2022

With the rise of startups and growing businesses , it has become more critical for investors to have a thorough understanding of equity to be aware of all of the advantages they are receiving from the companies they have invested in. So, if you’re an investor or the creator of a new business, read on.

Valuation 108

Valuation Equity Warrant Common Stock 108

www.paulgraham.com

APRIL 28, 2010

Want to start a startup? A typical startup goes throughseveral rounds of funding, and at each round you want to take justenough money to reach the speed where you can shift into the nextgear. Few startups get it quite right. I dont mean to suggest that our investors were nothing but a dragon us. Many are underfunded.

Technical Review 76

Technical Review Startup Software Review Angel Investor 76

Startup Professionals Musings

MARCH 11, 2013

If you aren’t so sure, need something fast, or need to keep your costs low, then an LLC is the best legal and taxable entity to facilitate your startup. Don’t wait for that first investor, the first prototype, or that first lawsuit. Every startup business needs annual tax return coverage. But don’t be misled.

LLC 234

LLC Nevada Delaware Limited Liability Company 234

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

www.quora.com

JANUARY 16, 2011

Find Questions, Topics and People Add Question Add Question Venture Capital Venture Capital Term Sheets Startups Term Sheets What are examples of good startup term sheets? Ty Danco , Angel investor out of Burlington VT Best summary of the standard term sheets is via Gabriel Weinberg's blog, [link] einberg.com/b.

Term Sheet 41

Term Sheet Startup Angel Investor Wiki 41

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

www.paulgraham.com

APRIL 28, 2010

When we sold our startup in 1998 I thought one day Id do some angelinvesting. You give a startup money and they give you stock. You give a startup money and they give you stock. When youhear people talking about a successful angel investor, theyre notsaying "He got a 4x liquidation preference."

Angel Investor 63

Angel Investor Syndicate Syndication Dilution 63

www.vccafe.com

MARCH 11, 2013

Startup Resources (Updated Mar 2013). Venture Capital Cafe > Startup Resources (Updated Mar 2013). VC & Startup Resources. Seed Startups. VC Cafe covers early stage Israeli and European tech & mobile startups. Hundreds of startups featured since 2005, will yours be next? About VC Cafe.

Software Review 53

Software Review Technical Review Startup 53

The Startup Lawyer

JUNE 22, 2010

If you follow this blog, you know that I think convertible debt is a good structure for a startup’s angel round. The main feature of the convertible note is that the debt investment made by the angel investor will typically later convert into equity. As a sweetener to the angel investor (i.e.,

Pre-Money Valuation 82

Pre-Money Valuation Angel Investor Preferred Stock Valuation 82

Gust

SEPTEMBER 29, 2011

The most successful serial entrepreneurs in the world may found three or four, perhaps even eight or ten venture-backed startups over the course of their careers. By contrast, venture capitalists and angel investors typically make scores or even hundreds of investments over the course of their careers. Knowledge is power.

Finance 178

Finance Term Sheet Preferred Stock Bridge Financing 178

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. It’s called restricted stock because it often comes with restrictions, such as vesting. See Also: 10 Tips for Dealing With Startup Stock Options.

Equity 60

Equity Employee Stock Options Vesting 60

Startup Professionals Musings

MARCH 7, 2015

They know from forums such as Shark Tank on TV that asking for either too much or too little will derail credibility in the eyes of the investor, and leave the entrepreneur with no money and a struggling startup. This is all about setting a credible current value on your startup -- not future value.

Preferred Stock 120

Preferred Stock Exit Strategy Equity Angel Investor 120

ithacaVC

DECEMBER 22, 2012

There are many angel investors that rarely take or want a board seat. Dave McClure (500 Startups) and David Lee (SV Angels) are 2 examples, but there are many many others. For clarity, a company with one founder can have a one member board (assuming a corporation). Might be kind of lonely, but completely legal.

Seed Stage 82

Seed Stage Preferred Stock Founder Angel Investor 82

Berkonomics

MAY 22, 2014

I am an angel investor, that is, an accredited investor who is assumed by the SEC and others to be sufficiently wealthy to afford to lose the investment and supposedly experienced enough to make good choices on fundable companies. The PPM does not meet the investing terms and conditions of the angels. Sounds simple, huh?

Early Stage 79

Early Stage Accredited Investor SEC Private Placement 79

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

Gust

OCTOBER 5, 2011

Last week , we gave some attention to the “why” behind convertible note financing for early stage startups. Going back to Part I , recall that although a convertible note is technically a loan made to the startup, in practice these loans are rarely expected to be repaid. These deal terms are simple but significant.

Finance 79

Finance Preferred Stock Term Sheet Early Stage 79

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

Both Sides of the Table

SEPTEMBER 5, 2012

When convertible debt first started being introduced as a “faster, cheaper way to get startups funded” they didn’t have pricing built into them. 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

www.mattbartus.com

SEPTEMBER 24, 2011

Perspectives on issues affecting founders, startups and investors from a veteran startup lawyer in Silicon Valley. Sometimes the consultant has a reasonable basis to think this, since lean startups are programmed to get things for free and may call on the consultant from time to time for free advice. Angel Investors.

Equity 40

Equity Vesting Silicon Valley Intellectual Property 40

The Startup Lawyer

FEBRUARY 4, 2011

Great news — your startup just got accepted to an incubator! 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. Pre-money valuations startups receive from incubators are typically low…really low.

Incubator 105

Incubator Pre-Money Valuation Option Pool Advisory Board 105

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

Startup Company Lawyer

MARCH 14, 2010

In addition, I think that a “peace treaty&# between early-stage investors and startup companies on standard terms (at least at a term sheet level) is a step in the right direction. Certain angel investors refuse to do convertible debt deals, but will be okay if there is a price cap. Dividend preference.

Finance 70

Finance Software Review Term Sheet Liquidation Preference 70

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. Angels and Advisors.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

Up and Running

MAY 23, 2016

To give you a better idea of what entrepreneurs in this industry are thinking about during each phase of the startup process, I interviewed SaaS entrepreneurs from all over the world, including our own COO Noah Parsons. Eric Ries, a Silicon Valley entrepreneur and author of The Lean Startup, popularized this strategy for web applications.

Software Review 74

Software Review Software Delaware Forecast 74

Growthink Blog

MAY 10, 2012

Nevertheless, this is when you get the startup money to kickstart your business with the bare essentials needed to begin making and fulfilling your first sales. The name is derived from the class of preferred stock investors receive in return for their capital. This video explains more. read more.

Equity 88

Equity Mezzanine Later Stage Venture Capital 88

Startup Company Lawyer

JANUARY 9, 2011

Convertible debt with a price cap seems to be the preferred structure for early-stage financings. Over the last 12 months, I’ve noticed a trend where early-stage startup companies raise seed financings of between $250K and $1M using a convertible note with a price cap. Is a priced Series A financing a valid alternative?

Liquidation Preference 57

Liquidation Preference Finance Preferred Stock Common Stock 57

Gust

OCTOBER 21, 2011

This week we move on to something near and dear to the hearts of entrepreneurs and investors alike: The exit, more formally known as a “ liquidity event.” Entrepreneurs generally don’t ask for this kind of language, but most sophisticated investors will insist on it in one form or another.

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. But pass they will. Brain damage.

Venture Capital 289

Venture Capital Liquidation Preference Common Stock Dividend 289

thestartuplawyer.com

FEBRUARY 24, 2010

Contact The Startup Lawyer: Home Page About Contact FAQs Glossary Ryan Roberts Law: Home Page Social Networks: Facebook Twitter LinkedIn Flickr Delicious Digg Last.FM 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.

Cofounder 40

Cofounder Founder Preferred Stock Startup 40

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. When an issue like this occurs at your startup, you’ll be glad your documents are “complicated.&#.

Delaware 49

Delaware Hockey Stick Preferred Stock Open Source 49

Startup Company Lawyer

JANUARY 11, 2010

After completing a lot of convertible debt deals over the last year on behalf of both companies and investors, I have refined some of my thoughts about pre-Series A convertible debt terms. Observation 1 — Convertible debt is a bad deal for angel investors. Assume the angel investor invests $500K.

Angel Investor 39

Angel Investor Valuation Bridge Financing Preferred Stock 39

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. When an issue like this occurs at your startup, you’ll be glad your documents are “complicated.&#.

Delaware 45

Delaware Hockey Stick Preferred Stock Open Source 45

Professor VC

DECEMBER 26, 2012

While this has been discussed ad nauseum on twitter and the blogosphere, I have relevant perspective given my three different roles in the new venture ecosystem - investing in seed deals as an angel, raising seed investment as a start-up CFO and teaching entrepreneurial finance as a Professor. As an angel, do I take this kind of gamble?

Finance 48

Finance Angel Investor Private Equity Preferred Stock 48

Tim Keane

APRIL 12, 2006

Startups and angels: Along the way to success. By Tim Keane, Angel Investor, Golden Angels Investors, LLC. « "What Makes an Attractive Angel Investment" | Main. | Ten questions the entrepreneur should ask the (prospective) investor. The best salesperson is.

Entrepreneur 60

Entrepreneur Valuation Sweat Equity Common Stock 60

Both Sides of the Table

SEPTEMBER 8, 2012

I recently wrote about my views that startups rounds should be priced. If you do an uncapped note it’s bad for the investor. But Paul Graham really did have a point in his “ high resolution fundraising ” post – that there is a problem – particularly in angel financing – with herding cats.

Pre-Money Valuation 294

Pre-Money Valuation Finance Liquidation Preference Warrant 294

Gust

OCTOBER 3, 2011

For a first time entrepreneur trying to figure out the arcane world of startup financing, it can be very confusing to understand the roles that different types of investors play in funding promising companies, as well as the point in a company’s life at which they enter the stage. From +/- $1.5m

Finance 70

Finance Venture Capital Intellectual Property Early Stage 70